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The Recent Recession: Impact and Future Prospects for the Indian Banking Sector Recession and Its Aftermath N.M.P. Verma Editor Recession and Its Aftermath Adjustments in the United States, Australia, and the Emerging Asia Editor N.M.P. Verma Department of Economics Babasaheb Bhimrao Ambedkar University Lucknow, India ISBN 978-81-322-0531-9 ISBN 978-81-322-0532-6 (eBook) DOI 10.1007/978-81-322-0532-6 Springer Dordrecht Heidelberg New York London Library of Congress Control Number: 2012943593 © Springer India 2013 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, speci fi cally the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on micro fi lms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. Exempted from this legal reservation are brief excerpts in connection with reviews or scholarly analysis or material supplied speci fi cally for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work. Duplication of this publication or parts thereof is permitted only under the provisions of the Copyright Law of the Publisher’s location, in its current version, and permission for use must always be obtained from Springer. Permissions for use may be obtained through RightsLink at the Copyright Clearance Center. Violations are liable to prosecution under the respective Copyright Law. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a speci fi c statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. While the advice and information in this book are believed to be true and accurate at the date of publication, neither the authors nor the editors nor the publisher can accept any legal responsibility for any errors or omissions that may be made. The publisher makes no warranty, express or implied, with respect to the material contained herein. Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com) In honor of Kamta Prasad Preface Recession is an economic instability that touches every person, the economy, and society. It ultimately also affects other economies depending upon the intensity of cross-country integration, openness, and trading. Therefore, bringing out a book like this is de fi nitely the need of the hour when the world has just witnessed a global recessionary crisis. The initial thoughts for creating this volume arose during my visit to Wisconsin, Madison, USA, in the post recession year of 2010. There, a few contributors to this book and many other academicians informally deliberated on the issue of fi ghting the recession which took place during 2007–2009 in the USA. The US economy was trying its best to recover by taking expansionary measures. It was also delibe- rated by some that the US recession had probable impacts on Europe, Australia, emerging Asia, and other continents. After my return from the USA, I formally started this project, had discussions with a large number of researchers, and invited many economists from this fi eld to contribute a chapter. Some of them have con- tributed and some wanted much more time to contribute. As time is a very important factor for this kind of study where the book should be published on time, only 11 contributions could be compiled in this volume. The chapters in this volume mostly focus on the USA, Australia, China, India, and Malaysia. However, the contributors also discuss European economies and Asian economies, such as those of Pakistan, Nepal, Bhutan, the Maldives, South Korea, Indonesia, and a few other core countries for a general description of recession. In creating this volume we were assisted by a large number of people and institu- tions. First and foremost we must thank the contributors, whose unconditional commitment and prompt submission of their chapters made my job as the editor quite smooth and easy. I am also thankful to many of my colleagues and friends, including Nirankar Srivastava, P.K. Sinha, several colleagues from various other institutions, and Ejaz Ghani, who is currently at the World Bank, for motivating me to convert this dream project into reality. Sagarika Ghosh, Sahadi Sharma, and their colleagues at Springer came forward to bring out this volume. Their valuable comments on the preliminary draft further reduced many shortcomings. I am extremely thankful to them for their work on the vii viii Preface production of this volume in about 5–6 months. I also thank Madhu Patel, Atul Kumar, and Vinit Kumar for typesetting and computational work. Lastly, I am thankful to our postgraduate students and PhD scholars, to whom I have been teaching macroeconomics for many years, for raising many complicated questions. This helped to re fi ne the project. I dedicate this book to Kamta Prasad, with whom I had a research association and from whom I learned the workings of a complex economy. I expect this volume to be of immense help as a reference book for postgraduate students, research schol- ars, academicians, corporate consultants, fi nancial experts, and other members of universities and research institutions in the fi elds of economics, management, and commerce across the globe. N.M.P. Verma Contents 1 Understanding Recession: Conceptual Arguments and US Adjustments ........................................................... 1 N.M.P. Verma and V. Dutta 2 The Financial Crisis and the Great Recession in the United States ................................................................................. 23 Mukti Upadhyay and Tim Mason 3 Dynamics of Deflation and Unemployment: Fall into an Abyss of Depression ............................................................ 47 Anson Wong and Michael Chu 4 Market Fluctuations and Country Risk Relationships for Australian and Indian Energy ................................. 67 John Simpson 5 The Chinese Economy After the Global Crisis .................................... 81 Liang-Xin Li 6 The Role of Macroeconomic Fundamentals in Malaysian Post Recession Growth .................................................... 113 Lee Chin 7 Impact of Global Financial Crisis on Economic Wellbeing: A Case of South Asia ............................................................................... 129 Nikhil Chandra Shil 8 The Asian Economic Crisis and Malaysia’s Responses: Implications for the Banking Sector...................................................... 157 Balakrishnan Parasuraman, Beatrice Lim, Fumitaka Furuoka, Catherine Jikunan, and Lo May Chiun ix x Contents 9 Output Growth in Post Liberalized India: An Input–Output Structural Decomposition Analysis ........................ 179 K.K. Saxena, Sarbjit Singh and Rahul Arora 10 The Recent Recession: Impact and Future Prospects for the Indian Banking Sector .............................................. 215 D.K. Yadav 11 Impact of the Global Downturn on the Indian Economy .................... 233 Basanta K. Sahu About the Book ................................................................................................ 257 Index ................................................................................................................. 261 Contrib utors Rahul Arora Department of Humanities and Social Sciences, Indian Institute of Technology , Kanpur , India Lee Chin Department of Economics, Universiti Putra Malaysia , Serdang , Malaysia Lo May Chiun Universiti Malaysia Sarawak , Kota Samarahan , Malaysia Michael Chu School of Continuous Education, Baptist University of Hong Kong , Kowloon , Hong Kong V. Dutta School of Public Policy, University of Maryland , College Park , MD , USA Fumitaka Furuoka Universiti Malaysia Sabah , Kota Kinabalu , Malaysia Catherine Jikunan Fumitaka Furuoka , Institute of Asia-Europe Centre, University of Malaya , Kuala Lumpur Liang-Xin Li Catherine Jikunan, Malaysian Trade Union Congress, Kota Kinabalu , Sabah , Malaysia Beatrice Lim Universiti Malaysia Sabah , Kota Kinabalu , Malaysia Tim Mason Department of Economics, Eastern Illinois University , Charleston , IL , USA Balakrishnan Parasuraman Faculty of Entrepreneurship and Business , Universiti Malaysia Kelantan, Kota Bahru , Malaysia Basanta K. Sahu Indian Institute of Foreign Trade , New Delhi , India K. K. Saxena Department of Humanities and Social Sciences, Indian Institute of Technology , Kanpur , India Nikhil Chandra Shil Department of Accounting, American International University , Bangladesh xi xii Contributors John Simpson School of Economics and Finance, Curtin University , Perth , Western Australia Sarbjit Singh Department of Humanities and Social Sciences, Indian Institute of Technology , Kanpur , India Mukti Upadhyay Department of Economics, Eastern Illinois University , Charleston , IL , USA N. M. P. Verma Department of Economics, Babasaheb Bhimrao Ambedkar University , Lucknow , India Anson Wong School of Account and Finance, Hong Kong Polytechnic University , Kowloon , Hong Kong D . K . Y a d a v Department of Economics, Babasaheb Bhimrao Ambedkar University, Lucknow , India Introduction and Overview Market failure at medium intervals is inevitable in a capitalist economy. Such failures may not be seen in a serious light in the short run because the market adjusts to demand through hoarding of inventory or import of required
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