Ifm Assignment

1.0 Introduction

India is emerging into an open-market economy by way of financial globalization process. Following Mishkin and Eakins (2012), this process happens when governments eliminating restrictions on financial institutions and markets domestically plus allowing their economies open up to flows of capital and financial firms from other countries. India liberates its economy including industrial deregulation, privatisation of state-owned companies, and reduced controls on foreign trade and investments. The process began in 1991 during then-prime minister Narasimha Rao and finance minister Mammohan Singh. The process continued with Singh as prime minister twenty years later. The country’s gross domestic product (GDP) growth averaged below 7% each year since 1997. India’s diverse economy ranged from agriculture to modern industries and services. India is the world’s second largest pool of English-speaking scientific and technical professionals and also the major exporter of information technology services, business outsourcing services, and software workers. In 2010, the Indian economy rebounded robustly from the global financial crisis largely contributed by strong domestic demand and growth exceeded 8% year-on-year.

However, its economy downturn started in 2011 when there was a slowdown in government spending and a decline in investment. This is due to investor no confidence about the government’s commitment to further economic reforms and about the global market. India has a large fiscal deficit and a deteriorating trade deficit.

At the end of 2012, Indian government announced additional reforms and deficit reduction measures to reverse India’s slowdown, including removing restrictions on foreign participation in direct investment in the economy. In 2013, India was facing the worst financial crisis in decades as rupee fell in the value rapidly. Within the span of about a year, India’s growth declined from more than 8% to around 5%.

2.0 Tapering of...