Global Crisis and its Impact on Indian Economy

The Indian economy is a mixed economy. It has acquired this form with the growth of a large public sector since Independence. Nationalization of banks, setting up a number of enterprises in the public sector and such other measures may create an illusion that the economy has advanced towards socialism but in fact socio-economic relations have not undergone any such change as to warrant the conclusion that the Indian economy has drifted away from its capitalist forms. India had a dream run of five years during 2003-08 as the GDP growth averaged nearly 9 % annually for 5 years; the best ever run for five years. The economy began to slow down from the middle of 2007-08. Global recession and credit crisis, whichbegan with sub prime crisis, is affecting almost all economies across the world.The Bank for International Settlement (BIS) report has succinctly brought out how and why the crisis has occurred. It is a little over a year since the US financial crisis became a global concern. Starting with home loan sector, US banks and lending institutions lent recklessly to borrowers who were not creditworthy and who had no repayment capacity, based on their income levels. Subprime lending spurred acute competition among banks and other lending institutions which resulted in unsafe and indiscriminate lending.