EXTERNAL FACTORS

INFLUENCE
OVER
INDIAN ECONOMY
BY MANISH RANJAN(35)
MD. KASHIF NAWAZ ANSARI(38)
KONDAVEETI MANORAJ(32)
 POINTS BREAKDOWN

 GLOBAL RECESSION 2008

 OIL PRICES GOING DOWN
 BREXIT
 US ELECTION
 Global Recession

 Loans to NINJA(No income, No Job, No Assets)

 Sub-Prime Lending
 ARM (Adjustable Rate Mortgage)
 Reckless Lending
 Increase in Loan Agents & Financial companies
IMPACT ON INDIAN ECONOMY

 The quantum of liquidity available during the first half

of FY 2008-09 is about a third lower than during the
first half of FY 2007-08.
 Foreign Institutional Investors have withdrawn from
Indian stock markets leading to sharp falls in key
indices.
 Export growth slowed down
 Why INDIA Survived?

 Less dependency on housing sector

 Strong central bank
D.Subbarao and his predecessor YV Reddy being
very prudent bankers. They applied brakes on banking
loans even before the crisis.

 Indian financial markets were relatively insulated from

global financial markets.
 India Strategy

 Reduction in the repo rate and Reverse repo rate

9% as on October 2008 to 4.75% in July 2009
3.25% in July 2009 from 6% as on October 2008

 RBI needs to neutralize the outflow of FII money by unwinding the market.

 This will mean drawing down the dollar reserves which is important at this
hour.

 In the IT sector, there should be correction in salary offerings rather than

job cutting.
DECLINE OF CRUDE OIL PRICES
Reason for decline of CRUDE OIL

 Strong U.S. dollar, 

 OPEC(Organisation of Petroleum Exporting
Countries),
 Oversupply,
 Declining demand and the Iran nuclear deal
 Factor affecting crude oil price

 World oil demand

 World oil supply
 Weather conditions
 Government policy
 Political Conditions
 Futures Market
 Impact of increase in oil prices on growth
and inflation levels in India

GDP=Private Consumption + Gross Investment + Govt Spending + ( Export –

Import).
International Increase in Extent of fall Extent of fall Extent of
oil international in in increase in
prices per oil prices (%) manufacturing GDP growth WPI (%)
barrel ($) sector (%)
(%)
50 38.9 2.1 0.4 1.5
60 66.7 9.7 1.9 3.6
70 94.2 16.9 3.4 5.7
80 122.2 24.5 4.9 7.9
140 126.1 29.7 7.3 7.2

Source:- Extractive Industries for Development

Report
 Inflation

 Crude oil price move up or down, inflation

follows in the same direction.
 Crude oil price increases, it’s directly affects the
rate inflation. When the prices went to high of
more than $100/barrel in 2008, the inflation also
went up to 12.27% which was highest for India in
previous two decade.
Steps taken by the govt. and RBI

What Govt. did ?

1. Provided huge amount of subsidies to oil companies to
keep them solvent.
2. They increased domestic prices of diesel and petrol.
3. Start looking for alternate energy options to prevent future
oil shocks.
What RBI did?
Increase in CRR, Repo rates.
(i.e. used monetary tools to calm down the heat)
 Conclusion
To summarize the study
When Oil prices Moves UP :
1. Inflation increases
2. Govt. spending on subsidy increases
3. Foreign currency reserves reduce
4. Our export becomes weaker
5. GDP is affected negatively
6.Share market crumbles
7. Investment decreases
Global Politics Affecting
Indian Economy
By
Kondaveeti ManoRaj(32)
Victory of Donald Trump
Immigration
 Trump expects to curb both legal and illegal immigration.

 The H-1B visas – a non-immigration visa which allows U.S.

companies to hire highly talented professionals temporarily.

 Trump terms H1B visa programme as 'unfair', and his stated purpose
is to end the programme.

 The H-1B visa is extremely important to the Indian software industry.

The removal of this visa will have a disastrous effect on the Indian
software companies send some of their staff to work on-site with their
clients in the U.S. through the H-1B visas.Indian IT stocks and IT
companies like TCS and Infosys are likely to be the victims of this
policy.

 Although Trump wants to put stricter immigration rules, he also says

he wants to encourage Indian entrepreneurs and students to the US.
Trade
 Trump's 'hawkish' trade policy of 'America first' and his plans to
renegotiate all foreign trade deals will affect trade treaties with India,
too.

 Trump sincerely believes that the world is robbing the Americans of

their jobs and thus, wants to close its doors to trade. To do so, he
plans to implement tariffs and quotas. Any tariff that Trump proposes
to either China or Mexico will affect India as well. Also, many a times,
Trump has also expressed his displeasure on the work that is
outsourced by America to India.
Taxation
 During the election process, Trump promised to lower taxes and
increase military expenditure. It is assumed that to fulfill these
promises, Trump will use government money that may lead to a debt
burden and a falling dollar. And a recession in US, would obviously
adversely affect investment and growth across the world, including
India.

 Trump's promise to reduce the US corporate tax rate from 35 per

cent to 15 per cent could result in companies like Ford, GM and
Microsoft rushing back to the US.

 This rush of US firms will hit Modi's Make in India push.

Sources
 Economic times

 ABP news

 The Hindu
THANK YOU