The world is presently facing economic crisis due to which economics world over are considered to be entering into prolonged slowdown in economic activities. The intensity of present economic crisis is so high that is being compared with the global economic recession in 1873, great depression of 1930s and East Asian crisis of 1990s. The current economic slowdown is considered to be sub prime mortgage crisis in the financial sector of United States. Global economics recession and its impact on Indian economy, in this paper we tries to explain the impact of three distinct channels, that is, the capital flows, sect oral growth and financial sector. The global economic recession has taken its toll on the Indian economy that has led to multi-crore loss in business and export orders, tens of thousands of job losses, especially in key sectors like the IT, automobiles, industry and export-oriented firms.
Indian economy also passed through these stages during the year 2008. The Economic Growth Rate, which was above 8% for consecutive period of three years since 2006, suddenly plunged to an average of 5.5%. Developed world is under the fear that recession may not turn out to be continuous process resulting into great depression. Generally recessions are for two quarters, but depression is a severe economic downturn that lasts several years. Earlier India was affected less by external world depressions as it relied more on internal consumption, saving and import substitutions.
However, after 1991 India opened up its economy to global players, share of exports, both goods and services, in GDP grew significantly.
The effects of the global financial crisis have been more severe than initially forecast. By virtue of globalization, the moment of financial crisis hit the real economy and became a global economic crisis; it was rapidly transmitted to many developing countries. India too is weathering the negative impact of the crisis. There is, however, an important difference between the crisis in the advanced countries and the developments in India. While in the advanced countries the contagion traversed from the financial to the real sector, in India the slowdown in the real sector is affecting the financial sector, which in turn, has a second-order impact on the real sector. The paper is an attempt to analyze the variables responsible for India’s recent growth, impact of world recession on these variables and their significance. It needs to validate whether India’s economy has shifted away from consumption and saving to external sector dependence.
