This research material discusses the scenario prevailing in the Global economy and provides a glimpse on the effects of the global financial crisis and the significant measures taken under the theme of 'God's Global Governance'
In many emerging and developing economies, activity has been relatively vigorous since the crisis, largely driven by buoyant internal demand, strong economic frameworks and swift policy responses. The global scenario is changing and a new world order is emerging. There is a global shift in clout from developed economies to emerging economies. Rapid improvements in emerging market assets since the crisis have started to give rise to concerns that capital inflows could lead to inflationary pressure,or asset price bubbles. GCC countries have more than enough to meet Chinese oil needs, and it is expected that this demand will increase as economic growth increases.China and the GCC can also diversify their bilateral relations beyond oil trade.
From there, the emerging markets would lead the way. The idea of inclusive growth has evolved and it directly energises corporate governance practices globally.
India is a huge economy; hence it provides ample scope for foreign banks across various sectors. Industrial growth is expected to expand in the coming years. Sectors such as infrastructure have an Immense scope. Hence, there is a potential for both funded and non-funded facilities In India. However, the challenge is to determine the price of products based on Inflationary trends. India has a rising middle class population and, with developments In Global retailing, the potential for retail products are Immense. Indian retail customers are more technologically savvy, so constant Innovation is needed to understand their needs.
In the last decade, various funds have invested into the BRIC (Brazil, Russia, India and China) countries' stocks, and the economies grew faster than America's. Currently, BRIC countries are facing numerous challenges. In India the current account deficit is under pressure and inflation is high due to high oil prices and a weakened rupee. The huge fiscal deficit is also affecting the Indian economy. The deficit Issues had an impact on the rupee, which has fallen substantially in recent years. With issues yet to be sorted out such as the fiscal deficit and the current account deficit, India is at risk of stagflation.
Global banks and Indian corporations are also considering full-fledged banking operations in India. According to Price Waterhouse Coopers (PWC), banking assets of emerging nations are likely to overtake that of G7 economies by 2050, with India likely to emerge as the third largest domestic banking market in the world in the next three decades. With an encouraging regulatory framework in a growing economy, Indian players and foreigners alike should strive to obtain new licenses and also expand on new products in the coming years. The Indian financial services sector has huge potential for global players. Inflation in India has remained quite high in recent times. India also has a huge current account deficit and a huge fiscal deficit. This deficit also impacted the rupee, which fell substantially in 2012& 2013. Capital markets also fell as a result. The key challenges for India include bringing down current account and fiscal deficit to acceptable levels, revive economic growth and keep inflation under control. A stable political scenario will give impetus to government to pass the reforms without much opposition and thereby enable India to face its economic challenges better. As industrial activity in China has weakened, the country has seen a gradual economic slowdown, especially in the base metal and industrial machinery sectors. The Chinese Central Bank recently cut rates to provide easing measures for the economy. In 2009, China was regarded to be the savior for the world economy after launching an aggressive stimulus program, which allowed it to forge ahead.
The emerging economies are witnessing significant challenges in 2013 such as slowdown in economic growth, surging inflation and huge fiscal and current account deficit. The financial markets are witnessing swings on concerns of possible tapering by US Fed Reserve. The emerging market currencies (except china) have taken a huge hit and the capital markets continue to be volatile. In June 2013 Chinese capital market collapsed on account of liquidity squeeze in their banking sector. India has also brought many measures to fight the currency volatility. The huge swings in currency market has once again revived the fears of 1997 Asian financial crisis. On the whole emerging economies have taken a back seat in 2013.
This time, hopes have dampened that the world's second largest economy will provide much support for the world's economic outlook.
The global financial crisis and the Euro crisis also had an impact on emerging economies. They recovered quickly after the global financial crisis; however they still face challenges from domestic issues and the euro crisis as well.