Global meltdown which started globally post dissolving of Lehman brother had not leaved India even. Financial structure of the Indian economy had been shaken with a surprising event. NSE has gone down by 33% same is the case for BSE which is down by 38% post this incident. This continuous fall in Share markets shows a great fear and concern among the common man over the security of the money invested.
Does India should really be affected to such a great extent where everything in the financial market is downward sloping? No, speaking technically and logically India should not suffer to such an extent because India has always kept its restrictions on the foreign and monetary policies keeping the defaulters under the controllable limits.
Indian banks have never been exposed to high risk subprime loans as in the case of banks from other countries .So there is no reason Indian banks or government should panic about the situation. Its the psychological panic and phobia in the mind of people which has created this meltdown in Indian financial markets.
RBI has introduced various monetary policies(reducing repo rate, reverse repo rate etc.) on regular basis to keep check on the downward flow of the market but currently the situation is completely different , there is no flaw as such in Indian market as of in US markets. Monetary policies are just able to nullify such flaws in the market and thus have not been effective in curbing down the negative impact of crisis. Problem lies in the mind of people and this fear could be removed by reassuring the mass by introducing the effective steps under fiscal policy like strengthening global trading systaem and forestall any protectionist tendencies which surface during such crisis.
