The Global Financial Crisis and its Impact on India

Abstract

The world has witnessed several financial crises in the past few decades, such as the OPEC oil crises of the 1970s, the United States Savings and Loan crisis of the 1980s, the prolonged economic downturn in the Japanese economy in the 1990s, the Asian financial crisis in the latter part of the 1990s, and the problems following the crash of the dot com bubble in the early part of the last decade. Each of these events had been accompanied by shocks to the economies of one or more markets or regions and it took several years of concerted economic and regulatory policy adjustments for the affected markets to return to stability. While it is normal for financial crises to occur frequently and the affected economies to recover subsequently, it nevertheless results in economic losses for the countries involved and for the people, businesses and institutions in those countries. The Global Financial Crisis, which started in 2008, is the latest in the series of economic crises to adversely impact world economies. Unlike the past few crises, the current crisis has not spared any of the countries or market sectors, and has devastated economies that were traditionally strong. While the world is slowly seeing an end to the crisis, it is widely acknowledged that among the financial crisis of the past hundred years, only the Great Depression of the 1930s had a more severe and protracted effect on the world economy compared to the current economic upheaval. What started as an excessively loose monetary policy in the 1990s in major developed economies transformed into global imbalances and a full-blown financial and economic crisis for all the economies of the world.