Download - Steering India Through Global Recession
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06/27/09 1
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06/27/09 Macro Economic Management 3
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06/27/09 Macro Economic Management 4
Steering Indian Economy through GlobalRecession
Presented By:Avirup GuptaRashi PaliwalRavi Singh Kalra
Upasna Kapoor
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Content
Globalization Vs. Decoupling
Steering India through recession with
monetary & fiscal measures
Investment Priorities
Corporate responsibilities and Prudentialregulations
06/27/09 Macro Economic Management 5
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Introduction
Present financial crisis
Became prominent in September 2008
Large financial institute failure and declining
stock exchange
The crisis led to liquidity problem
Emerged as Currency Crisis in October 08
Impact on developing countries too, like India
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o a za on s.Decoupling
Closed or preserved economy
Gained momentum recently
For developing economies its not a
feasible solution
Ideas, money, and commodities can flow
at the speed of click of mouse
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i di h h
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Steering India ThroughRecession
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A Gridlock Situation
06/27/09
Macro EconomicManagement 9
Recessionary Pressures
Businessespostponinginvestments Banks refusingto lend
Consumersrefraining from
spending
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Policies To Control
Recession
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Monetarypolicy
FiscalPolicy
Policies to control
recession
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Fiscal Policy
The Governments Spending andTaxation policies influence:-
Aggregate demand and the level ofeconomic activity
The pattern of resource allocation
The employment rate in an economy
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Growth
Rate
Time
Boom
Trough
Peak
Recession
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Indian Government, RBI andRecession Measures
Repo rate cut - 9 % to 5.5 %
Reverse repo rate - 6 % to 4 %
Bank Rate unchanged
Cut in CRR of scheduled banks -5 %from a peak of 9 % in august 2008
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Continued
Accelerated depreciation for commercialvehicles.
Free trade pact with European union
Public sector banks to shed SLR flab- infuse afresh credit of about 1.2 lakh crore
Export promotion
Increase in FII investment limit from US $ 6bn to US $ 15 bn
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Questions?In the current slowdown is Monetary policy
more effective than fiscal policy, consideringthe fact that Fiscal Policy suffers from insideLag?
In Indian Context for Fiscal measures what is
more relevant and effective- Governmentspending or Tax cuts?
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Investment Priorities
Consideration
sEmploymentGeneration
EconomicDevelopment
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Agriculture
IT
Infrastructure/ Core
projects
Real Estate
SMEs
Sectors
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60% of the population
Increase self sufficiencyand self reliance
Modernized system postharvest storage,
transportation,modernization of logisticssupply
75% income from US
Satyam fiasco
$ 2 billion spending of
government organisations06/27/09 Macro Economic Management 19
Agriculturesector
IT sector
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Initiator of economic growth
$ 475 billion in next 5 yearsProjects roads(highways),
bridges, electricity, dams, etc.IIFCL authorized to raise 100
billion through tax-free bonds
Initiator of economic progressConsiderations by PSBs to cap
rate at 8%Change in foreign ownership
rule by scaling downminimum area requirements
Infrastructure / Coresector
Real estatesector
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06/27/09 Macro Economic Management 21
Small and Medium Enterprises
(SMEs) $ 5 billion, comprising of 11 million units
Production 8000 products accounting
95% of industrial units
Contributes 40% of industrial output
Expected to contribute 22% of GDP by
2012
Considerations of PSB lending rates cut
within
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Corporate Social Responsibility
Regulator named Corporate Social Responsibility
Role of government -- as a watchdog on MNCs
Proper accounting disclosures, qualitymaintenance and disclosures, society & economicwelfare
Subprime Crisis - exhibited CorporateSocial
Irresponsibility
Securitization of subprime loan
Passing out risks of Non Performing Asset06/27/09 Macro Economic Mana ement 22
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ENRON(2001)
Financial scandal involving EnronCorporation and its accounting firmArthur Andersen
The losses not reported in its financialstatements.
WIPROThe World Bank imposed the ban from
2007 because Wipro offered shares
during its US IPO in 2000 to Bank06/27/09 Macro Economic Management 23
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QuestionsRaises questions in the publics mind aboutwhat they want markets to be free from.
OR Freedom from only barriers from trade?
OR For also freedom from Governmentregulations?
OR Even freedom from Responsibility fromtheir actions?
So the question here arises Do the governments need to redefine their
roles in the market economy.?
Or Can we expect that the corporate learnslessons?06/27/09 Macro Economic Management 25
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