The biggest crises that rocked the finance sector in India
Economics, finance, investment strategies define the ultimate developmental growth of a country and with different strategies come different crises. The whole world, particularly India, has been through various changes in the economy throughout each decade and sometimes, it has affected the workings drastically. We have seen the ups of our economy but before we go up, we do face the downsides. Wouldn’t it be interesting to know the crises our country went through before it started enhancing in the category and developing more and more as a country? Well, let us read more about the crises that rocked the finance sector in our country.
Decades of crises (1951- 1970s)
Earlier during the 1950s, India had come up with the first Five Year Plan for the new start of independent India but as mentioned above, it did start as the decades of crises. We came up with several strategies but the country was already facing the struggles of partition, leading to economical crises i.e. food crises and Foreign Exchange crises. This was associated with the early development of the country and then, we did manage to recover during the 60s. Higher growth was being achieved until the ultimate fall-out,
- Wars with China and Pakistan
- Two droughts in 1965 and 1966
Eventually, we did recover from it during the 1970s.
1991 Indian Economic crises
The 1991 crisis resulted in higher dependency on imports, leaving the country with the twin deficit; the Indian Trade balance as well as the fiscal deficit. By the 80s, India had been growing with its strategy but with the worsening reliance on imports, the situation got out of hand. The collapse of the Soviet Bloc, caused India to face devaluation of the rupee and the dire situation led the Foreign Exchange Reserves to hit a downfall. The rates of loans and expenditure increased with an increase in payments and a decrease in revenue.
We did recover with the movement, Liberalization of the Indian Economy and it helped with a result of the large increase in the income share, increasing from 35% in 1991 to 57.1% in 2014.
The Sudden Stop (2008s)
The concept of “sudden stop” was more of a global crisis that hit every country, during 1995 in the US and made its way to India in 2008. It was about the sudden and unexpected change in the inflows and it was said by the Bank officials that it was the movement that, “It’s not the speed that kills, it’s the sudden stop”. It resulted in,
- The massive slow-down in ECB, Trade Credit
- Forex market crises- devaluation of rupee
- Money market squeeze
- Collapse of Imports, Exports, remittances
- Decrease in GDP, increase in Expenditure and consumption
The recovery rate came as well with the fallout, around 2010s, with strong negative signals as well as an increase in GDP with the Credit Market going high.
Covid 19 (2020s)
Now, this is a global pandemic that we have been going through right now. I need not explain the way it has affected the various fields of various countries, from worldwide Lockdown to high downfall of employment rate and, with that the decrease in GDP and economy rate. India has had been struggling through the pandemic, but the fall of GDP continued till 2021 because of its second wave. The nominal GDP went from 15% to 5% in a year and the second wave dampened the short recovery we had climbed on. It directly impacted the economical structure of the country with fluctuations in the business and finance sector.
We have been recovering from the crises with a growth of 5.5%, starting with 2022. We have re-energizing the credit rate for a higher recovery rate, giving the space to make investments for sustained economic growth. So, as the pandemic is still going on, we can never stop being careful and focus on overcoming it, financially, physically and emotionally.
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