The Global Economic Crisis: Impact on India and Policy Responses

Rajiv Kumar and Pankaj Vashisht
Additional contact information
Rajiv Kumar: Asian Development Bank Institute
Pankaj Vashisht: Asian Development Bank Institute

No 164, ADBI Working Papers from Asian Development Bank Institute

Abstract: India's financial sector is not deeply integrated with the global financial system, which spared it the first round adverse effects of the global financial crisis and left Indian banks mostly unaffected. However, as the financial crisis morphed in to a full-blown global economic downturn, India could not escape the second round effects. The global crisis has affected India through three distinct channels: financial markets, trade flows, and exchange rates. The reversal in capital inflows, which created a credit crunch in domestic markets along with a severe deterioration in export demand, contributed to the decline of gross domestic product by more than 2 percentage points in the fiscal year 2008–2009. In line with efforts taken by governments and central banks all over the world, the Government and the Reserve Bank of India took aggressive countercyclical measures, sharply relaxing monetary policy and introducing a fiscal stimulus to boost domestic demand. However, this paper argues that with very limited fiscal maneuverability and the limited traction of monetary policy, policy measures to restore the Indian gross domestic product growth back to its potential rate of 8–9% must focus on addressing the structural constraints that are holding down private investment demand.

Keywords: india global financial crisis; gdp growth (search for similar items in EconPapers)
JEL-codes: E66 G01 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2009-11-12
New Economics Papers: this item is included in nep-cwa, nep-dev, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.adbi.org/working-paper/2009/11/12/3367.global.economic.crisis.india/ Full text (text/html)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.adbi.org/working-paper/2009/11/12/3367.global.economic.crisis.india/ [302 Moved Temporarily]--> https://www.adbi.org/working-paper/2009/11/12/3367.global.economic.crisis.india/ [302 Moved Temporarily]--> https://www.adb.org/adbi/working-paper/2009/11/12/3367.global.economic.crisis.india/)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:adbiwp:0164

Access Statistics for this paper

More papers in ADBI Working Papers from Asian Development Bank Institute Kasumigaseki Building 8F, 3-2-5, Kasumigaseki, Chiyoda-ku, Tokyo 100-6008, Japan. Contact information at EDIRC.
Bibliographic data for series maintained by ADB Institute ().