Countering slowing economies: comparative study; Impacts of financial crisis and policies adopted by India and China

Abstract

The Financial crisis of 2007-2009 has been called the worst financial crisis since the Great Depression in US by many leading economists worldwide. It had led to considerable failure of business and consumer wealth throughout the world. Many causes have been identified for the crisis, including macroeconomic, financial sector related and environmental reasons. The current crisis began in US with the bursting of US housing bubble, led by subprime lending. The crisis affected a number of financial institutions in US like government sponsored enterprises like Fannie Mae, Investment Banks, Hedge funds, Depository banks, Insurance agencies, other kind of funds etc. Due to increasing interconnectivity between global financial institutions and trade linkages, the financial crisis quickly spread around the world. The impact of crisis across countries has varied depending on many factors like dependence on export, regulatory systems in place, foreign reserves etc. Both market based and regulatory solutions had been implemented by different economies with varying degrees of success. We have limited the scope of our study to four areas, which are discussed in detail: •Reasons of Financial Crisis, why it spread around the world and the linkages between world economies •Impact of crisis on Indian and Chinese Economies •Policies adopted by different countries to counter financial slowdown, particular focus on Indian and Chinese policies and actions •Structures and systems which have to be put into place to protect from future crisis of this nature, specific suggestions for India.