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Impact of Global Meltdown on India
Chhitiz Kumar
* This presentation is from one of the guest lectures delivered by the author at B-School.
It’s a Global Village
Key Drivers
• World Trade Growth (see Annexure 1)
• International Finance Capital
• Growth of MNC (control $ 30 Trillion out of $ 65 Trillion global GDP)
Enablers
• Technology
• Transportation & Logistics
Strategic questions …
• Capitalist (for Profit) and Socialist (for Losses)?• Reserve Currency – Why US $ ?• Efficient Market Hypothesis • Role of Global Institutions – IMF, World Bank etc• Role of Individual Govt. vs. the World.• Need for a Global Regulator vs Country Regulator?• Risk Management vs Financial Innovations• “Greed is Good”…Really?
Impact on INDIA
The Good PartDomestic Demand driven Economy : Export/GDP at 25% (China 40%)
Well –diversified export portfolio (See Annexure 2)
Inflation is down : Commodity
Stable Banking System : No Bankruptcies
Prudent Lending Norms : No Subprimes Crises
Services driven economy
The Trouble is …
Liquidity Crunch and Cost of Capital
Project delay/postponement
Forex Reserves flucuations – FII withdrawl
Exports – Challenging Global Demand scenario
Ironically, $ is currency of choice !!
GDP Projections lowered
Impact on Indian Banking System
• Short Term (next 12 months) – Watchful, reactive to global and national events.
• Medium Term (1-3 Year)– Various national regulators – Reserve Bank of India,
SEBI, IRDA, MoF will stay hawkish– Entry of MNC Banks to India will be delayed/abandoned– PSU Banks will get stronger and spread overseas.– FII Inflow in Indian Markets, PE deals– Retail Banking will revive– NBFC will have to find new Business avenues/models
Annexure 1 -World Trade (in $ Bn)
59
1983
3675
7375
13619
0
2000
4000
6000
8000
10000
12000
14000
1948 1953 1963 1973 1983 1993 2003 2007
$ Bn Value
Source : WTO, 2008 Report
Annexure 2
