US Sub prime crisis

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shruti karuturi (Querist)
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14 May 2008 well, i would like to know what effects does the US sub prime crisis have on indian economy, Indian financial institutions, stock market etc..

Does it have any effect or is it the cause for the high inflation rate??...

CA. Yayati Tyagi

CA. Yayati Tyagi (Expert)
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15 May 2008 hi shruti,

us subprime crisis is affecting India in many ways :

1) some some banks like sbi and icici, invested and lost millions of dollars in sub-prime securities

2) Outsourcing companies in India (including big shots like Infy, Wipro etc. are loosing money as companies, which used to send them work from US, are closed or their business is down because due to this crisis U.S. has gone into recession.

3)US being largest economy in the world and economic powerhouse, its recesssion is affecting allmost all countries which trade with U.S., now people in US are buying less so our exports are affected and in same way companies in US are producing less so our imports are going expensive

4) this crisis has created liquidy crunch in US, which is affecting further investment in trade and industry there and here also (as US cos. will held their expansion plans)

5) Indian GDP growth rate is also slipping and forecasts are cutting down by RBI and other economists,

6) due to all these conditions stock market in India is dipping, it has come down from 21000 to 17000,

7) Indian cos. use to borrow money from US due to less interest rates but now because of credit crunch they now have to borrow at expensive rates,

8) all these conditions are creating pressure on inflation rates also,