Global Financial Crisis and Indian Economy

Abstract

All over the world banks are closing down, industries are shutting down, millions are losing jobs. An allpevading anxiety, frustration is enveloping. It all exploded one day like this. ‘Lehmann Brothers files for bankruptcy’ – these headlines splashed across the front pages have ‘shocked and awed’ the people all over the globe, no doubt. But the unprecedented ferocity and impact of this financial turmoil is only being felt now. Lehmann Brothers-4th Largest investment bank in the US With an enviable history of 158 years had survived the Great Depression of 1930s. It had even declared a profit of Rs.2400 crores for the first quarter of 2007. Despite the terrible prospect of bankruptcy starting in the eye, Lehmann had handed out plush jobs with annual package ranging from Rs.70 lakhs to Rs.1 crore to some of the pass-outs from IIM, Bangalore. Now, while these graduates are left high and dry, their senior alumni with ‘prestigious’ jobs at Lehmann have started packing to fly towards safer pastures-backhome!

The meltdown in the US financial markets, beginning with the sub-prime crisis and rapidly accelerating to affect an ever-wider circle of major institutions, began with the bankruptcy of Lehman Brothers, the below-par sale of Merrill Lynch and a US government bailout of American International Group (AIG), the world’s biggest insurer. Two other giant investment bankers Morgan Stanley and Goldman Sachs-had to be allowed to change their status to bank holding companies so as to bring them under supervision of the banking regulatory bodies.