Global Financial Meltdown and Indian Financial System: An Introspection

In the age of globalization, no nation may remain isolated from the world economic volatility. The turmoil in international financial markets of few advanced economies that started around mid-2007 has exacerbated substantially, and led to the collapse of key financial institutions. Serious losses suffered by them have affected all most all countries of the world. India also not an exemption to it as those advanced economies has considerable investment interest in the country. Keeping aligned to this, the study under consideration makes an endeavor to examine the impact of global financial meltdown on Indian financial system. The methodology adopted here takes the project through retrospection of few empirical literatures and is based on secondary information, the sources of which follow government publications, periodicals, reports and related plan documents. Findings reveal that Foreign Institution Investors (FIIs) are moving back creating a huge gap in this regard. Further, the diverse constituents of Indian financial system namely, stock market, currency market, and mutual fund investment have by-and-large been hit by world financial contagion due to sub-prime crisis for a variety of reasons. As such, the policy formulators have to be vigilant in order to ensure a balanced state of affairs.