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The ripples of crumbling USA
market can be witnessed all over the world. Whatever happens in
America, its impact can be felt way beyond the United States.
Indian economy is no exception to this rule. World over,
companies are biting dust including lions of financial world
like, Lehman Brothers, Bear Sterns, AIG, Merill Lynch etc. It
has been an unprecedented collapse of financial giants of
American economy. The effects of American crisis can be seen in
European and Japanese companies. Many banks are almost on the
verge of collapse and frantic steps are undertaken by respective
governments to prop them up.
India, on the other hand, is far more fortunate. Many factors
are responsible for relatively less negative impact on Indian
economy. The slow pace of financial reforms taking place in
India, cautious approach towards permitting foreign investments
in Indian business sectors, numerous bureaucratic hurdles and
regulatory constraints have turned out to be advantageous for
India. India has always been criticized for its slow speed in
economic growth but in hindsight it’s that very turtle speed has
proved to be a blessing in disguise.
Indian financial system has very little exposure to foreign
assets and their derivative products and that’s the prime reason
India won’t be as adversely affected as other major countries.
Revival of world economy will take a long time. Though, India
will be affected in certain aspects like, low investments by
foreign companies. Many FIIs (financial institutional investors)
are heavily selling their holdings in numerous Indian companies
and that is reflecting in gloom and doom scenario in stock
exchange. Apart, companies, mainly IT and ITES companies whose
prime business target is USA are bound to suffer. Also, textile
companies will find themselves with low top line and bottom-line
growth in their balance sheets because of less demand from
foreign countries and consequently less revenue from exports.
Another impact would be seen in financial reforms taking place
in India. India’s cautious approach towards integrating with
world economy has paid off and now even more caution would be
taken in de-regularization of the financial sector considering
conditions of market based economies. More regulations are
expected to come into force so that India does not have to face
similar worst conditions as faced by ASEAN counties in 1997-98
crisis and recession of 2008. Author - Mritunjai kumar,
expert economist and prolific writer..
Useful resource :
sovereign debt
crisis
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