Crisis Sevierity Essay

5995 Words Dec 29th, 2012 24 Pages
Dr. D.R . Rajashekharaswamy and Rangaswamy

A crisis so severe, the Indian financial system is affected.


The global financial crisis, brewing for a while, really started to show its effects in the middle of 2007 and into 2008. Around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. On the one hand many people are concerned that those responsible for the financial problems are the ones being bailed out, while on the other hand, a global financial meltdown will affect the livelihoods of almost everyone in an increasingly inter-connected world.
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The global crisis has affected India through three distinct channels: Financial markets, trade flows, and exchange rates. The reversal in capital flows, which create credit crunch in domestic markets along with a severe deterioration in export demand, contributed to the decline of gross domestic product by more than two percentage points in the fiscal year 2008-2009. in line with the efforts taken by governments and central banks all over the world, the government and the Reserve Bank of India took aggressive counter cyclical measures, sharply relaxing monetary policy and introducing a fiscal stimulus to boost domestic demand.

Financial Crisis an Overview A financial crisis refers to a loss of confidence in a country's currency or other financial assets causing international investors to withdraw their funds from the country. Financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles, currency crises, and sovereign defaults. Economists have offered theories about how financial crises develop and how they could be

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