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Ppt on Indian Eco

Date post: 05-Apr-2018
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    US DEBT CRISIS

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    SUB-PRIME ISSUE

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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.

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    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

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    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.

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    WHAT EXACTLY IS USDEBT CEILING????

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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.

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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

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    Expansion of the housing bubble

    Simple credit conditions

    Sub-prime lending

    Predatory lending

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    Deregulation Over-leveraging Complexity in financial

    modernization

    Inaccurate pricing of risk

    Debt ceiling

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    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.

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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)

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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

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    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


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