How has the economic crisis affected India?

How has the economic crisis affected India?

27/11/2013 | Rafael Martínez (Alumno UC)

We know that India and China are the most important economies of the oriental world. However, with the results that one can see, India will affect to the entire word.

On the one hand, we can think that India is independent and different from others countries but, the financial crisis has affected India too in several aspects of its economy. I will explain this: The impact of the crisis in India can be divided in three important yet different aspects with a general character: In the first place, the direct impact in the financial sector; next, the indirect impact on the economic activities; and finally, the impact of the potential geopolitical implications.

Fortunately, India and others emerging economies could prevent this first negative aspect because their banks weren´t exposed to the subprime credits (SUBPRIME CREDITS: mortgages credits with a high interest rate and risk). Only one private bank could take on this problem thanks their solid balance and the government operations. Although the rest of the world was a nightmare, in India the banks still can show positive results.

However, there is a second aspect that has directly affected India. After Lehman Brothers collapsed, India had strong and massive decreases in foreign investment and this produced changes in the credit demands from external sources of the Indian companies. This produced a credit crisis. The confidence turn down and the risk of the bank failure and prejudiced the credit expansion on the national market. For this reason, because of the world recession, the demand of the Indian exports of their main markets sank 17% between 2008 and 2009.

But, the real problem for India is their geopolitical problems. In fact, the conflicts are increasing because of the little resources for survival (food basically). This is very serious because India has a 40% undernourished rate children.

Another effect in this sense is that because of the crisis a lot of sectors wouldn´t be able to receive money for survival and the governments would have to decide whether to give resources for education, public health and development in general. These decisions will cause more conflicts, inequalities, tensions and anxieties. This situation will become worse because of the corruption.

Other serious problems are their terrorist conflicts with their nearly countries. India has disputes with China and Pakistan on the Western border and lives with the danger of the terrorist organizations that operate in Bangladesh. For this reason, although India has overcome the economic crisis in any aspects, their situation in Asia will always affect their development or will cause inconveniences for their cities and citizens.

Nota: Este artículo ha sido elaborado por Rafael Martínez, alumno de la Universidad de Cantabria como una de las actividades enmarcadas dentro del programa de capacitación lingüística, dando su permiso para la publicación del mismo en FxM.

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