The subprime crisis and what it means for India

The Sub Prime crisis has lot of positives:  China will think twice about investing in US Treasury Bonds.  Our MNC Bank managers will think twice about appointing novice marketing representatives to sell loans.  Our moneyed people will think twice about investing like sheep, into stocks and real estate.  Our software/bpo companies will think twice about hiring enmasse.  Our software/bpo employees will also think ten times about squandering away their money and thereby increasing prices of almost everything in places like Bangalore.....
India will bounce back.  genuine people will be hired.  Those who are average performers will also find jobs suitable for their profile.  Those lower than average need counselling and extra training, after identifying what they are good at.  All of you, have confidence.  Nothing is lost.
I have always maintained that when a transformation is happening, those within the transformation arc will stay and benefit out of it.  Those outside will feel the heat and may become depressed.  This is part of life.  But change is necessary.
The most disapointing, however is US failure to provide a glimmer of hope.  There is one basic tenet of financial policy... Dont throw good money over the bad ones.  The US did throw away a lot of its good money...

Only one word " LAY OFFS "

This is what sub prime crisis has caused, thousand of lay offs happening around the world with lacs of people being laid off...It was believed that the crisis will not effect INDIA. But the after effect of sub prime - financial crisis - recession can be seen in various industry. HR are the one who is facing the trouble of sacking the employees.

Subprime crisis turned into financial crisis which in turn turned into US recession and which affected the whole world. Now the whole world is going thought Recession " Global Recession". It is said that it could be another depression like that happened in 1930's.

What effect did it had on INDIA ??? Layoffs, thousands of employees lost their job ( sacked out of the company ), given pink slips. Freshers are unemployed. Economy with had a GDP of 9+ for past 3 years is struggling to maintain 7%.

The subprime crisis and its fallout in the U.S.Markets and failure of the biggest financial institutions prove beyond doubt that the free economy is not  free from pitfalls.
The overly criticised overregulations by the regulators in India particularly RBI seems to be the ideal one where strict monintoring and restrictions whenever necessary is proved to be correct.The turmoil in the free market will make the finance ministry to go slow on Financial Sector reforms.While Raghuraman committee argues for more derivative products in Indian Markets and advocating shortselling, the father of Capital Markets, USA ia banning Short sales.Let RBI,SEBI & Finance Ministry sit together and go slow on handing over the Public Sector Banks to the private hands.Only because of Government holdings and prudent supervision of RBI we have been got insulated by the Global turmoil now as well as during the 1997 Asian Crisis.While I do agree partnership between private and public, we should follow the MIDDLEPATH as advocated by the Late Prime Minister P.V.NARASIMHA RAO, who ushered the Liberalisation with HUMAN TOUCH.Let us not follow the west blindly.Time has come to the west to follow lessons from RESERVE BANK OF INDIA.Let Indian best practices be followed by Federal Reserve and not the Internaational best practices which proved to be a utter failure and impractical

Modern high inflation and high growth economics suggests that Indian economy can still manage to grow with high inflation, if we are able to keep our growth rate around 3% more than the inflation.As inflation is cooling down and expected to hover around 9%-10%, we need 12%-13% growth figure.There is unanimity that we cant even surpass last yr growth figure and growth figure may be around 8%.There is possibility of further dampening due to US crisis.
Due to financial markets integration worldwide,India is definately not immune to US financial crisis However, impact is not expected to be too bad.Three basic reasons are :(1) Our exposure to us market is substantial-IT industry's revenue is largely comming from US and europe marketand both markets are  prone to sub-prime crisis.(2)FII ,on-an-average, contribute 50% of market turnover and proportion of  US investors (directly and through PN route) is substantial here.(3) Exposure of Lehman as well as other US PE/Banks/IBanks etc. to Realty sector is huge (Few expert suggests that its even more than their capital market investments).It is ,therefore, obvious that FII flow will be moderated if not reduced considerably,IT sector will be in bad shape for atleast some more time.Financial services sectors too will be sorrow mode.Overall,  the major drivers of indian economy-service sector- will be down and so the economy. However, It is not going to create any massive inconvenience in our financial system and our growth may not be affected more that 0.5% to 1%.My two cents!

Good information.thanks

Gaurav, thanks for your valuable feedback but the I have already given the link for ready reference of reader. 

I am sorry, but I dont understand the reason for this post. If you want to cut paste news articles, then please send us the links and we will read it ourselves. Sorry about that.