The Global Financial Crisis

Hello to all my friends who were bugged by me into reading (and commenting on) my first post & welcome to my blog once again. Yeah its been quite some time since I wrote my first post. So here I am writing the second post of my blog.Well, lets talk about the current events and news (I promise, I'll try to keep it interesting and readable).

The biggest development (or disaster) in recent times has been the meltdown of the financial markets on Wall Street, New York (for the uninitiated, thats the hub of the world's largest Financial Insitutions) and the subsequent domino effect on major financial institutions in Europe and all over. The largest of the Banks are going bankrupt, the markets are at their lowest in recent history, oil prices though lower than what they were 4 months ago, are still high, in short, we are going through a big financial crisis. And it has the potential to snowball into an unparalelled economic depression engulfing the world economy. So what are the Central Banks and governments doing about it? Well, the Bush administration in the US has finally succeeded in geting the Financial Bailout Bill passed. The bill will allow the US Treasury Department to spend US $700 billion of taxpayer's public money in buying assets from or lending to the privately owned troubled financial Institutions on the verge of bankruptcy (think of Lehman Brothers). This bailout package is supposed to clean up the "junk" assets from the financial market & instill hope and trust amoung financial institutions so that they start borrowing and lending to each other and the market slowly limps back to normalcy. In the EU,(European Union) UK's central bank has already annouced partial nationalization of 4 of the biggest banks. The French & German politicians are debating their own bailout packages.Iceland has nationalised two of the largest banks.


What it means for the Indian Economy in general & the indian IT sector in particular?

In the short term, the Indian Economy is bound to be affected in a negative way with the worldwide financial meltdown.But in the long term the crisis might turn out to be beneficial for the Indian economy. Already, the world is looking towards emerging economies like China & India to drive demand for goods and services and steer World growth.It is quite possible that it is the demand from emerging economies that leads the world economy out of the current crisis. For the indian IT industry, its a hard time with the BFSI(Banking, Financial Services and Insurance) sector, which provides a major portion the total revenue, caught in the middle of the financial crisis. At the same time this is a golden opportunity for the Indian IT companies, to prove to their clients that their Offshore delivery model really works efficiently, cutting costs at the same time. It would definitely be a little easier to convince prospective clients to offshore, who would have been otherwise reluctant in doing so under favourable market conditions.If you see the indian IT industry's track record in the past 10 years, you would find many reasons to believe that it definitely has the potential to come out of the current financial crisis with flying colors.

As they say, "Every cloud has a silver lining". So lets hope the current global financial crisis is just a passing cloud and soon we'll have the sun shining over the world economy as before.

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