United States of America
India
P.15
Over the last few
months, India has entered
its worst economic crisis
since 1991, with growth
falling from a rate of 7-8% to
just 4-5% in June. Far more
worrying is the balance of
payments problem, which
has resulted in the Rupee
falling in value against the
US Dollar. The Rupee fell
by 18%, with many internal
firms struggling to repay the
foreign investment, which
private firms have inputted
over the last few years. This is
because, more Rupees make
up 1$. In other words, it is
more expensive now than it
was 2 years ago to pay for an
American good (e.g. car). It
was 69 Rupees for 1$ at the
end of August, up 9 rupees
against the usual exchange
rate.
In September, we had
reached the 5-year mark
since the Lehman Brothers
went bankrupt, causing
mass chaos across the world,
sparking the global recession,
which hit developed world
economies
very hard. On
September
15th 2008,
Lehman
Brothers filed
for bankruptcy for the largest
value of assets in American
history, valued at $600 billion.
Other large banks such as
JP Morgan Chase had to
contribute to help ensure
everything would not be lost,
however it was not enough
to save the bank. The following
day, the markets were strongly
affected with the Dow Jones
falling -4.4%, its highest drop
in a single day. This event
marked a chain of weakening
banks with several large firms
having to be bailed
out by their respective
governments due to
their saving losses.
What was the
significance of the
5-year mark? This showed
us that some of the world
economies, which had
struggled the initial impacts,
have recovered with growth,
especially the USA, however
many countries like France
(95.1% of annual output)
A worrying issue for the
common person is now the
high inflation, which is at a
staggering 10%. This means
the poor of India (who earn
sometimes only 3 rupees
a day) will face even more
hardship with the cost of basic
goods continuing to rise, thus
the expanding problem of
poverty is not stopping. The
GDP (value of output) of the
informal sector is considered
to be around 15% of India’s
current GDP. Hence, the GDP
of India could rise by 15%,
helping eliminate poverty if
all taxes on incomes are paid
fully, instead of being hidden
as “black money.” The informal
sector is the sector in which
the income and employment
are not recorded. However
not all activities in this sector
are illegal (Drug smuggling,
arms trading etc.). Included
actions could be cash-to-hand
payments.
2005, and having
close association with
the Indian government.
However what he is going
to do will be the main
question. Will he raise
interest rates like Brazil
to stable the economy, or
will his main focus be reinstating high economic
growth? Only time will
tell.
The man who was just
appointed the chief of the RBI
(Reserve Bank of India), India’s
central bank is Raghuram
Rajan, the 23rd Governor. He
is an economist with vast
experience, having been
the IMF’s chief economist in
economic figures
such as Christine Lagard,
Managing Director of
the IMF, were heavily
critical of this with some
labelling the shutdown
Last month, the US government as “immature” given the
experienced a shutdown after current global financial
situation. However
failing to agree the annual
budget due to the application after 16 days, the
senior members of the
of Obamacare. This resulted
in a huge worry for economies Cabinet forced through
an agreement on the
across the world. Effects of
debt ceiling between
the shutdown were seen
both parties to end the
in the Stock Market almost
shutdown, after endless
immediately with the Dow
discussions. In total,
Jones (US Stock market)
the shutdown cost $24
experiencing falling indices
billion, roughly 48 London
(market data as percentage
Olympic stadiums!
changes) due to the fall in
confidence. Many leading
and Japan (250% of annual
output) have found themselves
in mountains of debt which
the governments are findin