steering india through global recession

8/14/2019 Steering India Through Global Recession

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06/27/09 Macro Economic Management 3


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Steering Indian Economy through GlobalRecession

Presented By:Avirup GuptaRashi PaliwalRavi Singh Kalra

Upasna Kapoor


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Content

Globalization Vs. Decoupling

Steering India through recession with

monetary & fiscal measures

Investment Priorities

Corporate responsibilities and Prudentialregulations



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Introduction

Present financial crisis

Became prominent in September 2008

Large financial institute failure and declining

stock exchange

The crisis led to liquidity problem

Emerged as Currency Crisis in October 08

Impact on developing countries too, like India



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o a za on s.Decoupling

Closed or preserved economy

Gained momentum recently

For developing economies its not a

feasible solution

Ideas, money, and commodities can flow

at the speed of click of mouse


i di h h


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Steering India ThroughRecession


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A Gridlock Situation

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Macro EconomicManagement 9

Recessionary Pressures

Businessespostponinginvestments Banks refusingto lend

Consumersrefraining from

spending


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Policies To Control

Recession


Monetarypolicy

FiscalPolicy

Policies to control

recession


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Fiscal Policy

The Governments Spending andTaxation policies influence:-

Aggregate demand and the level ofeconomic activity

The pattern of resource allocation

The employment rate in an economy



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Growth

Rate

Time

Boom

Trough

Peak

Recession


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Indian Government, RBI andRecession Measures

Repo rate cut - 9 % to 5.5 %

Reverse repo rate - 6 % to 4 %

Bank Rate unchanged

Cut in CRR of scheduled banks -5 %from a peak of 9 % in august 2008


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Continued

Accelerated depreciation for commercialvehicles.

Free trade pact with European union

Public sector banks to shed SLR flab- infuse afresh credit of about 1.2 lakh crore

Export promotion

Increase in FII investment limit from US $ 6bn to US $ 15 bn


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Questions?In the current slowdown is Monetary policy

more effective than fiscal policy, consideringthe fact that Fiscal Policy suffers from insideLag?

In Indian Context for Fiscal measures what is

more relevant and effective- Governmentspending or Tax cuts?



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Investment Priorities

Consideration

sEmploymentGeneration

EconomicDevelopment


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Agriculture

IT

Infrastructure/ Core

projects

Real Estate

SMEs

Sectors


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60% of the population

Increase self sufficiencyand self reliance

Modernized system postharvest storage,

transportation,modernization of logisticssupply

75% income from US

Satyam fiasco

$ 2 billion spending of

government organisations06/27/09 Macro Economic Management 19

Agriculturesector

IT sector


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Initiator of economic growth

$ 475 billion in next 5 yearsProjects roads(highways),

bridges, electricity, dams, etc.IIFCL authorized to raise 100

billion through tax-free bonds

Initiator of economic progressConsiderations by PSBs to cap

rate at 8%Change in foreign ownership

rule by scaling downminimum area requirements

Infrastructure / Coresector

Real estatesector


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Small and Medium Enterprises

(SMEs) $ 5 billion, comprising of 11 million units

Production 8000 products accounting

95% of industrial units

Contributes 40% of industrial output

Expected to contribute 22% of GDP by

2012

Considerations of PSB lending rates cut

within


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Corporate Social Responsibility

Regulator named Corporate Social Responsibility

Role of government -- as a watchdog on MNCs

Proper accounting disclosures, qualitymaintenance and disclosures, society & economicwelfare

Subprime Crisis - exhibited CorporateSocial

Irresponsibility

Securitization of subprime loan

Passing out risks of Non Performing Asset06/27/09 Macro Economic Mana ement 22


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ENRON(2001)

Financial scandal involving EnronCorporation and its accounting firmArthur Andersen

The losses not reported in its financialstatements.

WIPROThe World Bank imposed the ban from

2007 because Wipro offered shares

during its US IPO in 2000 to Bank06/27/09 Macro Economic Management 23


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QuestionsRaises questions in the publics mind aboutwhat they want markets to be free from.

OR Freedom from only barriers from trade?

OR For also freedom from Governmentregulations?

OR Even freedom from Responsibility fromtheir actions?

So the question here arises Do the governments need to redefine their

roles in the market economy.?

Or Can we expect that the corporate learnslessons?06/27/09 Macro Economic Management 25


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steering india through global recession

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