global economic
Part 1:
Executive summary
The current essay demonstrates the scenario of Indian economic crisis in 2014. Causes and impact to India was talked in the first section; influence on other economy especially to Australia was analyzed and Stolper-Samuelson Theorem was applied in section 2; similar situations in history were mentioned in the third section.
1. Describe its causes - economic or non-economic (2% for creativity).
In 2014, many emerging economies are facing liquidity crisis, especially India. It was the aftermath of the US QE exit. The QE is the monetary policy applied by countries like US, UK, and some EU members, that to expand the money supply and leverage; it was an effective short-term fix to boost investment and economy growth, yet when it became too long, it caused negative influence in both domestic and the global economy.
Indian economy is highly dependent on foreign capital inflows, and most of them are the cheap money brought from countries with QE policies. With vast investment, the India government spent a lot on infrastructures and manufacture plants that the government kept a deficit account these years. Deficits became problematic when investment capitals stopped. Economically, short of money directly make those on-going projects unfinished; quitting QE will appreciate foreign currencies like USD while make the India currency Rupee comparably depreciate; when Rupee is weaker, there will be inflation in domestic commodity price. Non- economically, delay or stagnation of projects along with weak Rupee drove a loss of confidence on India economy, bear stock and gold market caused the equity and houses prices dropped,.
India is exposed under financial crisis bought by deep troubles at home and abroad: weak Rupee performance due to comparably strong dollar; market gloom due to foreign investment withdraws; domestic commodity price surge due to inflation caused by currency devaluation; GDP growth slowed and Indian government is facing
Executive summary
The current essay demonstrates the scenario of Indian economic crisis in 2014. Causes and impact to India was talked in the first section; influence on other economy especially to Australia was analyzed and Stolper-Samuelson Theorem was applied in section 2; similar situations in history were mentioned in the third section.
1. Describe its causes - economic or non-economic (2% for creativity).
In 2014, many emerging economies are facing liquidity crisis, especially India. It was the aftermath of the US QE exit. The QE is the monetary policy applied by countries like US, UK, and some EU members, that to expand the money supply and leverage; it was an effective short-term fix to boost investment and economy growth, yet when it became too long, it caused negative influence in both domestic and the global economy.
Indian economy is highly dependent on foreign capital inflows, and most of them are the cheap money brought from countries with QE policies. With vast investment, the India government spent a lot on infrastructures and manufacture plants that the government kept a deficit account these years. Deficits became problematic when investment capitals stopped. Economically, short of money directly make those on-going projects unfinished; quitting QE will appreciate foreign currencies like USD while make the India currency Rupee comparably depreciate; when Rupee is weaker, there will be inflation in domestic commodity price. Non- economically, delay or stagnation of projects along with weak Rupee drove a loss of confidence on India economy, bear stock and gold market caused the equity and houses prices dropped,.
India is exposed under financial crisis bought by deep troubles at home and abroad: weak Rupee performance due to comparably strong dollar; market gloom due to foreign investment withdraws; domestic commodity price surge due to inflation caused by currency devaluation; GDP growth slowed and Indian government is facing