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Cambridge Journal of Economics 2009 33(4):725-739; doi:10.1093/cje/bep034
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© The Author 2009. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

This article appears in the following Cambridge Journal of Economics issue: Special Issue: The Global Financial Crisis [View the issue table of contents]

The costs of ‘coupling’: the global crisis and the Indian economy

Jayati Ghosh and C. P. Chandrasekhar*

* Jawaharlal Nehru University, New Delhi, India

Address for correspondence: Jayati Ghosh; email: jayatig{at}bol.net.in

The view that the Indian economy would be less adversely affected by the global economic crisis because of limited integration and other inherent strengths has proved to be wrong. The economic boom in India that preceded the current downturn was dependent upon greater global integration in three ways: greater reliance on exports particularly of services; increased dependence on capital inflows, especially of the short-term variety; and the role these played in underpinning a domestic credit-fuelled consumption and investment boom. These in turn made the growth process more vulnerable to internally and externally generated crises, as is now becoming clear.

Key Words: Financial crisis • India • Growth • Exports • Foreign investment • Exchange rate • Consumption • Savings • Investment • Employment • Unemployment • Credit-financed growth • Stock market • Risk • Financial vulnerability

JEL classifications: E200, E240, G100, G180

Manuscript received March 25, 2009; final version received May 8, 2009.


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