andalib zehra amu resarch scholar economics) topic- global financial crisis and its impact on india

8/7/2019 Andalib Zehra AMU Resarch Scholar Economics) Topic- Global Financial Crisis and Its Impact on India

1/22

Global Financial Crisis and its Impact on Indias

Trade Flows

By

* Andalib zaihra

**Dr. Zeba Sheereen

*Research Scholar, Dept. of Economics, Aligarh Muslim University,Aligarh( [email protected] )**Associate Professor, Dept of Economics, Aligarh Muslim University, Aligarh


2/22

Global Financial Crisis and its Impact on IndiasTrade Flows

Abstract

The current global financial crisis is rooted in the sub-prime crisis which surfaced

in 2006 in United States of America. The speed and intensity with which the US sub-

primes crisis t hat appeared in the mid 2007 transformed itself i nto a global financial

crisis and then into a global economic crisis has attracted the attention of all . This

global crisis has been adversely affecting all the world economies and the magnitude

of its impact is exceeded by that of Great depression of 1930s. This crisis is unique

not only in terms of its depth but also in the extent of its reach: virtually no economy

has remained unaffected. Contrary to Decoupling Theory emerging economies has

been hit by the crisis. Economy like India where the financial sectors were not as

integrated with the global financial system, was spared the first round adverse effect

of the crisis and its banks were mostly unaffected. However it could not be escaped

the second round adverse effects of global meltdown. Indias integration with the

world economy with high trade/ GDP ratio and increased dependence on external

capital flows had made it vulnerable to global crisis. The turmoil into the financial

markets in the advanced countries spilled over into India through financial channels, through reversal of capital flows especially portfolio investments and

though trade flows despite sound macroeconomic fundamentals and banking system.

The immediate effects were steeply plummeting stock prices, loss of forex reserve,

and depreciation of Rupee and tightening of domestic liquidity. Indias export

import sector has been badly hit by the global slowdown. The government and

Reserve Bank of India took aggressive measures, monetary policy and fiscal

stimulus, to combat global crisis and to boost domestic demand.

This paper analyses (a) Impact of financial crisis on Indias trade flows and (b)Policy responses of the government to tackle the crisis.


3/22

INTRODUTION

A financial crisis refers to a loss of confidence in a countrys currency or other financial

assets causing international investors to withdraw their funds from the country. Economists

have offered theories about how financial crisis develop and how they could be prevented,

however financial crises are still a regular occurrence around the world. The current

financial crisis is rooted in the sub-prime crisis which surfaced in 2006 in United States of

America. The current crisis in US appeared through indiscriminate lending of housing loans

in countrys sub-prime mortgage market. From the financial sector it moved to the real

sector in the US market and then into the international market. The impact of financial

sector turmoil on real activity has become increasingly evident propagating beyond its initial

epicenters to affect other advanced economies and emerging markets economies (EMEs).

The followers of Decoupling Theory believe that because of strong GDP

growth of many developing countries especially of China and India, their market will

remain bullish even at the time of US recession. In fact emerging market Economies

(EMEs) remained largely insulated from the first round effects of global financial meltdown.

However as the crisis deepened in advanced economies, the complex and wide ranging

interaction between the financial and the real economy began to have an impact on EMEs.

Most Asian markets are now in big recession after the crash of Dow Johns. Indian economy

looked insulated from the current financial crisis. But when the collapse of Lehman Brotherson 23rd September 2008 morphed up the US financial meltdown into global financial

meltdown, the impact on Indian economy was immediate. This paper analyses impact of

global financial crisis on Indias trade flows and policy response of the government to tackle

financial crisis and to boost the domestic demand.

Origin of the crisis

As distinct from most recession in the past current deep recession is a combination of many

factors

(1) Credit crisis - The recent market instability was caused by many factors, chief among

them is a dramatic change in the ability to create new lines of credit, which dried up the

flow of money and new economic growth and buying and selling assets. Credit crisis is

the direct outgrowth of fall in housing prices that began in 2006 in sub-prime mortgage in

the US. This hurt individuals, business and financial institutions were left holding


4/22

mortgage backed assets that had dropped precipitously in value and werent bringing in

the amount of money needed to pay for the loans. This dried up their resumes cash and

restricted their credit and ability to make new loans.

(2) Boom in housing market - Sub-prime borrowing was major contributor to an increasein house ownership rates and the demand for housing. New buyers of housing entered

into the markets sub-prime borrowers. The influx of these new borrowers who could

traditionally not have had access to loans further increased housing demand. Increase in

house purchases during the boom period eventually led to surplus inventory of houses

causing house prices to decline in the summer of 2006. Once housing prices started

depreciating moderately in many parts of the US, refinancing became more difficult.

Some houses owners were unable to refinance their loans reset to higher interest rates and

payment amounts. Excess supply of houses places significantly downward pressure onprices. As prices declined more houses owner were at risk defaults and foreclosure.

Global financial crisis and its impact on world economy

The world economy experienced a sustained period of growth with only moderate

fluctuation coupled with low inflation, a phenomenon popularly known as the great

moderation till the precipitation of global financial crisis. The speed and intensity with

which the US sub-primes crisis that appeared in the mid 2007 transformed itself into aglobal financial crisis and then into a global economic crisis has attracted the attention of

all. The crisis is unique not only in terms of its depth but also in the extent of its global

reach; virtually no economy has remained unaffected. Even economies that are expected to

grow this year, such as those of China and India, are slowing down significantly from the

previous year of rapid growth.

A comparison of recent crisis with the various episodes of crisis in the past reveals that

some semblance can be found amongst them with regard to the underlying causes. As in thepast, the main causes of the recent crisis are linked to systematic fragilities and imbalance

that contributed to inadequate functioning of the global economy. However, what makes

the current crisis exceptional is that it emerged at the very epicenter of global capitalism,

the US and its contagion spread very quickly to the entire global economy, unlike previous

crisis that were usually confined to a region or a small number of countries. Economies like


5/22


6/22

sl i down from 3.7% in 2007 to 2% in 2008, g loba l gross domes ti produc t (GDP) is

expec ted to fa ll by more t an -2.7 % in 2009. (Tab le1)

Wor l rade

Wor ld trade s lowed down in 2007 and 2008 and has been shr ink ing a t a fas t rate s inceNovember 2008, in bo th vo lume and va lue. Trade vo lume grow th dece lerated f irst in the

United S tates and o ther deve loped coun tr ies. Indeed in 2008 impor t volume grow th ac tua lly

turned nega tive in the Un ited S tates (-3.7%) and Japan (-0.8%). Trade expans ion was more

resilient in deve loping and trans ition econom ies. In par ticular coun tr ies that have benef ited

from terms of trade ga ins un til mid 2008( i.e. ma inly coun tr ies in Afr ica, La tin Amer ica and

the Car ibbean and Wes t Asia) were ab le to increase their impor ts signif ican tly, A lthough in

some cases vo lume of their expor ts slowed down or even dec lined.

Figure 1 : Vo lume of Expor t and Impor t of goods by reg ion, (2007-2008)

(Annua l Percen tage Change)

Source : Calculated from UN CTAD Trade and Deve lopmen t R epor t, 2009


7/22

F iscal stimulus

As the financial crisis spilled over into the real sectors, a wide consensus emerged that the

effects of automatic stabilizers would not be sufficient to stop the downturn in aggregate

demand. Consequently government in developed and emerging market economies (EMES)

reacted with discretionary fiscal stimulus and support measures, such as debt financed

increases in public spending and tax cuts to counter the increasingly dramatic downturn in

final demand, outputs and employment.

The need for fiscal support to financial institutions was much larger in advanced countries

than in EMEs. The sizable bail out operations and provision of large amount of liquidity by

several central banks and government prevented a breakdown of financial systems. But these

measures even combined with sharp interest rate reduction were not sufficient to return the

financial system back to normal functioning and fully restore credit availability to non

financial sector. Similarly while an expansionary monetary policy is essential for keeping the

financial and economic crisis under control, it is not sufficient on its own to bring about

recovery. Therefore in order to stimulate demand, countercyclical fiscal policy measures that

have a direct effect on aggregate demand, are indispensable. Developed countries granted

3.7% of their Fiscal stimulus packages to bail out those financial institutions those were most

vulnerable. While developing countries granted 4.7% of their GDP for carrying bail out

operation.

Table 2: Financial stimulus and financial support to the financial system

in selected Economies

(Per cent of GDP)

Fiscal stimulus

Support for the

Financial Sector

Years to spend Fiscal

Stimulus

Developed Countries 3.7 48.5 -

Japan 4.7 22.2 3

United States 5.5 81.1 3

United Kingdom 1.9 81.7 3

Developing Countries 4.7 2.9 -

Brazil 5.6 1.5 1


8/22

India 1.8 6.4 3

China 6.2 0.5 2

South Africa 7.4 0.0 3

Transition Economies 5.8 7.4 - Russian Federation 5.4 8.0 2

Source: UNCTAD Trade and Development Report, 2009

Global financial crisis and its impact on Indian economy

For more than a year since the outbreak of the crisis, it appeared that the Emerging Asian

Economies, especially China and India, would not only remain insulated from the crisis, but

also play a major role in moderating the global slowdown and paving the way for worldwide

recovery in a year or so. While the overall policy approach has been able to mitigate thepotential impact of the turmoil on domestic financial markets, with the increasing integration

of the Indian economy and its financial markets with the rest of the world, there is

recognition that the country does face some downslide risk from these international

developments. With increased linkages with world economy it could not be decoupled from

the global financial crisis. The contagion effect of global financial crisis spread from

advanced economies to Indian market during the latter half of 2007 through three distinct

channel (a) Financial channel (b) trade channel and(c) confidence channel. Financial channel

includes the banking sector and major channel of capital flows such as FDI, portfolio inflows,external commercial borrowings (ECBs), trade credits, overseas borrowings of banks and

remittances. Given the prudent regulation and proactive regulation, the Indian banking sector

has remained more or less unaffected, at least directly by the global crisis. Only one of the

larger private sector banks ICICI bank was partly exposed but it managed to counter the crisis

through a strong balance sheet and timely government action. During the crisis global

financial institution withdrew significant part of portfolio investment from India like other

EMEs. The sharp fall in portfolio investment was due in large part to the need for repairing

the balance sheet of developed countrys financial firm. The sudden withdrawal of portfolio

investment from the Indian stock market brought about a crash in the market in January 2008.

The reversal of capital flows led to a fall in the value of rupee despite substantial running

down of foreign currency assets by Reserve Bank of India. A sharp contraction in Indias

corporate borrowing significantly impacted domestic investment activity. Moreover the


9/22

continued buoyancy of FDI suggests that confidence in Indian growth prospects remains

healthy.

I mpact of global financial crises on I ndia s Trade flows

The most straight forward transmission of global financial crisis to the Indian economy has

been the steep decline in demand for Indias exports in its major markets. Gems and jewelry

were first to feel pressure in the very bigning of global slowdown. In November 2008, it

witnessed a sharp decline in export order from US and Europe which resulted in a

retrenchment of more than 30,000 workers. A sharp deceleration in export growth not only

affects the economic growth through the text book type multiplier process, but is also likely

to cause debt default, bankruptcies and severe cutbacks in investments in the pipeline with all

their adverse implication encompassing both the financial and real sectors. Given the share of

export at around 22% of GDP, the quantitative impact of slowdown export on domestic

demand is far from negligible.

During the 2008-09 the deceleration was however modest in the case of manufacturing

goods. As result share of non oil exports as well as manufacturing goods exports in total

exports increased by around 8 percentage points during 2008-09 over the past year. At a more

disaggregated level the major commodities that witnessed a decline in exports during 2008-

09 were handicraft (from 0.5 to0.3 US$ billion), petroleum products (from 28.4 to 26.8 US$

billion), ores& minerals (from 9.1 to 7.8 US billion) and agricultural and allied product (from

18.4 to 17.5US$ billion). The global crisis however had a more pronounce impact on Indias

export during 2009-10(April-October). All sectors including engineering, chemicals, gems

and jewelry and petroleum exports witnessed a decline in export growth.

Table 3: Global Financial Crisis and Indias Exports

Commodity Amount (US $ billions) Growth April-October 2006-07 2007-

08

2008-09 2007-08 2008-09 2009-10

(1)Primary

Product

19.7 27.6 25.3 40.0 -8.0 -22.7

Agriculture and -12.7 18.4 17.5 45.3 -4.3 -25.5


10/22

Allied Products

Ores & minerals 7.0 9.1 7.8 30.2 -14.5 -16.1

(2)Manufactured

goods

84.9 103.0 122.8 21.3 19.6 -20.9

Chemicals &

Related Products

17.3 21.2 22.6 22.3 7.1 -15.8

Engineering

Goods

29.6 37.4 47.3 26.4 26.5 -28.7

Gems & jewelry 16.0 19.7 27.7 23.2 42.1 -38.2

Handicraft 0.4 0.5 0.3 16.0 -40.8 -38.2

(3)Petroleum

Products

18.6 28.4 26.8 52.2 -5.4 -35.8

(4)Others 3.2 4.0 7.7 26.4 148.9 -13.2

Source: RBIs Report on Currency and Finance, 2009

Geographical diversification of I ndia s export

The regional diversification of Indias export also experienced significant changes between

2000 and 2008. The slowdown in global GDP growth has constituted by far the most

important factor constraining the countrys export. Since the world income elasticity for

Indias export appears to be quite high, the negative impact of global economic meltdown on

countrys export earnings would tend to be correspondingly large. Indias export share in

traditional market such as EU and North America witnessed a significant decline. The

depreciation of rupee is the reflection of these external vulnerabilities. India has had to draw

down its foreign exchange reserve through the last quarter of 2008 and first quarter of 2009

largely in defense of the rupee. While Indias reserve are dominated in a basket of currencies

, the United States dollar is the principal foreign currency in which Indias external

transaction are denominated.

There was a structural shift in the share of Indias export in the favour of Latin ASEAN, WestAsia, and South Asia. Indias export to OECD countries was also decelerated during 2008-09.

The US led the deceleration in the export to OECD countries; nevertheless US continued to

be the single largest contributor to Indias export.


11/22

Figure2 : Geograph ical divers if ication of Ind ias Expor ts

Source : RBIs R epor t on Currency and F inance, 2008-09

Ex p r

of se r ic es

Like merchand ise expor ts of serv ices are a lso fac ing a ra ther s teep down turn. Dur ing the

third quar ter of 2008-09 grow th in serv ice expor t declined to mere 5.9% compared to

34.0% in the correspond ing per iod a year back. The earn ings from travels, transpor tation,

insurance and bank ing serv ices have con tracted, wh ile the grow th ra te of sof tware expor ts

has dec lined more than 21 percen tage po ints.


12/22

Figure 3 : Expor t of serv ices

Source : Calculated from R eserve Bank of Ind ia (2009c)

m p c th r o u h m p o r ts

The grow th in Ind ias impor t plunged sharp ly dur ing the third quar ter of 2008-09. A

weaken ing of impor ts was w itnessed in the case of crude o il, cap ital goods, and go ld andsilver. Crude o il perhaps the mos t cruc ial intermed iate inpu t requ ired for sus taining the

produc tion process, is the s ingle mos t impor tant item of Ind ias merchand ise impor t,

accoun ting for around one third of the total changes in interna tiona l oil pr ices, I t is thus no

wonder, have ma jor consequences for the Ind ian economy. The surge in interna tiona l oil

pr ices led to an increase in Ind ias crude impor t bill to $5.6 b illion in Ju ly 2007 to $10.96

billion in Augus t 2008, w ith the share of o il in total impor t bill r ising from 30.5% to 36.6%

over this per iod (Mihir R aksh it2009). Bulk impor t bill has increased from 112.7US$ b illion

to 135.7 US$ b illion in 2008-09. Non bu lk impor t bill increased from 138.7 US$ b illion to155.8 US$ b illion in the same per iod. To tal impor ts b ill increased from 251.4 US$ b illion to

291.5 US$ b illion in 2008-09.


13/22

Table 4: Global Crisis and Indias Imports

Commodity US $ billion Growth (%)

2006-07 2007-08 2008-09 2007-08 2008-09 1.

Bulk Imports 84.2 112.7 135.7 33.8 20.3 Petroleum &

Petroleum

Products

56.9 79.6 91.3 39.9 14.6

Edible Oil 2.1 2.6 3.4 21.4 34.4

Fertilizers 3.1 5.4 13.6 71.9 151.2

Iron & Steel 6.4 8.7 9.4 35.2 7.8

2. Non Bulk

Imports

101.5 138.7 155.8 36.6 12.3

Capital Goods 47.1 70.1 70.5 49.0 0.6

Export Related

Items

17.9 20.8 29.7 16.2 43.1

Pearls,

Precious& semi

Precious stone

7.5 8.0 14.4 6.5 81.1

Chemical,

Organic-

Inorganic

7.8 9.9 12.2 26.4 22.8

Others 36.6 47.8 55.5 30.8 16.1

Total Imports 185.7 251.4 291.5 35.4 15.9

Source: RBIs Report on Currency and Finance, 2009

Geographical Diversification of Indias Import

Geographical diversification of Indias import experienced significant change during 2007-08

and 2008-09. Traditional key trading partners in advanced countries like EU. , and US have

subsided in terms of their market share and new import partners from East Asia (especially

China) have emerged. Another important development has been a gradual dissipation of the

East European countries as a major source of Indias imports. The high share of OPEC


14/22

countries in the recent period reflects the magnitude of crude oil imports due to the rising oil-

intensity of the Indian economy and high oil prices. Imports from OPEC countries has

increased from 25.3% in 2005-08 to 32.6% of total imports in 2008-09. Imports from China

have increased significantly during recent years from almost minuscule level in1

the early1990s.Imports from China has increased from 9.6% in 2005-08 to 10.8% of total imports in

2008-09

Figure 4: Geographical diversification of Indias import

Source: Calculated from RBIs Report on Currency and Finance, 2008-09

I mpact on overall growth

Indias gross domestic product (GDP) growth had started slowing down in the first quarter of

2007-08, nearly six months before the outbreak of the US financial turbulence and

considerably ahead of the surge of recessionary tendencies in all developed countries from

August-September 2008. Indias GDP growth for 2008-09 was estimated at 6.7% as

compared to growth posted in previous year 9.2%. All the three segments of GDP namely

agriculture, Industry and services were seen to record growth of 1.6%, 3.1%and 9.3%

0

20

40

60

80

100

120

Geograpfical Diversification of India'sImports

2005-08

2007-08

2008-09


15/22

respectively in the 2008-09 against the growth of 4.7%, 9.3% and 10.4% respectively in

2007-08.

Table 5: Growth in GDP at Factor CostSector 2007-08 2008-09 2009-10

Agriculture & Allied 4.7 1.6 0.2

Industry 9.3 3.1 10.4

Services 10.0 9.3 8.3

Total 9.2 6.7 7.4 Source: RBIS Report on Currency and Finance, 2008-09

Policy Responses

Monetary Policy

Reserve Bank policy response was aimed at containing the contagion from the outside to

keep the domestic money and credit markets functioning normally see that the liquidity stress

did not trigger solvency cascades. In particular monetary policy of RBI targeted three

objectives:

(1)To maintain a comfortable liquidity position

(2)To augment foreign exchange liquidity

(3)To maintain a policy framework that would keep credit delivery on track so as to arrest

moderation in growth.

From mid September to till end- October 2008 the economy was in the grip of a serious

liquidity crisis and credit crunch. The Reserve Bank of India acted aggressively from mid

October to ease the situation by a series of rate cutting and liquidity injecting measures. RBI

brought down Cash e Reserve Ratio (CRR) from 9% to 5%, Statutory Liquidity Ratio (SLR)

25% to 24% and Repo rate from 9% to 4.75% and Reverse Repo rate from 6 to 3.25%.

Unconventional measures taken by the Reserve Bank of India are a Rupee- Dollar swap

facility


16/22

For Indian banks to give them comfort in managing their short term foreign funding

requirement, an exclusive refinance window for supporting NBFCs and expanding lendable

resources available to apex finance institutions for refinancing credit extended to small

industries, housing and export.

Taken together, the measures put in place since mid September 2008 have ensured that the

Indian financial markets continue to function in an orderly manner.

Fiscal StimulusThe fiscal policy responses of the Indian government to the financial crisis was to stimulate

demand for the countrys output and to bailout those group and industries those were most

vulnerable to the crisis. The central government announced three successive fiscal stimulus

packages one in early December 2008, the second one in early 2009 and the last one in early

March 2009.

The fiscal stimulus packages amounting to about 3% of GDP, included additional public

spending, particularly capital expenditure, government guaranteed funds for infrastructure

spending, cuts in indirect taxes expanded guaranteed cover the credit to micro and small

enterprises and additional support to exporters. The loans that were in default in farming

sector were waived by the government. Pay structure were revised to increase salaries of

government employees. All of these measures were implemented to stimulate the demand in

the economy.

C onclusion

The current global financial crisis, which started in 2008, has been adversely affecting all the

world economies and the magnitude of its impact is exceeded by that of great depression of 1930s. Indias integration into the world economy with a higher trade/ GDP ratio and

increased dependence on external capital flows made it more vulnerable to global crisis.

The immediate effects were plummeting stock prices, loss of forex reserve, and depreciation

of Indian rupee, reversal of capital flows and sharp tightening of domestic liquidity. Foreign


17/22

investors withdrew money from the Indian markets and this situation created fear among the

investors about the stability of stock market. Indias real GDP has shown strong sign of

slipping. Export sector has been badly hit by global economic slowdown. Gems and jewelry

were the first to feel pressure of this slowdown. Declining export and rising imports resultedin a larger current account deficit in 2008-09. The major commodities that witnessed a

decline in export during 2008-09 were handicrafts, petroleum products, ores, minerals and

agriculture and allied products. Like merchandise export services also faced rather steep

downturn.

The regional diversification of Indias export also experienced significant changes. Indias

export share in traditional market such as EU and North America witnessed a significant

decline. There was a structural shift in favour of Latin America. ASEAN, West Asia, North

America and south Asia.Merchandise import also caught global downswings in the second half of the 2008-09. A

massive weakening of imports was witnessed in case of crude oil, capital goods and gold and

silver. The surge in international oil prices led to increase in Indias crude import bill.

Geographical diversification of Indias import also experienced significant change during

2007-08 and 2008-09. . Traditional key trading partners in advanced countries like EU. , and

US have subsided in terms of their market share and new import partners from East Asia

(especially China) have emerged

However Indias banking system has been considerably less affected by the crisis because of

strong macroeconomic fundamentals and well regulated financial system.

The overall impact of the crisis in India has been less than in some other countries not only

because of government stimulus packages but also because Indian financial system is only

partially integrated into the world financial system and because of sound macroeconomic

fundamentals and well regulated financial system. Due to many monetary and fiscal measures

initiated during 2008-09 the economy is back to rapid economic growth.


18/22

References

y Bahaduri, Admit (2009): Understanding the financial crisis, Economic &Political

Weekly Vol. XLIV No.13, 28 Marchy Baru, Sanjaya: (2009): Strategic implication of Global Economic Crisis for India,

(IS AS) Institute of South Asian Studies, working paper no.77, 27 July

y Joseph, Mathew: Global Financial Crisis: How India was Impacted, (ICRIER)

Indian Council for Research and International Economic Relation, New Delhi

y Jha Raghubander: The global financial crisis and short run prospect India, ASARC

working paper 2009/01

y Kumar Rajiv: Global Financial and Economic Crisis; Impact on India and policy

response. (ICRIER) Indian council for Research and International economic

Relation, New Delhi.

y Kuma, Rajiv. and Vashisht, Pankaj: The Global Economic Crisis: Impact on India and

Policy Responses, ADBI Working paper series no. 164, New Delhi.

y Mohan, Rakesh: Global Financial Crisis and Key Risks: Impact on India and Asia

remarks prepared for IMF-FSF High-Level Meeting on the recent Financial turmoil

and Policy Responses at Washington D.C., October 2008.

y Prasad, A. and Reddy, C.(2009): Global Financial Crisis and its Impact on India,

College of Engineering, Andhra Pradesh.

y Rakshit, Mihir (2009): India Amidst Global Crisis Economic and Political weekly,

Vol XLIV No 13, 28 March.

y RBIs Report on currency and Finance, 2000-09y Singh, Sumanjeet: Global Financial Crisis and Indian Economy: Impact Assessment

Policy Responses and Recovery, University of Delhi.

y Subbrarao, D.(2009): Impact of Global Financial Crisis on India: Collateral Damage

and Response Speech delivered in Tokyo, 18 February. y UNCTAD Trade and Development Report, 2009


19/22

Appendix

Table 1: Volume of Export and Import in W orld Economy

Region/Country Volume of Exports Volume of Imports

2007 2008 2007 2008

W orld 5.5 4.3 6.4 4.0

Developed countries 3.7 3.2 3.6 0.7

Japan 6.8 4.8 0.8 -0.8

United States 6.8 5.5 0.8 -3.7South East Europe and

CIS

7.1 18.6 26.4 22.5

Developing countries 8.3 4.7 10.4 8.5

Africa 6.9 1.5 10.0 18.6

Latin America &

Caribbean

2.3 -1.0 11.7 6.7

China 21.9 12.5 14.2 7.7

India 12.8 9.5 12.2 17.7South East Asia 6.9 6.4 7.1 11.1

West Asia -1.4 4.2 16.1 11.5

Source: UNCTAD Trade and Development Report, 2009


20/22

Table2 : Geographical Diversification of Indias Exports (share in pre cent )

Source: RBIs currency and Finance Report, 2008-09

Table3 : Quarterly year on year growth rate of services export

Source: Reserve Bank of India, (2009c)

Region/Country 2007-2008 2008-2009

Advanced Economies 39.5 37.5

UK 21.2 21.0

US 12.7 11.3

Other OECD 5.6 4.7

OPEC 16.6 21.2

Saudi Arabia 2.3 2.7

UAE 9.6 13.1 Other OPEC 4.7 5.4

Developing Countries 42.5 37.6

Asia 31.6 28.1

China 6.6 5.1

Hong Kong 3.9 3.6

Africa 7.5 6.3

Latin America 3.4 3.1

Others 0.4 2.7

2007-2008Q3 2008-09Q3 2008-09Q4

Services 34.0 5.9 -6.6

Travel 11.6 -13.9 -25.9

Transportation 21.0 -8.1 -7.9

Insurance 19.4 -21.5 -28.5

Miscellaneous 40.9 1.5 -2.1

Software Services 41.3 19.5 -12.5

Business services 17.4 -12.6 -15.1

Financial Services 34.2 0.8 -13.5


21/22

Table 4 : Geographical Diversification of Indias Imports (Per cent in total )

Region 2005-08 2007-08 2008-09 1.Advanced Economies 34.3 35.4 31.8 EU 15.6 15.3 14.3

US 6.8 8.4 6.2 Other OECD 11.9 11.8 11.5 2.OPEC 25.3 30.7 32.6 Saudi Arabia 5.7 7.7 6.7 UAE 5 5.4 7.1 3.Developing Countries 30.4 31.5 32.9 Asia 24.5 25.5 26.6 China 9.6 10.8 10.8 Hong Kong 1.5 1.1 2.2

Africa 3.7 3.7 4.3 Latin America 2.2 2.3 2 4.Others 7.9 0.8 0.5 Total 100 100 100 Source: RBIs Report on Currency and Finance, 2008-09


22/22

Global Financial Crisis and its Impact on Indias

Trade Flows

By

* Andalib zaihra

**Dr. Zeba Sheereen

*Research Scholar, Dept. of Economics, Aligarh Muslim University,Aligarh( [email protected] )**Associate Professor, Dept of Economics, Aligarh Muslim University, Aligarh

andalib zehra amu resarch scholar economics) topic- global financial crisis and its impact on india

Documents