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7/31/2019 Ppt on Indian Eco
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US DEBT CRISIS
7/31/2019 Ppt on Indian Eco
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SUB-PRIME ISSUE
7/31/2019 Ppt on Indian Eco
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SUB-PRIME LOAN
In the US, borrowers are rated eitheras
Prime: - indicating that they have agood credit rating based on their trackrecord.
Sub-Prime : meaning their track recordin repaying loans has been below par.
7/31/2019 Ppt on Indian Eco
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7/31/2019 Ppt on Indian Eco
5/19
Loans were traded in US 56000 crores utook off 33000 croresFII took their money back thats whyIndia was effected As debt rises, price of gold also
rises India's banking are strong
7/31/2019 Ppt on Indian Eco
6/19
LEHMAN BROS
On September 15, 2008, Lehman Brothers filedfor bankruptcy. With $639 billion in assets and $619 billionin debt, Lehman's bankruptcy filing was the largest inhistory
Lehman was the fourth-largest U.S. investment bank at thetime of its collapse, with 25,000 employees worldwide.
Lehman's collapse was a seminal event that greatlyintensified the 2008 crisis and contributed to the erosion of
close to $10 trillion in market capitalization from globalequity markets in October 2008, the biggest monthlydecline on record at the time.
7/31/2019 Ppt on Indian Eco
7/19
WHAT EXACTLY IS USDEBT CEILING????
7/31/2019 Ppt on Indian Eco
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7/31/2019 Ppt on Indian Eco
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7/31/2019 Ppt on Indian Eco
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7/31/2019 Ppt on Indian Eco
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It is a United States-based financial servicescompany.It is a division of The McGraw-Hill Companies thatpublishes financial research and analysison stocks and bonds.It is well known for its stock-market indicesThe company is one of the Big Three credit-ratingagenciesIts headquarters are in 55 Water Street in Lower
Manhattan, New York City.
7/31/2019 Ppt on Indian Eco
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7/31/2019 Ppt on Indian Eco
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WHY S&Ps ACTION IS
FLAWED?
Political motivations
Poor arithmetic or malicious intent
S&Ps business model S&Ps professional incompetence
A recent history of defraudinginvestors
7/31/2019 Ppt on Indian Eco
14/19
Expansion of the housing bubble
Simple credit conditions
Sub-prime lending
Predatory lending
7/31/2019 Ppt on Indian Eco
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Deregulation Over-leveraging Complexity in financial
modernization
Inaccurate pricing of risk
Debt ceiling
7/31/2019 Ppt on Indian Eco
16/19
INDIAN ECONOMY
Us debt stands at$14.3 trillion.
Indias exposure to usdebts is $41 billionand is ranked at 14thposition in terms of
countries havingexposure to us debt.
7/31/2019 Ppt on Indian Eco
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IMPACT ON INDIAN ECONOMY EXPORTS
Indias exports to US include
IT services Pharmaceuticals Consumer
durables US It services & pharmaceuticals account a third of
indias export.
Us downgrading may result in:
1.Increase in borrowing cost2. Increase in taxes
(making exports costlier in either case)
7/31/2019 Ppt on Indian Eco
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IMPORTS
India mainly imports crude oil from US US downgrading have lead oil prices to fall
How the fall in prices will help India???
o reduce cost of production commodityprices fall Inflation declines
o Major sectors to benefit: Consumer goods,Construction automobiles, Capital goods
7/31/2019 Ppt on Indian Eco
19/19
WHY RBI INCREASEDINTEREST RATES????????? To curb inflation and to achieve balanced
growth.
Reasons for increasing interest rates:
o Higher inflationary pressure
o Wage price spiral
workers demand higher wages increase in inputcost price rise price expectations as a resultfollow upward trend and thus resulting in further rise
in wages INFLATION