In the midst of looming global
crisis, when everyone is speculating about the Indian economy, let’s have an
agile glance over what’s actually happening around the globe and where it could
end up.
As it happened:
Subprime
crisis, Greek nonremittal act & the latest Chinese meltdown. Apart from the
other major reasons, All three of them had one thing in common, ‘excessive
debt’. In USA, Bear Stearns and Lehman Brothers collapse happened due to their
inability to meet financial obligations as they already borrowed so much and
had nothing but a bunch of CDOs which they could not sell. Whereas in case of
Greece, by the spring of 2010, Greek officials
knew that their public expenditure is shooting while they did not have enough
revenue to meet them and so was clear that it was veering toward bankruptcy,
which threatened to set off a new financial crisis. In July, the €85bn bailout package was offered in order to mitigate
the situation. The most recent one is China. Their debt to
GDP rate is staggering 207%. The problem with China is explained in the
hilariously perfect way, “China could be in the world's greatest depression and they would
still report 7%," says Gordon Chang, a China expert and author of ‘The
Coming Collapse of China.’”
The Imminent Level:
Now it’s pretty clear to
everyone that if China is heading to a breakdown then it’d have consequences
all over the world. But the question is how it’ll affect the Indian economy.
Currently India is having debt to GDP rate is around 63%, much lower than other
preeminent countries. This is the basic reason why experts are bolstering the
domestic economy being a fundamentally strong one. Secondly, falling crude (39.29 $/bbl) is certainly a blessing for the economy as it helps
macro-economic management (both budget and fiscal) by improving macro
fundamentals (inflation, fiscal deficit and current account deficit). Despite
all the optimisms about the Indian market, a few days back, Sensex plunged like
never before. Though it’s just a temporary fall and markets are likely to
recover in the forthcoming days, only time can tell us whether this Chinese
boomerang will hit the Indian economy just like the Subprime crisis did or this
time India to emerge as the strongest powerhouse whenas the world is sinking!
Quick Statistics (India):
|
$
|
66.27 INR
|
|
Crude oil
|
39.29 $/bbl
|
|
GDP growth rate
|
7.5%
|
|
CA deficit
|
1.5%
|
|
Fiscal
deficit
|
4%
|
