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06/27/09 Macro Economic Management 3
 Steering Indian Economy through Global
Recession

Presented By:
Avirup Gupta
Rashi Paliwal
Ravi Singh Kalra
06/27/09 Macro Economic Management
Upasna Kapoor 4
 Content
Globalization Vs. Decoupling

Steering India through recession with

monetary & fiscal measures

Investment Priorities

Corporate responsibilities and Prudential

regulations

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 Introduction
Present financial crisis
Became prominent in September 2008

Large financial institute failure and declining

stock exchange

The crisis led to liquidity problem

Emerged as Currency Crisis in October 08’

Impact on developing countries too, like India

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 Globalization Vs.
Decoupling
Closed or preserved economy

Gained momentum recently

For developing economies its not a

feasible solution
Ideas, money, and commodities can flow

at the speed of click of mouse

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Steering India Through
Recession
 A Gridlock Situation

Consumers
refraining from
spending

Businesses
postponing Recessionary Pressures Bank’s refusing
investments to lend

Macro Economic
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 Policies To Control
Policies to control
Recession
recession

Monetary Fiscal
policy Policy

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 Monetary Policy

Policy through which the

government, central
bank, or monetary authority of a
country controls:-

 The supply of money

 Availability of money, and

 Cost of money or rate of interest

Macro Economic Management 11
 Fiscal Policy

The Government’s Spending and

Taxation policies influence:-

Aggregate demand and the level of

economic activity

The pattern of resource allocation

The employment rate in an economy

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 Peak
om

Rec
Bo

ess g h
io n Trou
Growth
Rate

Time

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 Indian Government, RBI and
Recession Measures
Repo rate cut - 9 % to 5.5 %

Reverse repo rate - 6 % to 4 %

Bank Rate unchanged

Cut in CRR of scheduled banks -5 %

from a peak of 9 % in august 2008
 Continued
Accelerated depreciation for commercial
vehicles.

Free trade pact with European union

Public sector banks to shed SLR flab- infuse a

fresh credit of about 1.2 lakh crore

Export promotion

Increase in FII investment limit – from US $ 6

bn to US $ 15 bn
 Questions?
In the current slowdown is Monetary policy
more effective than fiscal policy, considering
the fact that Fiscal Policy suffers from inside
Lag?

In Indian Context for Fiscal measures what is

more relevant and effective- Government
spending or Tax cuts?

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 Investment Priorities

Consideration
s
Employment Economic
Generation Development
 Sectors

Agriculture

IT

Infrastructure/ Core

projects
Real Estate

SMEs
 Agriculture
sector
60% of the population
Increase self sufficiency
and self reliance
Modernized system – post
harvest storage,
transportation,
modernization of logistics
supply
IT sector

75% income from US

Satyam fiasco
$ 2 billion spending of
governmentMacro
06/27/09 organisations
Economic Management 19
Infrastructure / Core
sector
 Initiator of economic growth
 $ 475 billion in next 5 years
 Projects – roads(highways),
bridges, electricity, dams, etc.
 IIFCL – authorized to raise 100
billion through tax-
free bonds

Real estate
sector
 Initiator of economic progress
 Considerations by PSBs to cap
rate at 8%
 Change in foreign ownership
rule by scaling down
minimum area requirements
Small and Medium Enterprises
(SMEs)
• $ 5 billion, comprising of 11 million units
• Production – 8000 products accounting
95% of industrial units
• Contributes 40% of industrial output
•Expected to contribute 22% of GDP by
2012
• Considerations of PSB lending rates cut
within
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 Corporate Social Responsibility
Regulator named Corporate Social Responsibility
Role of government -- as a watchdog on MNC’s
Proper accounting disclosures, quality
maintenance and disclosures, society & economic
welfare

Subprime Crisis - exhibited Corporate

Social
Irresponsibility
Securitization of subprime loan
Passing out risks of Non Performing Asset
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 ENRON(2001)

Financialscandal involving Enron

Corporation and its accounting firm
Arthur Andersen
The losses not reported in its financial
statements.

WIPRO
The World Bank imposed the ban from
2007 because Wipro offered shares
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during Macro
itsEconomic
US IPO in 2000 to Bank
Management 23
SATYAM Inc.
Started when Chairman B. Ramalinga Raju
thwarted buyout of two Maytas firms
Raju confessed Rs 7,136 crore fraud
Unassuming liability of 1,230 crore
Lesson – corporate governance must top Inc’s
list of priorities for all domestic and overseas
operations

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 Questions
Raises questions in the public’s mind about
what they want markets to be free from.
• OR Freedom from only barriers from trade?
• OR For also freedom from Government
regulations?
• OR Even freedom from Responsibility from
their actions?
So the question here arises
• Do the governments need to redefine their
roles in the market economy.?
• Or Can we expect that the corporate learns
lessons? Macro Economic Management
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