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ƥ The deadly ƝRecessionƞ fears are far

from over.

ƥ Euro crisis hit them like a thunder

bolt

ƥ The stocks across the world are

melting yet again.

ƥ the Indian IT sector, like many

other sectors, due to European crisis
lead to cancellations of many big
orders.
 How it all started

ƥ originated from the ancient civilisation land Greece

ƥ The European countries reacted rather slowly to avert

this

ƥ Markets reacted to the largest bailout package

announced by the European nations to prevent the
bankruptcy of Greece.
þ     
 



ƥ Greece which was epicenter of the sovereign default malaise as country

was known to live beyond its means.

ƥ In early 2010 economic activities of the PIGS have come under increased
scrutiny from the international invesment community, with the threat of
Sovereign defaultO
defaultO lurking around the corner lead to European crisis

ƥ With onslaught of the recession and subsequent introduction of

various financial stimulus packages, the government expenditure like public
job creation,pensions, social benefits etc ..on various countries took on
gargantuan proportions to support these packages.

ƥ To support these packages government was forced to borrow heavily

consequently generating high fiscal deficicts.Most countries had
manageable fiscal deficit, the government of PIGS nations mopped up a
huge debt bill.
Ñ 
 

 
  Ñ 


 




 


ƥ A deepening crisis of confidence in sovereign debt within the euro zone :-

:-
investors to rethink

ƥ The crisis of sovereign default by Greece :-

:-as a European concern for a few
months
since last quarter of 2009.
ƥ financial market round the world had pressurized for more relief packages,
ƥ it was actually about the EURO , the EU economy , as well as the
US.Moreover, with the IMF .
ƥ key donors include countries like China and India.
ƥ India also played a major role in mitigation package to Europe.
ƥ The Greek crisis threatens to bring down the entire 16-16-nation monetary
union.
ƥ The biggest casualty over the last week from the eurozone debt crisis has
been the euro, which was down 0.1 per cent on the day at $1.2334. Earlier
it had fallen to $1.2237, its lowest level since April 2006 and down from
$1.51 late last year.
 
 
  

ƥ crisis in an economy impacts other economies via three channels

ƥ á





it impacts the affected countryƞs trading partners
too.
ƥ exports/imports of its trading partners
ƥ 
 



Apart from movement in financial markets,


 


three kinds of financial flows could impact Indian financial markets:
ƥ Foreign Direct Investment:
ƥ Foreign Institutional Investment
ƥ External Commercial Borrowings
ƥ Remittances and NRI deposits

ƥ   


  


This channel shows confidence declines in

business and households seeing the global uncertainty.
 

 
 

ƥ The business and trade cycle of India has started to follow the
cycles of advanced economies.

ƥ With increased global integration-

integration-greater influence of global
business cycles.

ƥ The correlation between the cyclical component of the IIP of the

advanced economies and India has risen to 0.50 during the period
1991--2009 from 0.20 in during the period 1971-
1991 1971-1990
 


  

ƥ What impact the Euro crisis is likely have on Indian economy, since the epicenter of
the crisis is far away in Greek capital Athens

ƥ Perhaps not be any direct impact on the Indian economy from the European crisis.
However, with the increasing integration of the world economies, would have its
impact on the Indian economy as well.

ƥ Despite the assurances, the markets are reacting sharply, showing huge decline.
ƥ The investments might not increase seeing the global uncertainty. Investment was a
key driver in Indian 9% growth period (2003-
(2003-08).

ƥ IIP could again decline as it did post-

post-September 2008 crisis.
ƥ Credit growth could decline both because of banks becoming uncertain and business
not demanding credit

ƥ Foreign capital inflows could reverse to an outflow position.. The expectations of BSE
Sensex reaching soon to 21,000 levels are being revised downwards.
ƥ The volatility is again increasing
 
 

ƥ The European Union -21% of India's total export

ƥ Exports to Greece, Spain and Portugal, including Italy,
is only 4%.
ƥ Indian finance minister rightly said that export to PIGS
are marginally low and will not have any impact on it ..

ƥ India export mainly textiles, pharmacy products, Gems

etc to European countries:-
countries:-not much affected

ƥ Now, the Greek crisis has ballooned into a major

European crisis. the currency value of euro has
depreciated by 5% against the rupee since April.
ƥ ˜  
 

  


 

ƥ á


 
 


  
  

   





  
 
ƥ Economies of EU already introduced cut in spending.
Such spending cuts could lead to postponement or even
cancellation of orders for the Indian exporters
 
 

ƥ Export markets could also decline by increasing volatility.

ƥ some of the apparel exporters have started taking

corrective measures to tackle the consequences of fall in
demand and fluctuation in currency on account of re-
re-
emergence of global risk aversion, by opening stores in
the domestic markets and ruling out the effects of
currency variations and related hedging problems.

ƥ The export products likely to be affected could be in the

spaces of engineering, readymade garments, yarn
chemicals, oil seeds, electrical goods and leather.
 
    

ƥ International investors lost trust in world markets because of series

of crisis in US and Europe.

ƥ But a majority of FII and other individual investors choose Indian

markets to invest as showed its stability in their economy.

ƥ There was net inflow of foreign institutional funds into the domestic
capital markets since the start of 2010 till April-
April-end, - Rs 54,606
crore

ƥ the stock market barometer Sensex rose 93.9 points in the four
months to close at 17,558.71 on April 30

!

VA gradual slowdown in the European

market evidently affected revenue
generation of the major IT companies of
India.

Many linked the downsizing of companies

and decline in the workforce in the IT
companies as a result .

The economic turmoil resulted in a

recession in the IT companies.
They are taking measures to cut down
cost and also reducing their workforce.
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 Indiaƞs top three
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economic slowdown and financial crisis in the global market

may pose a threat

The present      in the global market has

send rippling effects to the Indian economic market as well.

Besides the KPOs and BPOs of India, small and medium sized
companies - affected by the financial situation outside the
country
 UESTIONS ?
ƥ Some questions arising in minds of global investment
community are: -
ƥ 1. What should be the next course of action for the
markets from here?
ƥ
2. Will the European crisis worsen even further?
ƥ
3. Will Greece eventually default even after a 110 billion
euro bailout?

ƥ 4. Will $1 trillion European rescue package stop the

ravage of the contagion of the PIIGs nation
Why is India an Out-
Out-performer?
ƥ Indian economy is far less dependent on exports to Europe.
ƥ Indian IT companies have a lower exposure to European clients.
only4% of total exports exposure to debt-
debt-stuck economies such as
Greece, Spain, Italy and Portugal

ƥ India¶s IIP data has registered a growth of 5.1% compared to

3.7% witnessed during April 2009.

ƥ Thus, there are various parameters on which Indian stock markets

have out-
out-performed the global indices while going passing through
the turmoil phase of European crisis.

ƥ Investors waiting on sidelines should use every dip from here to

create a portfolio for long-
long-term duration
 India heated :how much?
ƥ Heavy losses suffered by major International
Banks
ƥ India is facing heat on three grounds:
ƥ (1) Our Share Markets are falling everyday,
ƥ (2) Rupee is weakening against dollars and
ƥ (3) Our banks are facing severe crash crunch
ƥ However, one positive point in favor of India is
the fact that Indian Banks are more or less
secured
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European crisis: A double whammy
for Indian economy
ƥ There will be indirect effect As regards to India,
ƥ large foreign exchange reserves
ƥ The strengths are substantial and capital inflows would
eventually resume the normal course
ƥ The financial storm in Europe may not mean a double-
double-
dip in the global economy yet, but it certainly is a double
whammy for Indian exports, which were just beginning
to heal from the injuries of 2008-
2008-09.
ƥ The question now isƜisƜwill the government now have to
extend a further helping hand to the exporters by
increasing the amount of the special package?
 OVERVIEW
ƥ The above is a worse-
worse-case scenario and all would
depend on the nature of European crisis.
ƥ We still do not know where the crisis is headed.
ƥ Comparisons have been made on how the crisis
is similar to earlier US crisis but we have a far
more complex problem here.
ƥ Before the Recession hit the world economies in
2008, the Indian financial experts insisted that it
would not have any impact on our country. And
then the crisis hit and hit them hard with equity
markets declining from 21,000 levels to 8,000
levels.
ƥ As the Euro crisis started to show its impact, the
Indian experts once again laughed off when
asked whether we could be impacted. And now
we are seeing some strains on equity markets,
capital inflows etc. We may not be impacted by
the European crisis as much as previous crisis,
but forgetting history so quickly is a crime. Who
knows whatƞs in store for you!
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ƥ http://www.merinews.com/article/economic
http://www.merinews.com/article/economic--meltdown-
meltdown-and-
and-its-
its-india-
india-effect-
effect-
deloitte-report/147727.shtml
deloitte-
ƥ http://www.oppapers.com/subjects/impact--of
http://www.oppapers.com/subjects/impact of--recession-
recession-on-on-indian-
indian-banks-
banks-
page1.html
ƥ http://mostlyeconomics.wordpress.com/2010/05/25/how--european-
http://mostlyeconomics.wordpress.com/2010/05/25/how european-crisis-
crisis-
could--impact-
could impact-india-
india-understanding-
understanding-thethe--linkages/
ƥ http://www.krepublishers.com/02--Journals/JSS/JSS-
http://www.krepublishers.com/02 Journals/JSS/JSS-21- 21-0-000-
000-09-
09-Web/JSS-
Web/JSS-
21--1-000-
21 000-09-
09-Abst-
Abst-PDF/JSS-
PDF/JSS-21-
21-1-001-
001-09-09-963-
963-%20Prasad-
%20Prasad-A/JSS-A/JSS-21-21-1-001-
001-
09--963-
09 963-%20Prasad-
%20Prasad-A-Tt.pdf
ƥ http://www.acrobatplanet.com/non--fictions
http://www.acrobatplanet.com/non fictions--ebook/ebook-
ebook/ebook-global-global-economic-
economic-
slowdown--and
slowdown and--its-
its-impact-
impact-indian-
indian-it
it--industry.html
ƥ http://www.indianchild.com/economics/effects--of
http://www.indianchild.com/economics/effects of--recession.htm
ƥ http://www.fibre2fashion.com/industry--article/9/877/impact-
http://www.fibre2fashion.com/industry article/9/877/impact-of of--recession-
recession-
in-
in-american-
american-economy-
economy-on- on-india1.asp
ƥ http://www.mumbaispace.com/economics/impact--of
http://www.mumbaispace.com/economics/impact of--us
us--recession-
recession-in-in-
india.htm
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