A Perspective from India
Murali Murti and N. V. Krishna
The global financial crisis (GFC) is a term often used to describe the turbulence that shook major economies of the developed world during 2008 and early 2009. The GFC was characterized by economic recession, increased unemployment, the collapse of major banks, investment companies, and insurance companies, the collapse of the realty sector, and a sharp reduction in household and institutional credit. Further damage to the system was averted by huge bailout packages, with the Troubled Asset Relief Program (TARP) in the United States alone accounting for nearly $1 trillion.
The crisis also took a huge toll in human terms, with more than 100 million people slipping below the poverty line, workers in formal and informal sectors such as manufacturing, construction, and commerce being seriously affected, and more than 18 million people joining the pool of unemployed. It is also estimated that millions of children worldwide were affected by cognitive and physical disabilities resulting from malnutrition.
The United States and the developed economies of Western Europe were the worst hit by the crisis, whereas some other major economies, including China and India, escaped relatively unscathed. The focus of this chapter is on examining possible factors that led to a higher level of resilience of some economies, in particular, India. Resilience in this context denotes the ability to withstand the effects of an economic crisis with a relatively moderate impact, and the ability to recover rapidly from such crises. Given that such crises may recur in the future, it is critical that countries and economies move toward increasing the resilience of their systems.