PROJECT REPORT

“A STUDY ON FINANCIAL CRISIS FACED BY INDIAN

GOVERNMENT.”

SUBMITTED
IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF
THE DEGREE OF BACHELOR OF COMMERCE
UNIVERSITY OF CALICUT

Submitted by
Mr. SOURAV. C
(Reg.No.ZEARBCM016)
Under the guidance and supervision of
Mrs. SANDHYA .A. U
Assistant Professor
DEPARTMENT OF COMMERCE & MANAGEMENT STUDIES

LEMENT COLLEGE OF ADVANCED, STUDIES PATTAMBI

(Affiliated to Calicut University)
2017-2020
 LEMENT COLLEGE OF ADVANCED STUDIES
DEPARTMENT OF COMMERCE AND MANAGEMENT STUDIES

PATTAMBI,PALAKKAD-679303

CERTIFICATE
This is to certify that the project report entitled as“A STUDY ON
FINANCIAL CRISIS FACED BY INDIAN GOVERNMENT” is a bonafide
recorde of the original work carried out by Mr. SOURAV. C with Reg.No.
(ZEARBCM016) in the Department of commerce and management, Lement College
of Advanced, Studies, pattambi, during the academic year 2019-20 in partial
fulfillment of the requirement for the award of the BACHELOR DEGREE OF
COMMERCE of the University of Calicut.

Mrs. SREEJAYA. P Signature

Head of The Department of commerce External Examiner
Lement College Of Advanced Studies
Pattambi

Place: Pattambi
Date:
 LEMENT COLLEGE OF ADVANCED, STUDIES PATTAMBI
DEPARTMENT OF COMMERCE AND MANAGEMENT STUDIES
PATTAMBI,PALAKKAD-679303

CERTIFICATE

This is to certify that the project report entitled “A STUDY ON FINANCIAL

CRISIS FACED BY INDIAN GOVERNMENT.” Is a bonafide record of work done
by Mr. SOURAV. C (Reg.NoZEARBCM016) under my supervision and guidance
and submitted in partial fulfillment of the award of Bachelor of commerce, under the
University of Calicut.

Place: Pattambi Mrs.SANDHYA. A.U

Date: Assistant Professor In Commerce
Lement College Of Advanced Studies
Pattambi
 DECLARATION

I SOURAV. C (Reg No: ZEARBCM016) here by declare that the project entitled
“A STUDY ON FINANCIAL CRISIS FACED BY INDIAN GOVERNMENT.”
Submitted to Lement College of Advanced Studies, Pattambi for the partial fulfillment
of the requirements for the Bachelor’s Degree in Commerce is a record of original
work done by me during the period of study at Lement College of Advanced Studies,
Pattambi. I also declare that this project has not been submitted before for the award
of any Degree, Diploma, title or recognition.

Place: Pattambi SOURAV. C

Date:
 ACKNOWLEDGEMENT

I express my sincere gratitude to Mr. SHABEER. KP the Principal of LEMENT

COLLEGE OF ADVACED STUDIES,PATTAMBI permitting me to undergo this
institutional training.

I owe my sincere gratitude to Mrs.SREEJAYA. P, (Head of the Department of

commerce and management studies), for the general and advice imparted on me.

I hereby express my profound gratitude to my guide Mrs. SANDHYA. A.U, Assistant

professor, Department of Commerce and Management Studies, LEMENT COLLEGE
OF ADVANCE STUDIES,PATTAMBI for her valuable guidance and suggestions
rendered during the course of this study, and also during the preparation of this report.

I express my sincere thanks to all teaching staff of the department of commerce and my
friends who helped me in the preparation of this project.

I express my gratitude to all others, especially the respondents who have helped me,
including my family members for their tolerance and support.

I am thankful to almighty for showing abundance grace to complete this project without
any hindrances.

Place: Pattambi SOURAV. C

Date: (REG. NO: ZEARBCM016)
 CONTENT

Chapters Description Page no.

I Introduction 1-9

II Review of literature 10-14

III Theoretical Framework 15-18

Data analyze and

IV 19-37
interpretation
Findings, Suggestion &
V 38-42
Conclusion
Bibliography,
43-48
Appendix,Questionnaire
 LIST OF TABLE

TABLE NO TITLE PAGE NO

4.1 India’s real GDP growth 20
4.2 Rampant corruption 21
4.3 Volume of cashless transactions 22
4.4 Sales of motor vehicles in India 23

4.5 Average tariff rates on imports in India 24

National per capita disposable income and

4.6 25
growth rate 2015-2019
4.7 Annual change in India’s GDP 26
Government spending on industry
4.8 27
declined
Data regarding poor employement
4.9 28
opportunities during recession
Declining of auto-vehicle industry during
4.10 29
recession
Distribution of India’s exports by
4.11 31
principal regions 2018-2019
Deployment of foreign currency assets as
4.12 32
on 31 march 2018
India’s GDP growth are decelerated
4.13 33
remarkably in 2019
Contribution to the economy of India by
4.14 35
sector 2017-2018
Contribution to the economy of India by
4.15 36
sector 2018-2019
Unemployement rate in India from 2012-
4.16 37
2019
 LIST OF CHARTS

TITL
CHART NO E PAGE NO
4.1 GDP growth 20
4.2 Rampant corruption 21
4.3 Volume of cashless transactions 22
4.4 Turnover 23

4.5 Average tariff rates on imports in India 24

4.6 National per capita disposable income 25

4.7 Percentage change 26
Government spending on industry sector
4.8 27
as % of GSDP
4.9 Value 28
4.10 Profit in crore 29
Economy wide fluctuactions in
4.11 30
productions
4.12 percentage 31

4.13 Deployement of foreign currency 32

4.14 Decelerated GDP growth 33

4.15 Core sector output 34

Contribution to the economy of India by

4.16 35
sector 2017-2018
4.17 Sales 36

4.18 India –unemployement rate 37

 1

CHAPTER 1
INTRODUCTION
 1.1 INTRODUCTION

Indian economy is an agricultural economy. This project mainly focuses

on India’s financial recession and its consequences and remedies. The dynamics
of India’s growth is slow down due to some financial recession. This crisis
brewing within the Indian economy has gained unanimous acceptance by now.
Even the latest annual report of the reserve bank of India for the fiscal year 2018-
2019 confirmed that the Indian economy has indeed it a rough path. The GDP
growth rate of the economy has slipped to 5% in the 1st quarter of financial year
2020, the lowest in over 6 year. This is an indication of tougher times ahead. Be
it the recent collapse of automobile sector or the rising number of nonperforming
asset(NPA) sluggish consumers demand of failing manufacturing sector; all have
an hand in this declaration of this growth rate. The sport in instances of job losses
from automobile manufactures to biscuit makers has led to general acceptances
of down turn. This is the 3rd instances of an economic slowdown forIndia in the
past decade after once that began in June 2008 & March 2011.

The technical term for the same is growth recession. A recession is defined
in economics as three consecutive quarters of contraction in GDP. But since India
is a large developing economy, contraction is a rarity. The last instance of
negative growth for India was in 1979. A growth recession is more common place
where the economy continues to grow but at a slower pace than usual for a
sustained period, what India has been facing now a days.

In addition, another major component of India’s GDP is investment,

induced by both-private and government sectors. It has been a key driver of
growth since the liberalisation of 1991. Though gross fixed capital formation
(GFCF), the main constituent of investment in the economy, increased, yet its
contribution to growth fell by 6.2% points in 2014 -2019 than in 2011 -2014. The
slackening of investments lower the level of infrastructure development, causes
hesitation in creating small business, stop entrepreneurs from investing in
research and development, and thus stagnates technological development. Capital
investments are long-term gains that generate profitability for many years by
improving operational efficiency and boosting innovation. It goes without saying
that for holistic growth of the economy and to gain. Competitive edge over others,
the economy must innovate.
In addition to these factors, the slump in the economy is also affected by the
various exogenous factors. A leading dampener is the US-china trade war, which
has contracted world trade and, in turn, Indian exports.

Also, high rates of GST, liquidity crisis in NBFES and shift in the
behavioural pattern of the work force due to the entry of young people has
discouraged savings. When people save less in the economy, it leaves less money
for investment.

The growth of the Indian economy had been predominated by consumption

inclusive of both-private final consumption expenditure (PFCE) as well as the
government final consumption expenditure (GFCE). Over the last 5 years, the
total consumption expenditure by Indian households had accelerated with an
average growth of rate of 7.8% compared to an average of 6.1% in 2011-14. But
the recent sharp fall in PFCE in the June quarter to 3.1% compared to 7.2% in the
March quarter has significantly contributed to the recent slowdown.

That being said, any fall in consumption expenditure, as and when it would
happen, would escalate the crisis ever more. If consumption spending falls, then
output and employment level also fall since consumption expenditure directly
impacts the other two. As a consequence, the economy would stagnate, and prices
deflate. Lower prices, if unable to recover the costs; would initiate the layoff
process. This, in turn, reduces earning further. Hence this vicious cycle keeps on
repeating itself until the economy slips into a deeper state of shock.

Now India’s GDP decreasing by 4.5%. This denotes a financial recession

in India’s industrial and economic region.
 1.2 STATEMENT OF PROBLEM

This project is the detailed study and summary about financial crisis faced
by Indian government and its challenges to the Indian industry and economical
region. This particular topic is chosen because our Indian Government is the one
of the highly successful democratic country in the world. Now India is focused
financial crisis in the industrial and economic field. The main reason of financial
crisis is very difficult to be analysed because recession is prevail in the different
parts of our country. Firstly this crisis began in the region of vehicle
manufacturing industry. Besides demonetisation and various regulatory
restrictions imposed by Government in our financial policies adversely reflects
our financial and economical region.

This topic discloses the reason for recent financial crisis and its causes and
some suggestion to overcome the crisis faced by Indian Government. Declining
in GDP from 5% to 4.5% points out that there in a financial recession in every
area of our economy. But this recession is not major consequence have we can
overcome this financial crisis in future
 1.3 SCOPE AND SIGNIFICANCE OF STUDY

When an economy registers negative GDP growth for 2 or more

consecutive quarters, it could be termed as a recession. India’s GDP growth has
slowed down from 5% to 4.5% recently. This reveals that there is a financial crisis
in the field of auto mobile industry and some other economies such as real estate
and banking.

This topic exposes focuses on the financial crisis or challenges faced by

Indian economic social and financial region. Some incidents points offer a deep
into India’s spectrum, a deeper study of ground reports from various state indicate
that economic slowdown has hit India where it hurts most the crucial medium and
small scale enterprises (MSME) or the back bone of most Indian sectors. This
projects has an enormous scope about the financial crisis and challenges faced by
Indian government in various sector of our economy.
 1.4 OBJECTIVES OF THE STUDY

PRIMARY

1. The prime objective of this project to reveal financial crisis faced by

Indian industry and economic region, causes and suggestion to improve
our economic condition.
2. To understand India’s GDP and its increase or decrease level.

3. To understand the merits and demerits of financial crisis and to

suggest various plans to overcome the recession situation.

SECONDARY

1. Abolishing of black money and business transaction should be held

in clear and trust way.

2. To know the causes of depression of growth of GDP recently.

 1.5 RESEARCH METHODOLOGY

Research Methodology is a method to solve research problem

systematically. It involves gathering data use of statistical techniques
interpretation and drawing conclusion about research data. The research topic
“THE FINANCIAL CRISIS FACED BY INDIAN GOVERNMENT” is based
on casual research method, the study is based on survey method and enquiries.

RESEARCH DESIGN
The Research Design selected for the study is Descriptive Research design
and Exploratory Research design. The main purpose of Descriptive Research
design and Exploratory Research design is to describe the state of view as exit at
present. Simple it is a fact finding investigation. Research design provides a
guidance to enable to keep track of all action order to meet the objective; the
survey and field study was conducted by secondary data.

1.5.1 SOURCES OF DATA

The data sources used for preparing this project is from primary sources of
secondary sources of data.

SECONDARY DATA
Secondary data are those data which are collected through indirect personal
enquiries, third parties, internet and websites. For collecting these types of
information for this project study depend leading channels, newspapers, books and
articles published by economic ministry of India and government gazette. Different
chronicles, articles, journals published by ministry of finance of government of
India.
1.5.2 SAMPLE DESIGN
The research was mainly opted on financial crisis faced by Indian
Government from websites and various published articles. Design selected from
union budget and notification of government.

1.5.3 TOOLS FOR DATA COLLECTION

Data are collected through internet.

1.5.4 TOOLS FOR ANALYSIS

The collected data is analysed by the following methods.
1. Percentage method.
2. Graphical presentation
3. Charts and table presentation

1.5.5 PERIOD OF THE STUDY

21 DAYS (DECEMBER 10 – JANUARY 4)
 1.6 LIMITATION OF THE STUDY
The following are the important limitation of the study

1. The respondents are unaware about the consequences of financial

recession faced by Indian government.
2. Lack of proper knowledge about economic policy of our
government is a hazard for preparing for the project.
3. Most of the respondent and government authorities reluctant to
say about financial recession.
4. Unavailability of articles leads to delay in preparing this project.
5. Undisclosed source of information seriously affected this project
study.
6. Financial recession is curse to man kind.it destroys industrial and
economic equilibrium of the country.
7. Our finance minister Mrs NIRMALA SEETHARAMAN admitted
that there is a slow financial recession but she does not give a
correct solution for overcome the recession.
8. Respondents non-cooperative mind adversely affect the data
collection and this leads to lag in preparation.
 CHAPTER 2
REVIEW OF LITERATURE
 11

REVIEW OF LITERATURE
We firstly start by the presentation of overall up to date empirical studies
analysing the relationship between financial development and economic
recession and; secondly fall into a classification, step by step firstly based on
major results in the literature review, secondly on different methodologies used
and finally on geographical orientation.

BASHIR ET AL
Attempt to analyse the concept of financial crisis, describing the causes and
consequences of the 2007 financial crisis and its effects on the world economy,
and especially on achieving the MDGs in the Tunisian context. He found that
Tunisian banks were not directly affected by the credit crisis and bullet premiums
since they do not have many assets abroad. Additionally, the crisis did not
affected the opening programs to the global economy established by Tunisia since
policymakers continued lowering tariffs to meet international commitments and
stimulate economic exchanges with the rest of the world. The global recession
had the effect of removing 38000 jobs in Tunisian manufacturing sector.

PAREJO AND SUDRIA

Highlight an important point of the recession that would ensure that the
financial crisis has an impact on the development by focusing on the performance
of the industrial sector. With data from multiple sources (Eurostat, INE, Thomson
Reuters DataStream, the International yearbooks of industrial statistics and VOX
EU etc.), they use the evolution of the Industrial Production Index of Spanish
economy during the 1929 crisis and 2007 according to the method proposed by
Eichengreen and O‘Rourke’s (2009). They conclude that in the year that preceded
each crisis, some countries are particularly affected compared with other
developed countries with similar income levels and initialization (EURO area in
this case). The recession has not only affected the economy in terms of industrial
production, but also investment, domestic consumption, and especially
employment (with an unemployment rate of 19% in 2010)
Again in developed country, some authors show that because of the 2007 great
recession and financial crisis, households are not more optimistic than companies
about their future economic prospects. Hurd and Rohwedder (2010) estimate on
American data collected between 2008 and 2009, that more than
39% of American households are unemployed, have not been treated fairly and
have Housing payment arrears. Moreover, they forecasted an increase of goods
and services market prices and real estate prices.
Other studies focus on the impact of policies, predictions and recommendations
that followed the recession and show that in general they can be wrong at
2.97.2%. According to Petralias et al. (2013), this situation illustrates the higher
degree of uncertainty surrounding gain, loss or stagnant growth predictions in
Greece during the year 2013.

ALIA AND CHASSEM

Analyse the Cameroonian case by using annual data over the period
1979-2004 and show that financial development stimulates growth while trade
openness seems to reduce it. Financial development is approached by a
composite indicator of financial development and trade openness by degree of
Cameroonian economic openness. According to them, structural policies of
stronger growth could undoubtedly have positive effects on growth within
both short term and long term. Aka (2008), using a GARCH (General Auto
Regressive Conditional Heteroskedasticity) coming from the model of Engle
(1982), analyse the effects of the subprime crisis in the US on the WAEMU
economies and leads to the conclusion that all sectors are affected by
significant contagion effects in stock return and volatility.
Thus, it is the development of the financial system in time which facilitates the
transmission of the recession even if the financial systems. The different
development models, such as industrial organization, the role of the state and
social institutions may yet make the spread of crisis in some developed countries
different. This is for example case of japan; after having known the fastest growth
of all time, now suffers from many problems that cannot be called cyclic (that is
to say related to the Japanese recession) but rather structural and are obstacles to
economic dynamism and achievement of long term growth
(Siddiqui,2009).

MASWANA
Investigates the impact of the global financial and economic crisis on African
economic development focussing on Botswana, Cameroon, coted’ivoire, DRC,
Ghana, Kenya, Mauritius, Nigeria, Senegal, South-Africa, Tanzania and Zambia.
He used a nonlinear generalization of integration, the threshold auto-
regression model (TAR), with employment pf the method of Chan (1993) to
estimate the threshold value because larger shocks bring about a different
response than do smaller shocks. The main finding is that the current financial
meltdown and economic recession crisis might have spread into Africa via
business cycle and trade co-movement rather than financial links.

BEACHY
Analyse what provided the largest financial and economic collapse in decades.
He estimate that the proximate causes of the recent crisis are the housing bubble
and subprime mortgage lending boom, but the groundwork for all the crisis are
skewed financial sector incentives, errant economic assumptions, and inequitable
socioeconomic structures laid. Fernald (2014), chows that, the prerecession trends
in less developed countries reflects a reduction in the level of potential output in
2013 as U.S. labour and total-factor productivity growth was slowed prior to the
Great Recession. One explanation can be find on disruptions during or since the
recession, and industry and state data rule out “bubble economy” stories related
to housing or finance. So, he use a calibrated growth model to estimate
productivity growth in 1973-1995. The productivity growth remain slower for the
less economic, this implies that, slack than recently estimated by the
Congressional Budget office.

GABBI et al.
Attempts to explain the recent financial crisis and the subsequent Great Recession
from the point of view of incentives that change as a consequence of
securitization and contagion process. It provides a critical analysis of the basic
principles of the Asymmetric Information Approach and its two branches that
view difficulty the evolution of banking and the role of securitization in it.
Considering the methodology with which the relationship between financial
development and the recession is studied. Several approaches can be identified
include: macroeconomic approaches, we distinguish in one hand, studies that use
data descriptive statistics methods to describe the contagion of the financial
development on the real economy, and on the other hand, studies that evaluate the
impact of financial development on the level of activity (GDP) through different
transmission channels (exports, remittance, inflation, and official development
assistance).
Several indicators are used in the empirical analysis of the link between financial
development and growth/recession. The most commonly used
indicators for financial development and recession available for many developing
countries over a long period of time, are the rate of GDP growth, liquid assets, or
loans granted by financial intermediaries (excluding central bank and government
agencies) to the private sector.

GOLDSTEIN AND RAZIN (2012)

We provide an extensive review of three literatures that have been developed over
more than three decades, highlighting the analytical underpinnings of three types
of crises: banking crisis and panics, credit frictions and market freezes, and
currency crises. We argue that features from this types of crises have been at work
and interacted with each other to shape the events of the last few years. We
address some of the policy challenges that face the global economy today using
the analytical tools at hand.

ITAY GOLDSTEIN, ASSAF RAZIN (11 MARCH 2013)

Broadly speaking, there are three types of economic crisis: crisis and panics,
credit frictions and market freezes, and currency crises. This column argues that
features from this types of crises have been at work and interacted with each other
to shape the events of the last few years. From an extensive review of literature
on these issues, it’s clear that the biggest challenge policy makers and economists
face is in developing integrative models that better describing contemporary
economic real
 CHAPTER 3
THEORETICAL FRAMEWORK
 16

THEORETICAL FRAMEWORK

Financial and monetary systems are designed to improve the efficiency of

real activity and resource allocation. A large empirical literature in financial
economics provide evidence connecting financial development to economic
growth and efficiency (Levine 1997, Rajan and Zingales 1998). Unfortunately,
financial crises, generating extreme disruption of the normal functions of
financial and monetary systems, have happened frequent throughout history.
The last five years have been characterised by great turmoil in the world’s
financial systems, which took much of the economic profession by surprise. We
have witnessed the meltdown of leading financial institution in the US and Europe,
a sharp decrease in lending and trading activities, and the ongoing challenge to the
European Monetary Union. Explaining the forces behind the crisis and coming up
with suggestions for policy makers on how to solve it and fix the system going
forward have become top priorities for many economists.
These recent events feature familiar ingredients from the history of
financial crises. Understanding the theories behind this crises and where these
theories need to be further developed is crucial for properly addressing the current
challenges and designing the financial systems for the future.
The current global economic crisis has influenced the world economy.
Scholarly and political debate on both the nature of economic crisis in capitalism
and the fundamental reasons of the current economic crisis has become vital. In
the Renaissance of theories of crisis, this articles has inquired into the nature of
economic crisis and investigated the distinction between the fundamental reasons
(forms of existence) and the triggering factors (forms of appearance) in the
context of the current global economic crisis. To serve this purpose, it has briefly
mentioned the perception of keynessiance and classical /neo classical economists
and evaluated in the diversity in Marxist theory of crisis. It made an inquiry into
two approaches in Marxism, the tendency for the rate of profit to fall and over
accumulation, and provided a comparative analysis within the intricate
production process.
The main reasons for financial crisis happening in our country is huge
burden due to demonetisation, liberal monopolistic policies framed by Central
Government .privatisation of public sector enterprises BSNL, Sale of BPCL etc.
The financial crisis mainly happened in vehicle market. A large number of
Vehicle Companies cease their production and sometimes leads to closed down.
This project analysis financial crisis from a theoretical point of view. For it
reviews what different schools of economic thought have to say about financial
crisis. It examines first the approaches that regard financial crisis as a disturbing
factor of a generally stable real economy (wicksell, haiyek, Schumpeter, Fisher
and the early Keyness). Thereafter, approaches, where the dichotomy between
the monitory and the real sphere is lifted are reviewed. Here in particular the later
works of Keyness and the contributions of Minsky are of importance. Lastly, it is
looked at the behavioural finance approaches. After having reviewed difference
approaches it is examined where those approaches have similarities and where
they can be combined fruitfully , Based on this, we develop an on theoretical
frame work methodologically based on a Wicksellian cumulative process,
however , overcoming the neo classical dichotomy. The projects ends with some
policy recommendations based on the developed theoretical frame work.
An important aspect of financial crisis is the involvement of
government and the potential collapse of arrangements it creates such as an
exchange rate regime. While the traditional literature on currency crisis
focused on the government alone, the third generation models of currency
crisis. A major challenge in policy analysis is going forward to incorporate the
frictions highlighted above the coordination failure, incentive problems
asymmetric information, government constraints into a macro economic
model that can be calibrated and provide quantitative output as to the optimal
mix and magnitude of policy.
Financial crises are no new phenomenon. Even before market mechanisms
dominated the whole economy financial crises were possible. Famous, for
example, became the “tulip mania” in 1637 in the Netherlands which was a
speculative bubble with extreme price increases of bulbs of at that time newly
introduced tulips. When the bulb prices suddenly collapsed in a panic many
speculators became over-indebted and became bankrupt. From the late 18th
century on, when modern capitalism in England unfolded, financial crises were
companies of capitalist development, however with different intensity in different
historical periods. Already in 19th century, economists started to develop models
to try to understand financial crises. Karl Marx and John Steward Mill among
others, analysed financial crises. However, as the aim of this project is not a
history of economic thoughts we will not discuss those and other economist of
that time as all their important arguments are included in later approaches about
financial crises.
Knut Wicksell’s (1898) analysis seems to us a suitable framework to
discuss financial crises. He delivered a framework of cumulative process, and
with it one of the financial crises. This framework has been shaping economic
thinking until today. Economists in the Keynesian and in the neoclassical
economist which in many ways stepped out of the traditional neoclassical model,
which later became mainstream thinking. In the Wicksellian approach dynamic
economic process of are explained by the interaction of two types of return, which
typically diverge or at least do not tend to equilibrium. Neoclassical and
Keynesian economists agree that one of the two rates is the money interest rate.
Which rate of return has to be compared with the money interest rate is solved
differently in the two approaches. In the neoclassical paradigm it is the natural
rate of return it is determined in the real sphere. In Keynesian paradigm it is
expected rate of return for investment in the enterprise sector.
Understanding the mechanisms through which financial globalisation
affects economic performance is crucial for evaluating the costs and benefits of
opening financial markets. This project is a first attempt at disentangling the
effects of financial integration on the two main determinants of economic
performance: productivity (TFP) and investment. I provide empirical from a
sample of 70 countries observed between 1975 and 1999. The results for both
de jure and de facto indicators suggest that financial integration as a positive
direct effect on productivity, while it does not directly affect capital
accumulation. I also control for indirect effects of financial globalization
through financial development and banking and currency crises. While financial
integration does not systematically increase domestic financial debt, it may raise
the likelihood of banking crises, though only to a minor extend. Yet, the overall
effect of financial liberalization remains positive for productivity and negligible
for investment.
 19

CHAPTER 4

DATA ANALYSIS AND INTERPRETATIONS

 GRAPHICAL REPRESENTATION
India’s Real GDP Growth
TABLE NO: 4.1
Year GDP Growth
2014-2015 7.5%
2015-2016 8%
2016-2017 7.1%
2017-2018 7.2%
2018-2019 5%
2019-2020 4.5%

CHART 4. 1

GDP Growth
9.00%

8.00%

7.00%

6.00%

5.00%

4.00% 7.50% 8%
7.10% 7.20%
3.00%
5% 4.50%
2.00%

1.00%

0.00%
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020

GDP Growth

INTERPRETATION:
In 2014-2015 India’s GDP was 7.5%. In 2015-2016 it was 8%. This
denotes a slight increase in the financial level of phenomenon. From 2016 the
GDP rate declining from 7.1%. Thus in 2019-2020 it was 4.5%. This discloses
that there is a financial crisis focusses on India’s Global Economy.
 RAMPANT CORRUPTION

TABLE NO: 4.2

Year Corruption Anti-money
perception index laundering index
2015 3.6% 6.05%

2016 3.6% 5.95%

2017 3.0% 5.64%

2018 3.8% 5.77%

2019 3.8% 5.69%

CHART 4.2

RAMPANT CORRUPTION
7.00%
6.05% 5.95%
6.00% 5.64% 5.77% 5.69%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
2013 2014 2015 2016 2017

Corruption Perception Index Anti-Money Index

INTERPRETATION:
Our central government takes necessary action to abolish corruption. From the
above table we can understand that in 2015 Corruption perception index was
3.6% and in the year 3.8%. Anti-money laundering index was declining from
6.05% to 5.69%.
 VOLUME OF CASHLESS
TRANSACTIONS TABLE NO: 4.3
Year GDP Growth
2014-2015 7.5%
2015-2016 8%
2016-2017 7.1%
2017-2018 7.2%
2018-2019 5.0%
2019-2020 4.5%

CHART 4.3
GDP GROWTH
9.00%

8.00%

7.00%

6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
2014 - 2015 2015 - 2016 2016 - 2017 2017 - 2018 2018 - 2019 2019 - 2020

GDP GROWTH

INTERPRETATION:
In 2014-2015 India’s GDP was 7.5%. In 2015-2016 it was 8%. This denotes a
slight increase in the financial level of phenomenon. From 2016 the GDP rate
declining from 7.1%. Thus in 2019-2020 it was 4.5%. This discloses that there is
a financial crisis focuses in India’s global economy.
 23

SALES OF MOTOR VEHICLES IN INDIA

TABLE NO: 4.4
Year Turn over

2014 13 crore

2015 10 crore

2016 12 crore

2017 13 crore

2018 9 crore

2019 7 crore
CHART 4.4
Turnover (In Crore)
13 13
12
10
9
7

2014 2015 2016 2017 2018 2019

Turnover 13 10 12 13 9 7
(In Crore)

INTERPRETATION:
From the above table we can confirm that the sales of motor vehicles in the auto
industry in India. In 2014 turnover will be 13 crore but due to the financial crisis
turnover was reduced to 9 crore and in 2019 it was 7 crore. All of this reveals
there is a slow and gradual financial recession faced by India.
AVERAGE TARIFF RATES ON IMPORTS IN INDIA
TABLE NO: 4.5
Year Food Imports All Merchandise
Imports
2012-2013 18 14
2013-2014 23 12
2014-2015 33 9
2015-2016 24 10
2016-2017 18 11
2017-2018 5 7
2018-2019 3 6

CHART4.5

Average Tariff Rates On Imports In India

35

30

25

20

15

10

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Food Imports All Merchandise Imports

INTERPRETATION:
The above table exhibits average tariff rates on imports in food items and all
mercantile items. From 2012-2013 it was 18 and 14 percentage and in 20182019
it was 3 and 6 percentage. It shows gradual decrease and lowest investment
possibilities in the field. Moreover prospective investors does not involve in huge
imports.
 25

NATIONAL PER CAPITA DISPOSABLE INCOME AND

GROWTH RATE, 2015-2019
TABLE NO: 4.6
Year National per capita
disposable income
2015 21966

2016 20167

2017 18311

2018 16510

2019 14551

CHART 4.6

National Per Capita Disposable Income

25000
21966
20167
20000 18311
16510
14551
15000

10000

5000

0
2015 2016 2017 2018 2019

National Per Capita Disposable Income

INTERPRETATION:
From the above graph we can assess that National per capital disposable income
in 2015 was 21966. From 2016 it was decrease and in 2019 it was 14551. This
shows that the national per capital disposable income would be declined due to
financial crisis.
 ANNUAL CHANGE IN INDIA’S GDP
TABLE NO: 4.7
Year Percentage Change

2014 10%

2015 10%

2016 9%

2017 6%

2018 5.1%

2019 4.5%

CHART 4.7

Percentage Change
12 %

10 %
10% 10%
8% 9%

6%
6%
5.10%
4% 4.50%

2%

0%
2014 2015 2016 2017 2018 2019

Percentage Change

INTERPRETATION:
The above information is based on the ministry of statistics and program
implementation. These are revised data of GDP of India. From the above table
we can conclude that current trajectory of India’s economy is perceived both at
home and abroad. GDP rate declining by 4.5% in 2019.
 GOVERNMENT SPENDING ON INDUSTRY DECLINED

TABLE NO: 4.8

Year Government spending on
industry sector as % of GSDP

2015-2016 0.13%

2016-2017 0.13%

2017-2018 0.09%

CHART 4.8

Government spending on industry sector as % of

GSDP
0.14 0.13 0.13

0.12

0.1 0.09

0.08

0.06

0.04

0.02

0
2015-2016 2016-2017 2017-2018
Government spending on industry sector as % of GSDP

INTERPRETATION:
Government spending on industry sector as a percentage of the GSDP has not
really picked up in recent years and the total capital expenditure on the industry
sector declined to rupees 0.09% in 2017-2018 from rupees 0.13% in the previous
year. The delay in sanctioning of the incentives and the disbursement process
could not create the desired result.
 DATA REGARDING POOR EMPLOYEMENT
OPPORTUNITIES DURING RECESSION
TABLE NO: 4.9
YEAR ANGLE VALUE

2016 93° 335

2017 92° 331

2018 89° 320

2019 86° 310

CHART 4.9

VALUE

2016

320, 25%
2017
310, 24%

2018

2019

331, 25%
335, 26%

INTERPRETATION:
The above pie chart resembles during the financial recession period employment
opportunities became declining from 2016-2019. Reasons for this was carrier
opportunities became low due to unhealthy financial status of concerns.
More over companies discourages innovative employment opportunities.
 DECLINING OF AUTO-VEHICLE INDUSTRY DURING
RECESSION
TABLE NO: 4.10
COMPANY PROFIT IN CRORE(2018-2019)

FIAT 5800

CHEVROLET 4300

OPEL 2400

MAHINDRA 3100

CHART 4.10

PROFIT IN CRORE(2018- 2019)

3100, 20%

5800, 37%

2400, 15%

4300, 28%

FIAT CHEVROLET OPEL MAHINDRA

INTERPRETATION:
During these years profit of vehicle companies were very low. This discloses that
due to financial crisis companies cannot afford to appoint fresh employees.
Besides incentives and salary emoluments are curtailed to existing employers.
 ECONOMY WIDE FLUCTUATIONS IN
PRODUCTIONS CHART 4.11

ECONOMY WIDE FLUCTUATIONS IN PRODUCTIONS

40

35

30

25
Axi
s
Titl 20
e
32 32
15
28 28
26

10 21

0
INTEREST BOND STOCK STOCK
BOND PRICE INTEREST
RATE PRICES PRICES PRICE
FALLING RATE RISING
FALLING RISING FALLING RISING
ECONOMY WIDE FLUCTUATIONS IN
32 28 21 26 28 32
PRODUCTIONS
Axis Title

INTERPRETATION:
The phases of business cycle are characterised by changing employment industrial
productivity and interest rate. A recession occurs when a declines occurs in some
measure aggregative economic activity and causes cascading declines in the other
key measures of activity. This domino effect of the transmission of the economic
weakness from sales to output to employment to income, feeding back into further
weakness in all of these measures in turn, is what characterizes a recessionary
down turn.
DISTRIBUTION OF INDIA’S EXPORTS BY PRINCIPAL REGIONS 2018-
2019
TABLE NO:4.11

COUNTRIES PERCENTAGE
OTHERS 3.6%
LATIN AMERICA 3.6%
AFRICA 5.8%
OTHER DEVELOPING ASIA 23.4%
CHINA 6.5%
OPEC 21.1%
OTHER DECD 4.9%
EU 20.2%
US 10.9%
CHART 4.12

Percentage
US 10.9

EU 20.2

Other DECD 4.9

OPEC 21.1

China 6.5

Other Developing Asia 23.4

Africa 5.8

Latin America 3.6

Others 3.6

0 5 10 15 20 25
Percentage

INTERPRETATION:
For the global economy 2018 and 2019 was particularly a bad year. A string of
economic indicators released early that year suggested that close to four years
after the onset the global recession in 2019 a sluggish economy of India was set.
Finance ministry of India argue that Indian economy growth is so robust. The
decline of software export revenue is bound to affect GDP growth adversely.
 DEPLOYMENT OF FOREIGN CURRENCY ASSETS AS
ON 31 MARCH 2018
TABLE:4.12
Deployment Of Foreign ($ Billion)
Currency Assets

Foreign Currency Assets 274.3

Securities 142.1
Deposits With Central Banks 126.9
Deposits With Bank/Assets 5.3

CHART 4.13

DEPLOYMENT OF FOREIGN CURRENCY

300 274.3

250

200

142.1
150 126.9

100

50
5.3
0
Foreign Currency Assets Securities Deposits With Central Deposits With
Banks Bank/Assets

Deployment Of Foreign Currency Assets

INTERPRETATION:
On March 2018, foreign currency assets deployed the following manner.
1. Foreign currency asset-274.3 billion
2. Securities-142.1 billion
3. Depositswith central banks-126.9
4. Deposits with bank/assets-5.3.
INDIA’S GDP GROWTH ARE DECELERATED REMARKABLY IN 2019

TABLE NO: 4.13

MONTH AND YEAR PERCENTAGE PERCENTAGE
JAN-2017 7.4% 6.1%
JULY-2017 6% 6.8%
JAN-2018 7.7% 7.7%
JULY-2018 8% 7%
JAN-2019 6.6% 5.8%
JULY-2019 5% 4.5%
CHART 4.:14
DECELERATED GDP GROWTH
9

7 7.7

6 .8 7
6
6.1
5.8
5

4 4.5

0
Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
DECELERATED GDP GROWTH 6.1 6.8 7.7 7 5.8 4.5

DECELERATED GDP GROWTH

INTERPRETATION:
India’s economy grew just 4.5% in the second quarter of 2019. This is the
slowest pace of growth of the last 6 years. What’s alarming is that India’s
GDP numbers have been consistently declining for the past few quarter.
 CORE SECTOR OUTPUT AT 10 YEAR LOW

CHART 4.15

CORE SECTOR OUTPUT

7

CORE SECTOR OUTPUT Linear (CORE SECTOR OUTPUT)

INTERPRETATION:

India’s core sector output declined 5.8% in September following October’s 5.2%
drop. The core sector includes 8 critical industries such as natural gas, coal,
cement, steel, refinery products, crude oil, fertilizers and electricity. Bearing
refinery product and fertilizers, all other sectors witnessed substantial contraction
in October.
 CONTRIBUTION TO THE ECONOMY OF INDIA BY
SECTOR 2017-2018
TABLE 4.14
SECTORS PERCENTAGE
AGRICULTURE 24%
GOVERNMENT 12%
LEISURE AND HOSPITALITY 17%
FINANCE BUSINESS AND 5%
OTHER
HEALTHCARE AND EDUCATION 17%
TRADE,UTILITIES AND 14%
TRANSPORTATION
MANUFACTURING 8%
CONSTRUCTION 3%

CHART 4.16

PERCENTAGE
3% AGRICULTURE

8% GOVERNMENT
24%
LEISURE AND HOSPITALITY
14%
FINANCE,BUSINESS AND OTHER

12% HEALTHCARE AND EDUCATION

17%
TRADE,UTILITIES AND
17% TRANSPORTATION
MANUFACTURING
5%

INTERPRETATION:
This pie chart exhibits the contribution to the economy recession in
India 20172018. From this chart construction field is 3% manufacturing
8% agriculture 24%. This creates low productivity problems and points
out a financial recession in these fields.
 CONTRIBUTION TO THE ECONOMY OF INDIA BY
SECTOR 2018-2019
TABLE NO: 4.15
SECTORS PERCENTAGE
AGRICULTURE 14%
GOVERNMENT 9%
LEISURE AND HOSPITALITY 14%
FINANCE BUSINESS AND 8%
OTHER
HEALTHCARE AND 17%
EDUCATION
TRADE,UTILITIES AND 16%
TRANSPORTATION
MANUFACTURING 12%
CONSTRUCTION 10%

CHART 4.17

SALES
CONSTRUCTION AGRICULTURE
10% 14%

MANUFACTURING
12 % GOVERNMENT
9%

TRADE, UTILITIES LEISURE AND

AND HOSPITALITY
TRANSPORTATION 14%
16 %

HEALTHCARE AND FINANCE,BUSINES

EDUCATION S AND OTHER
17% 8%

INTERPRETATION:
This pie chart exhibits the contribution to the economy recession in
India 20182019. From this chart construction field
is10%manufacturing12%agriculture 14%. This creates low productivity
problems and points out a financial recession in these fields.
 UNEMPLOYEMENT RATE IN INDIA FROM 2012-
2019 TABLE N0: 4.16
YEAR PERCENTAGE
2012 2.69%
2013 2.82%
2014 2.77%
2015 2.78%
2016 2.73%
2017 2.5%
2018 2.55%
2019 2.55%

CHART 4.18

INDIA- UNEMPLOYEMENT RATE

290.00%

280.00%

270.00%

260.00%

250.00%

240.00%

230.00%
2012 2013 2014 2015 2016 2017 2018 2019
INDIA- UNEMPLOYEMENT RATE

INTERPRETATION:
For the indicator, the World Bank provides data for India from 2012 to 2019. The
average value of India during the period was 2.67% with a minimum of 2.5% in
2017 and a maximum of 2.82% in 2013.
 CHAPTER 5
FINDINGS SUGGESTIONS AND CONCLUSIONS
 FINDINGS

1. It is this activity that has been slowing down in India, since the beginning
of 2019. The GDP growth during January to march 2019 slowed down to
5.8%.looking at economic activity in the period April to June 2019, it is
safe to say that the GDP growth would have slow down further during the
period.

2. GDP of an economy is the sum of private conception expenditure,

investment, government expenditure and net exports (exports minus
imports). There are many high frequency economic indicators which tell
us about the state of each of this four inputs that form the GDP. Let’s look
at a series of 15 economic indicators to see how the economic activity
during the period April to June 2019 has slowed down.

3. Domestic car sales: During April to June 2019, car sales fell by 23.3% in
comparison to the same period in 2018. This is the biggest contraction in
quarterly sales since 2004 (that’s how far back the quarterly data in the
centre for monitoring Indian economy database goes). A slowdown in car
sales negatively impacts everyone from tyre manufacturers to steel
manufacturers to steering manufacturers etc., when it comes to the
backward linkages that car manufacturers have. As far as forward linkages
are concerned, many auto dealerships are shutting down or shrinking. At
the same time, the vehicle loan growth has slowed down to 5.1%, the
slowest it has been in 5 years.

4. Two-wheeler sales: These have not been as badly hit as car sales. Between
April and June 2019, two-wheeler sales had contracted by 14.8%. In the
aftermath of the start of financial crisis. In fact, even mopeds are not
selling, with their sales down 19.9% between April and June 2019(in
20182019, a total of 880000 mopeds were sold, suggesting there is still
good demand for them).

5. The volume growth or the number packs sold, of fast-moving consumer

goods (FMCG) companies has slowed down over the last one year. If we
look at Hindustan Unilever Ltd, the volume growth between April and June
2019 was at 5%. It was 12% during the same period last year. There are
other examples as well. Dabur India posted a volume growth of 6% during
April and June 2019, against 21% last year. Britannia was down
 6% against 13% last year. Indeed this is worrying, given that people seem
to be going slow on making everyday purchases.

6. Non-oil non-gold non-silver imports: This is a good indicator of consumer

demand as it indicates when people buy more imported goods. During
April to June 2019, these imports fell by 5.3%, the biggest contraction in
three years. They had risen by 6.3% during the same period last year.

7. New investment projects announced: The value of new projects announced

during April to June 2019 fell by 79.5% year on year. This is the highest
fall since September 2004. In absolute terms, the value of new investment
projects announced during April to June 2019 stood at RS 71337 crore, the
lowest since September 2004. This is a great indicator of the fact that
businesses really do not have faith in the economic future of India,
irrespective of what they say in the public domain.

8. Almost all these economic indicators suggest that we are well into an
economic slowdown, and it can possibly get worse from here. The irony is
that this slowdown seems to be obvious to everyone except the
government.

9. As a consequences of the financial recession faced by Indian government

all the industrial sector and economic sector will be slowed down, as a
result employment opportunities and new innovations became low. Indian
finance minister MRS NIRMALA SEETHARAMAN obviously stated that
our government will face a slowdown in the field of business and industrial
sector, due to financial recession foreign investment and foreign currency
exchanges are not entertained

10.If consumption pending falls the output and employment also fall since
consumption expenditure directly impact the other. Rupee value is at
9month low. It is estimated that it may plummet to 73.5 by the end of
September 2019. This has weighted on India’s key exports like rice.
 41

SUGGESTIONS

1. RBI central board approval for transfer of RS 1.76 lakh crore to central
government in line with Bimal Jalan committee is an extreme move.

2. Budgeted growth in tax collection for FY 20 is estimated at around

23%, this would be a tall task and especially with sluggish growth.

3. Eventually, either government would lose sight of fiscal prudence or

slowdown the planned expenditure, neither of these would help in
changing the growth trajectory and market sentiments.

4. Combination of positive policy actions and active execution of these

plans are surely going to have a desired and immediate impact both in
promoting growth and changing the investor sentiments.

5. While the prime focus of the government will be to boost demand, it

will also have to ensure that India continues in the direction of fiscal
consolidation. Gripped by a dual-ended challenge, there are only a few
ways the government can boost economic growth.

6. The confederation of Indian Industry (CII) has recommended that the

government cut key interest rates to boost demand and provide a boost
to the economy

7. A recent report indicated that the government is planning to infuse RS

40,000 crore in public sector banks to provide a boost to all sectors that
have been gripped by a slowdown.

8. Automobile demand has dipped significantly, the government could

tweak some policies to provide relief to that sector.

9. It is no secret that maintaining fiscal balance while achieving higher

growth is a tricky challenge and it would require a perfect mix of fiscal
and monetary measures to drive the economy towards higher growth.
 CONCLUSION

After several decades of sluggish growth, the Indian economy is now

amongst the fastest growing economy in the world. Despite several problems
facing the Indian economy many economist point to potential strength of Indian
economy which could enable it to continue to benefit from high levels of
economic growth in future.

The Indian economy has also been displaying signs of stress for a while;
the June quarter numbers have provided fuel to all the doomsday predictions, with
the GDP reading at a 25-quarter low. News about slowing sales, pilling inventory,
plant shut-downs, lay-offs etc. have become frequent. The consequences of a
recession could be pretty dramatic. Sharp fall in consumption and investments,
higher unemployment-rates, lower wages and rise in income inequality are a few.
Also, it takes a country, many years to recover from the effects of a recession. In
fact India has not experienced a recession in recent history. But there were times
when the country witnessed slowdown in about two or four quarters in 2018 on
account of the spike in global oil prices, in 2019 there is a huge loss in auto mobile
industry.
Recently many have lost their employment and the country faced a worst
financial crisis. In 2019 our finance minister MRS NIRMALA
SEETHARAMAN says our government will adopt some new policies for swipe
out the financial crisis or recession recently.

Higher spends were seen in the significant increase in the number of road
construction projects awarded by the government in FY18 (nearly doubled in
terms of kilometres to be constructed) and high inflow of bulk orders received by
manufactures of rail wagons in FY19.

Apart from the high base effect, the subdued growth in the government’s
capex this year can also be attributed to weak activity amid general elections and
muted tax collections.
Private capex has been muted for a while and the liquidity crunch in
the Aftermath of IL&FS crisis, could have further hampered growth.
BIBLIOGRAPHY
 BIBLIOGRAPHY
1. JOURNALS:
a. B.H. Crona- Global Recession(April 2010)
b. C.W. Lawrence- financial recession(January 2008)

2. BOOKS:
a. B.H. Pandey- financial management(July 2005)
b. C.C Sekhar- Global financial crisis and consequence(August 2001)

3. WEBSITES
a. HTTP//WWW.TUITOR-2U.COM
b. HTTP//WWW.STOCKOPA.COM
APPENDIX