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One Event that has affected the Indian Economy

The subprime crisis in the US and the recession in the US

The subprime concept

Anyone with a bad history with respect to repayment of loans is tagged by the US and thereby he cannot get loans(in any form) from any Government agency in US.This person then finds out other options of borrowing like taking money(or any other asset) from a non recognised or private firm.These bodies charge a bit extra on interest.If this person now defaults with these private agencies,the agencies in turn default to the Government in some way leading to a scenario of subprime crisis.

In US the subprime crisis happened with respect to the housing business.This led to overall recession in the US economy.The cash reserve with the US government decreased.The spending power of people was affected.The immediate repercussion of this was felt by the developing economies like India,where in big players like US have invested a lot of funds in various industries.

The US decided to pull back this cash in whatever possible way.This led to the turmoil in the Indian share Market .Sensex crashed.Also the IT industry was affected by the overall recession.Over the past 5 years IT has been a major contributor for the GDP growth of India.

This sector had witnessed a huge growth rate over this period of time.This rate suddenly declined.The sector stagnated.The government looked for other sectors which could strengthen the economy,but none could sustain the growth rate.The GDP fell .

With the falling GDP, the Government had to come up with some option to stabilise things.SBI changed its CRR index for the banks,further changes were made which resulted in inflation and along with rising oil prices worldwide added to the woes of the Indian economy.The