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Presented byNayan prakash Gandhi

designation: management scholar

Qualification:[MBA, PGPM,DIM, PGD (Cs), ASESI {New Delhi}, CRM]

Organization :Poona School of Business , pune

Email id: psbnayangandhi@gmail.com1

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Objective

About the crisis

Meaning of sub prime mortgage

Impact on India

Opportunities for Indian from crisis

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About the crisis

Post 2001, the US government hadencouraged US banks to lend money topeople, to encourage spending & investingmainly for the purpose of buying houses

These banks granted loans to large number ofborrowers despite having lower income levels,unsure employment status, unscrupulouscredit history, etc.

Huge number of borrowers availed of bank

credit without evaluating their repaymentcapacities. The economy was flush withliquidity & stock markets were booming

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The bubble burst

A silent storm brewed in international financialmarkets with origins in the US housing market,which witnessed an unprecedented boom since2001

The boom was led by rising housing prices, low

interest rates & aggravated by various financialinnovation

Housing prices in USA began to drop in 2006.Rising interest rates & falling housing prices ledto rise in sub prime mortgage delinquencies &resultant foreclosure

Result: The housing bubble burst in Aug 2006

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Meaning of SubprimeMortgage SUBPRIME MORTGAGE It is the mortgage

for people with shaky credit, or specifically,people who is unlikely to be able to pay the

mortgage. Usually its given to those who are seeking

money to finance their houses.

Sub prime rates were higher than prime rates

of banks.

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Sequence of events

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Impact on India

A slowdown in the US economy is badnews for India.

Indian companies have major

outsourcing deals from the US. India's exports to the US have also

grown substantially over the years. Indian companies with big tickets deals

in the US are seeing their profit marginsshrinking.

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Indian share market Employment market

Tourists inflow to India has come down

Government and other private companies are reluctant in starting new

ventures and starting new projects etc. Impact on real estate market

Impact on manufacturing industry

Impact on FMCG market, IT sector

Impact on financial services etc.

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Opportunities in India due to USOpportunities in India due to US

recessionrecession

US recession may be a boon for Indian offshore softwarecompanies

The impact of recession is higher to small and mediumsized (SMEs) enterprises whose bottom lines getsqueezed due to lack of spending by consumers

SMEs in the US are under severe pressure to increaseprofitability and business margins to survive. This willforce them to outsource and even have M&Aarrangements with Indian firms.

India is going to be a great beneficiary of this trend whichwill minimize the impact of the US recession on Indian

industry By March 2008, India had received SME outsourcing

deals worth $7 billion from the US as against $6.2 billionin the previous year

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MAJOR THREATS DURING THIS

CRISIS:

Reduction in global demand for goods andservices

Reduction in prices of globally traded goods andDecline in GDP

Domestic shock of lowered investment demand

A sharp rupee depreciation

potential stress on balance of payment

Rise in unemployment problem with public finance

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CONCLUSION:

Sub prime crisis (global meltdown) has adverseeffects on the economy of developed countries,but not on Indian economy. India has potentialcapture domestic market because there is a huge

demand in each sector of the Indian Economy inthe period of this global crisis also. So in someside it shows some challenges but as samepattern it shows many better opportunities by

which we can say Sub-prime (global meltdown)crisis is an positive threats with potentialopportunity

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Why are we shocked when success brings

Us more problems than it solve?

We are surprised by the obvious. BecauseIndian still believe on

The ultimate measure of a man is notwhere he stands improvement of comfortand convenience, but where he stands attimes of challenge and Controversy

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