Journal of International Business Operations and Trade Policy

Volume 2 Issue 2

The Dimensions of Global Meltdown - The Impact and Incidence

Dr. K. Bhanu Prakash1, Mr. P. Siva Reddy2

Associate Professor1, Assistant Professor &CFO2
Department of MBA
Laki Reddy Bali Reddy College of Engineering Andhra Pradesh
1
Corresponding authors’ email id: bhanucool@yahoo.com , siva.podapala@gmail.com2

Abstract
As headwinds from the Global Financial Crisis (2008-09), followed by the
European Sovereign Debt Crisis (2010-12) and the Global Commodity
Price Realignments (2014–16) subside, the Cyclical Upswings in Global
Output have grown by 3.7 percent in 2017 which is half per cent higher
than in 2016. (IMF, Jan, 2018).The Global Economies experienced 3.0 per
cent Economic Growth in 2017, a significant acceleration compared to
growth of just 2.4 per cent in 2016, and the highest rateof global growth
recorded since 2011. Labour market indicators continue to improve in two-
thirds of countries worldwide in 2017 and remain steady at 3.0 per cent in
2018 and 2019. Yet, Weak growth in Per Capita Income poses setbacks to
sustainable development targets across countries and regions. The
Investment Rebound is amid of low Financial Volatility and Financing
Costs, reduced fragilities in Banking Sector, rising levels of NPAs.(UN
World Economic Situation Report, 2018).

Indian Economy is also on the path of Economic Prosperity and GDP

Growth is picking up and expected to grow at 7 percent, its fastest pace in
the Oct-Dec Quarter after disruptions from a shock ban on high-value
currency notes in Nov, 2016 and the chaotic launch of a GST in July are
fading (The Hindu, 27th Feb, 2018).The revival for survival from recession
is termed as ‘Economic Prosperity’ and the creeping of Economic
Depression around the Global Economies is termed as ‘Global Meltdown’
(IMF). The crash of Stock, FX ,CX and Bond Markets, volatility in Stock

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 Journal of International Business Operations and Trade Policy
Volume 2 Issue 2

Prices and Returns, the rise of Non-Performing Loans of FIs impacts

Investment Climate and finally Household Savings and Consumption per
se. While acknowledging the persisting cyclical and long-term risks and
challenges, the paper addresses dimensions of meltdown and offer
suggestions on ‘Economic Prosperity’ and ‘Sustainable Economic
Development’ in long-run.

Keywords:- Global Meltdown, Underpinnings, Global Trends

INTRODUCTION Initially, the US Mortgage Markets were

Global Meltdown - The Conceptual influenced by the Global Meltdown and
Underpinnings then spread to Atlantic and surpassed to
The revival of global economy from Asia. Indeed, the crisis was worse than
recession to prosperity is termed as 1930s’ economic depression and erupted
‘Economic Prosperity’ and the creeping of through Financial Markets connecting to
Economic Depression around the Global USA and European Economies. There is
Economies is termed as ‘Global no consensus on speed, scale and scope of
Meltdown’ (IMF).The crash of Stock, FX , impact, however, the complexity,
CX and Bond Markets, volatility in Stock uncertainty, causes, consequences,
Prices and Returns, the rise of Non- contagion mechanisms widely vary for
Performing Loans of FIs impacts major economies around the world. The
Investment Climate and finally Household meltdown deeply affecting all, had
Savings and Consumption per se.The Neo- distinctive impacts on North America,
Liberal Financial Reforms made the Asia, Europe, emerging economies of
economies to turn away from Brazil, Russia, India and China (BRIC)
manufacturing things of value towards and the developing world beyond. (Paolo
seeking profit from FX and Credit is the Savonaet al., 2011).
seed of the ‘Global Meltdown’ and its
impact spread entirety of the sectors of the Some of the causes for economic
economy(Craig J. Calhoun and Georgi M. downturn include: (i) Thefall of U.S.
Derluguian, 2011). Investment Bank Lehman Brothers on 15th
Sep, 2008, unleashed shock waves that
shook the Financial Markets and destroyed

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trust in the Banking System. (ii) The
dissonance between the Financial Markets
and Policy Makers in regard to global
imbalances, (iii) Deregulation,
Securitization, (v) Sub-Prime Mortgage
Crisis, (vi) Poor Regulations
Supervision per se.
The Global Trends, Trajectories and
Travails of Money, Currency and Stock
Markets
The Financial Institutions,
Markets, Financial Intermediaries and
Financial Services are constituents of
Financial System that provide a framework
for carrying out economic transactions and
Monetary Policy help to channel savings
into investment, thereby supporting
economic growth. (IMF Factsheet).
Financial System is essential for economic
as well as financial stability.
The mixed trend was observed in North
and South American Money Markets
while S&P-500 gained by 1.18% and the
Brazil Bovespa rose to 0.41%. The
Mexican Bolsa lost by 0.37%. The
European Money Markets are also
mixed. The France CAC-40 is up by
0.14% while the FTSE- 100 gains by
0.13% and the DAX of Germany is off by
0.06%. The Asian Money Markets
finished mixed. The Nikkei 225 gained by
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Journal of International Business Operations and Trade Policy
Volume 2 Issue 2
1.07%, while the Shanghai Composite led
the Hang Seng lower. They fell by 1.13%
and 0.73% respectively.(World Markets,
(iv) CNN, 27th Feb, 2018).
and In FX Markets the EUR/USD stays
positive near 1.2320 ahead on 27th Feb,
2018. (www.fxstreet.com)Stock Market
drops in volatile trade
(www.motilaloswal.com)Sensex and Nifty
End Lower as Banking Shares Drag.
Financial (Bloomberg). The Sensex is down 99.36
points or 0.29% at 34346.39,
(www.moneycontrol.com) and Nifty-50 on
Tuesday faced resistance at around
10,554.30 level before closing the day
resembles 'Dark Cloud Cover' formation.
Global Currency, Forex, Equity and Debt
Markets swayed this month resulting the
raise of Interest Rates by Fed that pushed
US Bond Yields higher along with Dollar
(TMUBMUSD10Y, +0.35%). This trend
tends to boost the Dollar and can attract
FIs which increase demand for Dollar,
dynamical rise in the value of US$.
(www.marketwatch.com)
Indian Economy - The Diaspora
India, the ‘Fastest Growing Major
Economy’ and emerging ‘Top-3 Economic
Powers’ of the World in the World (CSO&
IMF)in the Nex-Gen,has an enormous
 Journal of International Business Operations and Trade Policy
Volume 2 Issue 2

growth potential and the projected GDP Allied, Industry, and Services Sectors are
Growth Rate to 7.3 per cent in 2018 and 4.37%, 5.77%, and 7.87%,
7.5 for the next 2-years. It is respectively(MOSPI) .The growth of the
estimated to have grown at 6.7 per cent in Manufacturing is at 7.7% and the Public
2017, a positive GDP Growth Rate since Administration, Defence and Services
2016. However, China grew at 6.8 per Sectors registered highest growth of 11.2%
cent, 0.1 per cent more than that of India in and Mining and Quarrying Sector
2017. While in 2018, its growth rate is contributed its lowest 1.3%.
projected at 6.4 per cent and for the next
two years, the country's growth rate will Objectives of the Study
drop marginally to 6.3 and 6.2 per cent, While acknowledging the persisting
respectively. (Global Economic Prospects, cyclical and long-term risks and
World Bank, 2018).The Indian Economy is challenges, the paper addresses dimensions
on the path of Economic Prosperity and of meltdown and offer suggestions on
GDP Growth is picking up and expected to ‘Economic Prosperity’ and ‘Sustainable
grow at 7 per cent, its fastest pace in the Economic Development’ in long-run.
Oct-Dec Quarter after disruptions from a
shock ban on high-value currency notes in The Dimensions of Global Meltdown - A
Nov, 2016 and the chaotic launch of a Panoramic View
GST in July are fading (The Hindu, 27th An abrupt fall in global economic activity
Feb, 2018).India’s biggest Tax Reform is in the autumn of 2008 resulted a strong
now a reality. This indicates strong decline of global trade. The decline was
turnaround of Indian Economy from sharp and rapid and the sheer size of the
meltdown to economic prosperity and the US Financial Market and its central role as
investment reviving.(Dr.K. Bhanu Prakash investment destination spreads the crisis
& Dr. J. Chandra Prasad, 2017) globally. The Bubble Burst impacts the
Global Economies in terms of Economic
The Average Growth Rate from 1951 to Growth, Unemployment, Savings and
2014 stands at 4.96%, reaching an all-time Investment. The Global Meltdown has
high of 10.16% in 1988-89 and a record gripped the economies globally in many
low of -5.2% in the 1979-80. In 4 years, aspects and respects negatively impacting
the Rate of Growth was negative. The the Stock Market, pulling down its Indices
GVA Growth Rates of Agriculture & there by the Consumer confidence

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 Journal of International Business Operations and Trade Policy
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plummeted over time. With drought in contracted significantly in the Czech

Credit, Consumption of Goods and Republic, Bulgaria and Romania and
Services also tanked. This was shrank in Denmark, UK and Sweden due
accompanied by the Credit Card Industry to the collapse of external demand and
meltdown with increasing number of external financing constraints. In Hungary
defaults by Credit Card Holders. Higher the decline partly reflected policies to
Education became very expensive despite ensure macro-economic consolidation.
stimulus packages by Federal Reserve. Poland was the only country that
Banks hesitate to extend Credit both for registered a positive growth in 2009.
Corporations and Consumers, Wild Cards, (Liliana CRĂCIUN and Manuela Violeta
Pay Cuts all change the mindset of OCHEA,2014) . The impact of the
Americans. meltdown was caused by the deterioration
of aggregate demand, the uncertainty of
The US Economy cast a gloom, the business environment, the rate of
Unemployment soared up and Output was financial constraints and the collapse of
negatively affected. Investment Banks and the market value of the assets. However,
Firms incurred huge losses, Corporate and the strong fundamentals of India’s
Personal Bankruptcies mounted and Auto Financial and Regulatory Systems, less
Industry financially bleeds. The Private reliance on Derivatives, a Cautious
Firms and Banks were bailed out by Approach of Indian Banking System, the
injection of Tax Payers’ Money and finally strong Debt Market, and Credit Cards for
the US Government turned dynamic to Metros are some of the major factors that
help Firms and Banksto improve their helped India to escape from the onslaught
business performance. (Subhrendu of ripple effects of global economic
Bhattacharya, 2009). meltdown.

This contagion spreads globally and the SUGGESTIONS AND CONCLUSIONS

emerging economies of Asia showed Global Economic Activity continues to
notable resilience to the global downturn. strengthen with notable upside surprises in
Economic activity in Latin America Europe and Asia and Global Growth
contracted sharply and the Baltic Countries forecasts for 2018 and 2019 have been
registered the depth of the decline in revised upward by to 3.9 percent,
economic activity. The economic activity reflecting momentum and the expected

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 Journal of International Business Operations and Trade Policy
Volume 2 Issue 2

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