Description
I have analyzed this according to the chronology of events. Then i have studied the impact of this slowdown on Chinese & Indian Economies and suggest the ways by which both India & China can pass through this phase without without much damage.
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
1
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Author:
Ashish
Jude
Michael
Participant
PGPEx2012
(OUC
China
+IIM
Shillong
)
2
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Table
of
Content
Executive
Summary
1.1Eurozone
Crisis:
Brief
Introduction
1.2Eurozone
Crisis:
Major
Attributes
1.3Eurozone
Crisis:
Effect
on
European
Economy
1.4Eurozone
Crisis:
Effect
on
Global
Economy
2.1
Chinese
Economy:
Brief
Introduction
2.2
Chinese
Economy:
Under
Eurozone
Crisis
2.3
Chinese
Economy:
Actions
Taken
2.4
Chinese
Economy:
Suggestions
3.1
Indian
Economy:
Brief
Introduction
3.2
Indian
Economy:
Under
Eurozone
Crisis
3.3
Indian
Economy:
Actions
Taken
3.4
Indian
Economy:
Suggestions
4.1
Conclusion:
Exhibits:
1-?18
Bibliography
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
3
Executive
Summary
This
report
is
about
the
Eurozone
crisis
and
how
emerging
economies
such
as
India
&
China
should
deal
with
it
and
also
what
they
should
learn
from
this
crisis.
I
have
divided
this
report
basically
into
four
parts;
first
part
gives
the
history,
detail
&
analysis
of
Eurozone
crisis.
Second
part
I
have
explained
briefly
about
Chinese
economy,
how
Eurozone
crisis
has
affected
its
economy,
what
are
the
action
taken
by
government
and
suggestions.
In
third
part
I
have
discussed
about
Indian
economy
on
similar
lines
and
finally
I
have
concluded
in
part
four.
Eurozone
crisis
is
not
a
single
economic
recession,
which
we
have
faced;
in
recent
past
but
it
is
actually
one
of
the
event
in
the
chain
of
events
of
what
economist
commonly
say
“
Global
Financial
Crisis”.
The
table
below
shows
the
events,
which
hit
the
global
economy
during
last
5
years.
2007–2012
Global
Financial
crisis Major
Events
• • • • • • • • • •
2000s
energy
crisis
2008–2012
global
recession
Automotive
industry
crisis
of
2008–2010
Dodd–Frank
Wall
Street
Reform
and
Consumer
Protection
Act
European
sovereign-?debt
crisis
Financial
Crisis
Inquiry
Commission
Subprime
crisis
impact
timeline
Subprime
mortgage
crisis
United
States
housing
bubble
United
States
housing
market
correction
1.1
Eurozone
Crisis:
Brief
Introduction
European
union
trace
back
its
roots
in
1951
with
the
“Treaty
of
Paris”
with
about
6
members.
Now
is
a
economic
&political
union
of
27
countries
of
Europe.
It
having
about
20%
of
global
GDP
as
per
PPP
(Purchasing
Power
Parity).
It
introduced
a
common
currency
Euro
in
2002.The
17
countries
accepted
Euro
as
their
currency
and
these
17
countries
formulate
the
“Eurozone”
.Soon
Euro
became
second
most
traded
currency
of
the
world
just
behind
USD
(United
State
Dollar).
Year
2010
saw
onset
of
European
Sovereign
Debt
Crisis
which
is
commonly
referred
as
Euro
Zone
Crisis.
There
are
four
major
causes
for
this
crisis.
First
the
rising
government
(public)
debts.
The
stability
of
a
country
can
be
determined
by
the
percentage
of
the
government
(public)
debt
to
its
GDP.
(Exhibit
1)
clearly
shows
that
the
relative
position
of
major
countries.
We
can
see
that
Greece
is
already
is
in
a
very
bad
condition
as
its
public
debt
is
436
billion
$
which
constitutes
to
143%
of
its
GDP,
next
to
follow
are
Italy,Ireland
,Portugal
,&
4
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Spain
with
figures
of
115%,
95%,93%
and
60%.
Though
Spain
appears
better
in
this
situation
but
in
next
cause
we
can
observe
the
problem
faced
by
Spain.
Second
cause
is
the
rise
in
trade
imbalance.
If
we
see
Exhibit
2
we
can
see
that
In
terms
of
%
of
GDP
Portugal,
Iceland,
Greece,
Spain
and
Italy
are
having
figures
of
-?9.9%,
-?7.1%,
-?6.5%,
-?4.7%
and
-?3.3%
respectively.
Only
Germany
is
the
country
which
have
a
positive
trade
balance
of
6.7%
hence
is
one
of
the
strong
economy.
Third
cause
is
structure
of
Eurozone.
The
concept
of
Euro
has
structural
problems.
It
has
a
monitory
union
but
not
a
fiscal
union.
For
stability
of
a
currency
system
the
member
countries
should
follow
same
fiscal
path
but
they
have
no
common
treasury
to
enforce
them.
Each
country
is
free
to
follow
its
fiscal
policy.
It
happened
in
the
case
of
Greece,
it
was
hard
to
control
its
national
institutions.
Lack
of
quick
response,
if
any
decision
has
to
be
taken
by
Eurozone
all
17
member
countries
have
to
be
unanimous
and
this
takes
lot
of
time.
Lack
of
“Banking
Union”
common
for
Europe
to
avoid
“bank
runs”.
Fourth
cause
is
monitory
policy
inflexibility
a
member
country
cannot
print
the
money
to
pay
to
debit
holders
also
ECB
(European
Central
Bank)
has
inflation
control
mandate
not
unemployment
mandate
and
the
Loss
of
confidence
of
Investors
in
affected
countries
is
worsening
the
crisis.
1.2
Eurozone
Crisis:
Major
Attributes
Earlier
I
have
already
discussed
the
major
causes
for
the
Eurozone
crisis
now
I
will
be
doing
a
sort
of
microscopic
analysis
of
the
attributes,
which
set
these
causes.
There
are
6
attributes,
which
have
played
an
important
role
in
setting
the
causes,
which
in
turn
created
the
Eurozone
Crisis.
The
developed
economies
have
accumulated
sizeable
deficit
while
the
developing
countries
have
large
surpluses.ie.
China.
This
made
the
developing
countries
(China)
to
finance
the
developed
ones
(U.S.).
Instead
of
blaming
developing
countries
for
saving
rather
than
over
spending
developed
countries
should
learn
to
manage
their
spending’s.
Developing
countries
measure
their
creditability
by
the
amount
of
foreign
reserve
they
poses
where
else
that
is
not
the
condition
for
developed
countries.
It
appears
that
the
general
trend
was
that
if
GDP
is
sizeable
and
though
a
developed
country
is
running
on
deficient,
banks
and
investors
took
it
for
granted
before
studying
the
basics
of
investments.
There
were
different
rules
for
developed
and
developing
economies
and
this
may
be
one
of
the
attributes.
Second
attribute
is
protectionism
and
in
adequate
financial
help
to
poor
countries.
For
example
protectionism
measures
deeply
penalize
poorer
countries
that
rely
on
a
restricted
number
of
export
products
ie.
Crops
and
minerals.
Third
attribute
is
Loss
in
competitiveness,
Germany
had
improved
in
competitiveness
in
terms
of
changes
in
unit
labor
cost
but
Greece,
Portugal
Ireland,
Italy
and
Spain
lost
it.
Fourth
attribute
can
be
the
lack
of
cross
border
financial
supervision
and
lack
of
fiscal
policy
coordination.
Fifth
attribute
is
the
difference
in
productivity
among
Eurozone
countries
if
we
compare
with
GDP
per
hour
worked
we
can
see
that
countries
like
Slovakia,
Slovenia,
Portugal
and
Greeece
are
below
30
per
hour
worked
and
France,
Belgium
and
Ireland
have
50
Per
hour
worked
.
(Exhibit
3)
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
5
Sixth
attribute
is
the
rice
in
Gini
index
which
shows
the
income
disparity.
The
gap
between
rich
and
poor
is
increasing
the
top
five
countries
where
Gini
index
is
maximum
in
Europe
are
Portugal,
Greece,
Italy,
Spain
and
Ireland.(Exhibit
4)
1.3
Eurozone
Crisis:
Effect
on
European
Economy
The
European
economy
has
contracted
by
about
0.3%
in
2012
and
is
forecasted
to
grow
by
1%
in
2013
similarly
the
unemployment
rate
is
in
2012
is
11%
and
is
expected
to
be
10.3%
in
2013.
(Source
BBC).Bujt
one
important
factor
is
the
rise
in
unemployment
in
the
young
population
,
it
is
at
the
highest
level.
(Exhibit
5
&
6)
1.4
Eurozone
Crisis:
Effect
on
Global
Economy
Eurozone
crisis
is
not
just
affecting
the
economies
of
the17
member
countries
or
European
countries
but
all
the
countries
from
US,
China
to
African
countries.
Eurozone
is
a
big
market
for
US,
China
and
India
the
slowdown
in
Eurozone
will
slowdown
the
economies
or
related
countries
too.
If
the
Euro
collapse
it
will
not
only
affect
322
million
Europeans
but
also
150million
African
countries
whose
currency
is
pegged
to
Euro.
Also
the
world
financial
system
will
collapse
as
many
major
banks
hold
large
amount
of
Euro.
This
may
bring
an
economic
recession
worse
than
what
world
had
experienced
in
2007.
2.1
Chinese
Economy:
Brief
Introduction
China
is
currently
is
second
largest
economy
of
world
having
a
GDP
of
11.29
Trillion
United
States
Dollars
(USD)
as
per
Purchasing
Power
Parity
(PPP).
Its
economic
reform
started
in
1978
and
since
then
it
is
progressing
with
an
average
GDP
growth
rate
of
10%.
Its
had
developed
it
self
as
the
factory
for
the
world.
If
we
consider
the
sector
wise
break
up
of
Chinese
Economy
agriculture:
10.1%,
industry:
46.8%,
services:
43.1%.
The
Industry
and
Services
are
balanced
but
agriculture
is
very
less.
Sectorwise
break-?up
of
Chinese
Economy
Agriculture
Industry
Services
It
has
become
an
export-?oriented
economy
with
surplus
in
terms
of
balance
of
payment.
It
has
a
foreign
reserve
of
more
than
3
trillion
USD.
And
it
is
forecasted
it
will
take
over
US
by
2020.
When
we
consider
China
economy
it
is
keenly
observed
&
controlled
by
government
there
are
nearly
all
large-?scale
business
and
banks
are
SOEs
(State
6
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Owned
Enterprise)
while
medium
to
small-?scale
industry
are
dominated
by
private
players.
Till
now
china
has
protected
its
domestic
companies
from
foreign
competitors.
China
initially
started
as
a
location
for
low
cost
labor
but
with
economic
growth
that
advantage
is
decreasing
also
the
rise
in
the
older
population
is
a
concern.
China
is
now
concentrating
its
focus
on
more
sustainable
industries
such
as
services
&
R&D.
Also
11th
5
year
plan
has
laid
emphasis
on
environmental
aspects
too.
Another
concern
for
China
is
the
rise
in
income
disparity
among
earning
population.
We
should
appreciate
the
commitment
that
the
Chinese
political
leaders
have
towards
economic
growth.
Since
1978
they
have
achieved
all
major
5
year
plan
targets.
They
have
industrialized,
developed
infrastructure
and
acquired
skill
sets
for
human
resource
for
sustaining
this
growth
weather
by
sending
people
outside
for
studies
or
by
developing
Chinese
education
system.
We
can
say
China
is
a
much
healthy
economy
as
the
government
debt
to
GDP
is
about
25%
(Exhibit
7),
Balance
of
trades
is
always
surplus
(Exhibit
8)
and
the
unemployment
rate
is
low
about
4.1%(Exhibit
9).
Another
major
challenge,
which
China
is
facing,
is
the
increasing
disparity
in
income
level.
It
has
a
GINI
index
of
45%
(0.48),
which
can
be
said
alarming.
Initially
China
approached
the
theory
of
“Let
some
people
get
rich
first”
this
has
given
rise
to
such
disparity.
The
costal
provinces
are
very
developed
as
compared
to
the
central
provinces.
The
recent
conflict
arising
with
Japan
related
to
Diaoyu
islands
may
also
slow
down
the
economy
further,
Japan
being
major
trading
partner
for
China.
2.2
Chinese
Economy:
Impact
of
Eurozone
Crisis
As
we
know
that
China
is
basically
an
export-?oriented
economy
and
if
we
see
the
statistics
its
major
export
partner
is
Europe,
it
accounts
of
about
17%
of
Exports
and
8%
imports.
We
can
say
the
Chinese
economy
is
highly
dependent
on
European
market.
Any
slowdown
in
Eurozone
will
affect
Chinese
economy.
We
have
seen
it
during
Eurozone
crisis
when
the
growth
rate
of
China
felled
below
8%
mark
in
months
in
2012
and
Chinese
government
has
revised
real
GDP
growth
rate
at
7.5%.
If
we
see
in
above
graph
there
is
a
significant
slowing
down
of
Chinese
economy
with
the
onset
of
Eurozone
crisis.
Also
there
is
a
problem
of
increase
in
inventory
for
goods
as
the
demand
in
EU
has
reduced
but
production
in
China
haven’t.
This
has
created
problems
for
stockiest
and
dealers.
FDI
in
China
has
also
reduced
by
3.7%
over
all
and
4.1%
from
EU
this
year
and
it
is
attributed
to
the
Eurozone
crisis.
Yuan
is
appreciating
but
there
is
no
problem
of
Unemployment
though
orders
have
reduced
and
industrial
production
has
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
7
slowed
down
seen
due
to
the
crisis.
Also
the
balance
of
trade
has
taken
during
start
of
2012
and
also
the
unemployment
rate
was
nearly
fixed
around
4%
mark.
2.3
Chinese
Economy:
Actions
Taken
In
order
to
fight
the
slowdown
and
to
take
advantage
of
Eurozone
crisis
China
has
taken
following
steps:
1. Focus
has
been
diverted
to
Africa
and
development
of
African
&
Emerging
economies.
2. China
is
investing
directly
or
indirectly
in
Europe
on
the
principle
“Recession
is
the
best
time
to
invest”.
China’s
direct
investment
in
Europe
soars
up
in
second
quarter
of
2012
by
more
than
67%
as
compared
to
last
year.
3. China
is
ready
to
support
or
even
bailout
countries
like
Greece
and
bailing
out
Europe
but
surprisingly
major
Chinese
are
back
away
from
European
lenders
it
appears
as
a
paradox.
4. China
has
cut
down
the
interest
rates
in
May
2012
to
boost
up
industrial
activity.
2.4
Chinese
Economy:
Suggestions
1. China
should
increase
its
domestic
consumption
for
GDP
growth
rather
than
wholly
dependent
on
exports.
2. China
should
diversify
its
exports
to
developed
as
well
as
emerging
and
underdeveloped
countries
so
that
it
can
reduce
the
risk
of
induced
economic
slowdown.
China
has
already
started
this
activity
by
focusing
on
Africa.
3. China
should
increase
its
investment
in
Europe
and
they
are
already
implementing
it.
4. China
should
try
to
stabilize
and
if
possible
bail
out
Europe
so
that
its
economic
growth
is
not
affected.
5. China
should
not
follow
the
western/European
model
of
spending
on
deficient.
6. China
should
focus
more
towards
services
rather
than
industry
as
it
is
slowly
losing
its
advantage
of
low
cost
labor
hub.
7. China
should
focus
in
reducing
its
GINI
index
of
48%
is
a
bit
high.
Chinese
government
is
already
on
action;
it
has
stopped
the
special
benefits
&
tax
holidays,
which
were
earlier
given
in
costal
provinces.
Instead
they
are
encouraging
foreign
companies
to
set-?up
their
plant
in
central
part
of
China
by
granting
them
special
benefits
and
tax
holidays.
3.1
Indian
Economy:
Brief
Introduction
Indian
economy
is
fourth
largest
economy
of
World
with
a
GDP
of
4.457
Trillion
USD
as
per
PPP.
After
China
it
is
Indian
Economy
on
which
on
rapid
growth
among
emerging
economies.
It
is
an
economy
based
on
services.
It
is
also
seen
as
a
lucrative
market,
which
is
highly
dynamic.
If
we
consider
the
break
up
of
Indian
Economy
sector
wise
Agriculture
is
17.2%,
Industry
is
26.4
%
and
services
constitute
56.4%.
8
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Sectorwise
break-?up
of
Indian
Economy
Agriculture
Industry
Services
We
can
observe
that
the
Industry
and
services
are
not
in
balance.
It
is
becoming
a
service
hub.
Especially
IT
&
BPO
(Business
Processed
Outsourcing)
services.
India
is
facing
the
problems
of
Government
debt
and
maintains
balance
of
trade.
The
Government
debt
is
about
68.53%
of
GDP
(Exhibit
13)
and
balance
of
trade
has
always
been
in
deficit
(Exhibit
14).
Major
portion
of
import,
which
India
has,
is
crude
oil.
Even
the
foreign
reserve,
which
India
has,
is
not
too
much.
Its
about
328
billion
USD.
The
major
trade
partners
for
India
is
EU
followed
by
China.
India
has
maximum
trade
deficit
with
China.
The
unemployment
rate
has
sharply
reduced
to
3.8%
from
9.4
%(2010)
(Exhibit
15).
This
is
a
good
sign
as
the
period
of
Eurozone
crisis
when
west
is
facing
high
unemployment
rate
India’s
unemployment
rate
has
reduced
by
one
third.
If
we
consider
the
industry
structure
the
heavy
industry
are
dominated
by
SOEs
but
they
all
are
now
opened
for
domestic
private
players
so
that
the
monopoly
of
SOEs
can
be
removed
and
the
competition
will
allow
SOEs
and
private
players
to
improve.
If
we
compare
to
China,
Indian
government
supports
entrepreneurship
most,
and
then
the
JVs
with
foreign
players.
The
philosophy
behind
this
is
that
a
small
or
medium
scale
enterprise
started
by
an
entrepreneur
provides
much
more
employment,
the
profit
earned
by
that
is
distributed
to
many
individuals
rather
than
in
a
JV
where
the
share
of
profit
goes
out
to
foreign
firm.
India
is
still
relatively
closed
to
China
when
it
comes
to
FDI(Foreign
Direct
Investments)
still
there
are
many
sectors
where
FDI
is
either
restricted
or
very
less.
To
boost
its
economy
India
can
open
the
sectors
and
this
can
attract
foreign
investors.
India
has
a
major
challenge
of
keeping
economic
growth
with
politics.
As
compared
to
China
where
stern
decisions
can
be
taken
by
government
for
economic
development
of
country
in
India
this
is
not
the
same
case.
There
have
been
major
cases
for
example
the
land
acquisition
case
for
POSCO
(Korean
mining
giant)
or
opening
of
FDI
in
retail.
If
we
compare
to
GINI
index,
which
is
38%
(0.38)
for
India,
which
is
marginally
better
than,
China
but
still
it
should
be
ideally
controlled
below
35%(0.35).
3.2
Indian
Economy:
Impact
of
Eurozone
Crisis
Indian
economy
is
much
more
venerable
than
to
China
to
Eurozone
crisis.
One
of
the
reasons
is
services
sector
(IT),
which
is
concentrated
on
US
and
Europe.
Because
of
the
crisis
many
major
European
projects
have
been
paused
while
new
are
not
released.
Though
in
some
cases
Eurozone
can
be
considered
beneficial
for
India,
for
example
the
reduction
in
unemployment
rate
from
9%
to
about
3.8
%(Exhibit
15)
during
Eurozone
crisis
is
due
to
the
factor
that
many
European
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
9
firms
are
improving
their
bottom
line
by
cutting
down
their
expenses.
They
are
outsourcing
many
jobs
related
to
(BPO)
to
India
where
low
cost,
skilled
labor
is
available.
From
the
above
graph
we
can
see
that
the
GDP
growth
has
fallen
below
6%
mark
though
it
is
increasing
now.
Government
of
India
has
reduced
the
GDP
growth
target
for
year
2012-?13
from
7.5%
to
6.5
%.
This
can
be
attributed
to
the
slowdown
caused
by
Eurozone
crisis.
Europe
is
biggest
trading
partner
for
India.
With
exports
accounting
to
about
19%
and
imports
about
14%
.
Even
though
the
exports
to
EU
have
sill
been
positive
Exports
growth
30%
&
Import
Growth
16
%
approx.,
the
fear
of
crisis
deepening
threatens
India.
FDI
investment
inflow
has
increased
by
34%
this
during
year
2011-?12
as
compared
to
year
2010-?11.
Though
the
FDI
during
2011-?12
was
about
46.48
billion
USD
which
is
nearly
one
fourth
of
China’s
FDI
inflow.
And
the
FDI
inflow
during
first
few
months
of
year
2012-?13
is
19.5
billion
USD
as
compared
to
7.1
billion
dollars
last
year.
The
FDI
condition
doesn’t
look
bad
at
present
but
if
this
crisis
deepens
then
it
will
be
tough
for
India
to
attract
foreign
investors.
Meanwhile
the
FDI
outflow
towards
Europe
has
increased
specially
Indian
IT
firms.
But
still
India
is
not
figuring
among
top
10
countries
investing
in
Europe
where
else
China
is
among
them.
The
free
fall
of
rupee
against
USD
is
a
major
concern
for
Indian
Economy.
This
causes
the
Oil
deficit
for
the
country
to
pile
up.
Government
has
taken
some
stringent
actions
to
arrest
this.
10
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
3.3
Indian
Economy:
Actions
Taken
In
order
to
avoid
economic
slow
down
Indian
government
has
taken
following
steps:
1. The
export
focus
has
been
shifted
from
western
countries
to
emerging
economies.
Indian
government
encourages
domestic
companies
to
export
to
African
countries.
This
may
be
one
of
the
reasons
that
even
during
the
Eurozone
crisis
Indian
exports
are
not
hit
much.
2.
Decision
to
open
FDI
upto
51%
in
multiband
retail
is
the
way
of
government
to
attract
foreign
investors
in
India
and
ensure
that
flow
of
FDI
is
continuous.
3. Reduction
in
interest
rates.
During
February
&
March
2012
the
industrial
growth
of
India
was
at
standstill
to
boost
it
government
decreased
the
interest
rates.
4.
In
order
to
reduce
the
government
deficit
it
has
reduced
some
subsidies
on
Oil
&
Gas
products.
5. For
boosting
service
sector
government
has
encouraged
foreign
firms
to
set
up
their
R&D
facility.
3.4
Indian
Economy:
Suggestions
1. India
should
focus
on
emerging
economies
rather
than
developed
countries
for
exports
as
recent
economic
crisis
has
proved
that
western
economic
models
are
not
sustainable.
2. India
should
reduce
its
spending
as
the
deficit
in
terms
of
GDP
is
high
about
68%
though
it
is
continuously
decreasing
from
past
5
years.
3. India
should
spend
more
on
basic
like
primary
&
secondary
education
this
will
generate
more
skilled
manpower
required
for
service
sector.
4. Competitiveness
of
SOEs
should
be
improved
which
government
has
already
done
by
allowing
domestic
players
in
many
sectors
such
as
defense
production.
5. Indian
firms
should
diversify
in
Europe
as
during
recession,
as
it
is
the
right
time
to
invest
and
they
have
capital
to
invest.
6.
India
should
try
to
reduce
the
balance
of
trade
by
exporting
services
to
emerging
economies
as
well.
7. India
should
make
some
strong
laws
regarding
land
acquisition,
which
is
a
concern
for
many
FDI
investors.
8. India
should
try
to
attract
FDI
in
infrastructural
projects.
9. India
should
develop
some
alternative
such
as
biofuel,
which
can
reduce
its
dependency
on
crude
oil,
which
at
present
covers
about
40%
of
its
total
imports.
10. India
should
market
its
handicrafts,
tourism
and
traditional
medication
more
aggressively.
They
can
earn
a
lot
of
foreign
currency
and
improve
standard
of
living
of
masses,
which
in
turn
increases
domestic
consumption.
11. Sustainable
development
should
be
preferred
rather
than
the
rapid
and
unsustainable
growth.
4.1 Conclusion:
In
conclusion
I
will
like
to
say
that
Eurozone
crisis
is
the
outcome
of
an
unstable
economic
structure.
In
order
to
boost
consumption
people
and
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
11
government
were
encouraged
to
spend
on
credit.
And
this
credit
comes
as
a
loan
from
future
and
when
it
reaches
its
tipping
point
we
find
ourselves
in
recession.
Bubbles
are
formed
when
virtual(fake)
demands
are
created
for
short
period
of
time
these
bubbles
can
act
as
a
catalyst
but
they
always
burst
into
recessions.
Hence
I
would
say
for
a
sustainable
development
should
always
take
the
middle
path,
which
is
also
said
as
the
“Mean
way”
according
to
Confucianism.
Eastern
economies
still
follow
the
same
and
now
its
again
the
west
looking
towards
east
for
solutions
and
the
sustainable
structure
of
economy.
Savings
may
be
a
new
term
for
west
but
it
is
built
in
value
in
eastern
culture.
I
still
regard
Korean
model
of
development
much
better
than
the
western
model.
Collectivism
is
any
day
better
than
individualism
otherwise
we
will
be
seeing
“Occupy
Wall
Street”
movements
and
economic
crisis
very
often.
I
think
this
is
the
right
juncture
to
think
and
act,
when
the
fast
developing
economies
should
come
out
from
the
rat
race
of
GDP
growth
but
focus
on
sustainable
development.
One
of
the
reasons
that
India
and
China
were
not
hit
much
in
previous
recession
was
because
they
had
taken
the
“Mean
way”
for
economic
liberation.
-?-?<>-?-?
12
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Exhibit
1
Exhibit
2
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
13
Exhibit
3
GDP
per
Hour
worked
2008
Exhibit
4
Gini’s
Coefficient
(as
%)
Exhibit
5
Unemployment
in
EU
14
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Exhibit
6
Unemployment
Young
population
Exhibit
7
China
Government
Debt
to
GDP.
Exhibit
8
China
Balance
of
Trade
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
15
Exhibit
9
China
Unemployment
rate
Exhibit
10
Trade
of
Goods
EU
with
China
Exhibit
11
Trade
of
Services
EU
with
China
16
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Exhibit
12
FDI
EU
with
China
Exhibit
13
India
Government
debt
to
GDP
(%).
Exhibit
14
India
Balance
of
Trade
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
17
Exhibit
15
India
unemployment
rate
Exhibit
16
Trade
of
Goods
EU
with
India
Exhibit
17
Trade
of
Services
EU
with
India
18
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Exhibit
18
FDI
with
India
by
EU.
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
19
Bibliography
1. The
Lessons
of
the
Eurozone
Crisis
that
should
shape
the
EUs
G20
Stand
by
Yannos
Papantoniou
Former
Economy
&
Finance
Minister
of
Greece.
2. The
Euro
Debt
Crisis
and
Its
Impact
on
the
World
By
Julian
Knight
3. BBC
Business
4. Eurostat
5. Market
watch
6. Financial
news
7. WTO
8. www.tradingecomomies.com
9. The
Economic
Times
10. www.publicserviceeurope.com
11. Wikipedia
doc_990890706.pdf
I have analyzed this according to the chronology of events. Then i have studied the impact of this slowdown on Chinese & Indian Economies and suggest the ways by which both India & China can pass through this phase without without much damage.
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
1
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Author:
Ashish
Jude
Michael
Participant
PGPEx2012
(OUC
China
+IIM
Shillong
)
2
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Table
of
Content
Executive
Summary
1.1Eurozone
Crisis:
Brief
Introduction
1.2Eurozone
Crisis:
Major
Attributes
1.3Eurozone
Crisis:
Effect
on
European
Economy
1.4Eurozone
Crisis:
Effect
on
Global
Economy
2.1
Chinese
Economy:
Brief
Introduction
2.2
Chinese
Economy:
Under
Eurozone
Crisis
2.3
Chinese
Economy:
Actions
Taken
2.4
Chinese
Economy:
Suggestions
3.1
Indian
Economy:
Brief
Introduction
3.2
Indian
Economy:
Under
Eurozone
Crisis
3.3
Indian
Economy:
Actions
Taken
3.4
Indian
Economy:
Suggestions
4.1
Conclusion:
Exhibits:
1-?18
Bibliography
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
3
Executive
Summary
This
report
is
about
the
Eurozone
crisis
and
how
emerging
economies
such
as
India
&
China
should
deal
with
it
and
also
what
they
should
learn
from
this
crisis.
I
have
divided
this
report
basically
into
four
parts;
first
part
gives
the
history,
detail
&
analysis
of
Eurozone
crisis.
Second
part
I
have
explained
briefly
about
Chinese
economy,
how
Eurozone
crisis
has
affected
its
economy,
what
are
the
action
taken
by
government
and
suggestions.
In
third
part
I
have
discussed
about
Indian
economy
on
similar
lines
and
finally
I
have
concluded
in
part
four.
Eurozone
crisis
is
not
a
single
economic
recession,
which
we
have
faced;
in
recent
past
but
it
is
actually
one
of
the
event
in
the
chain
of
events
of
what
economist
commonly
say
“
Global
Financial
Crisis”.
The
table
below
shows
the
events,
which
hit
the
global
economy
during
last
5
years.
2007–2012
Global
Financial
crisis Major
Events
• • • • • • • • • •
2000s
energy
crisis
2008–2012
global
recession
Automotive
industry
crisis
of
2008–2010
Dodd–Frank
Wall
Street
Reform
and
Consumer
Protection
Act
European
sovereign-?debt
crisis
Financial
Crisis
Inquiry
Commission
Subprime
crisis
impact
timeline
Subprime
mortgage
crisis
United
States
housing
bubble
United
States
housing
market
correction
1.1
Eurozone
Crisis:
Brief
Introduction
European
union
trace
back
its
roots
in
1951
with
the
“Treaty
of
Paris”
with
about
6
members.
Now
is
a
economic
&political
union
of
27
countries
of
Europe.
It
having
about
20%
of
global
GDP
as
per
PPP
(Purchasing
Power
Parity).
It
introduced
a
common
currency
Euro
in
2002.The
17
countries
accepted
Euro
as
their
currency
and
these
17
countries
formulate
the
“Eurozone”
.Soon
Euro
became
second
most
traded
currency
of
the
world
just
behind
USD
(United
State
Dollar).
Year
2010
saw
onset
of
European
Sovereign
Debt
Crisis
which
is
commonly
referred
as
Euro
Zone
Crisis.
There
are
four
major
causes
for
this
crisis.
First
the
rising
government
(public)
debts.
The
stability
of
a
country
can
be
determined
by
the
percentage
of
the
government
(public)
debt
to
its
GDP.
(Exhibit
1)
clearly
shows
that
the
relative
position
of
major
countries.
We
can
see
that
Greece
is
already
is
in
a
very
bad
condition
as
its
public
debt
is
436
billion
$
which
constitutes
to
143%
of
its
GDP,
next
to
follow
are
Italy,Ireland
,Portugal
,&
4
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Spain
with
figures
of
115%,
95%,93%
and
60%.
Though
Spain
appears
better
in
this
situation
but
in
next
cause
we
can
observe
the
problem
faced
by
Spain.
Second
cause
is
the
rise
in
trade
imbalance.
If
we
see
Exhibit
2
we
can
see
that
In
terms
of
%
of
GDP
Portugal,
Iceland,
Greece,
Spain
and
Italy
are
having
figures
of
-?9.9%,
-?7.1%,
-?6.5%,
-?4.7%
and
-?3.3%
respectively.
Only
Germany
is
the
country
which
have
a
positive
trade
balance
of
6.7%
hence
is
one
of
the
strong
economy.
Third
cause
is
structure
of
Eurozone.
The
concept
of
Euro
has
structural
problems.
It
has
a
monitory
union
but
not
a
fiscal
union.
For
stability
of
a
currency
system
the
member
countries
should
follow
same
fiscal
path
but
they
have
no
common
treasury
to
enforce
them.
Each
country
is
free
to
follow
its
fiscal
policy.
It
happened
in
the
case
of
Greece,
it
was
hard
to
control
its
national
institutions.
Lack
of
quick
response,
if
any
decision
has
to
be
taken
by
Eurozone
all
17
member
countries
have
to
be
unanimous
and
this
takes
lot
of
time.
Lack
of
“Banking
Union”
common
for
Europe
to
avoid
“bank
runs”.
Fourth
cause
is
monitory
policy
inflexibility
a
member
country
cannot
the
money
to
pay
to
debit
holders
also
ECB
(European
Central
Bank)
has
inflation
control
mandate
not
unemployment
mandate
and
the
Loss
of
confidence
of
Investors
in
affected
countries
is
worsening
the
crisis.
1.2
Eurozone
Crisis:
Major
Attributes
Earlier
I
have
already
discussed
the
major
causes
for
the
Eurozone
crisis
now
I
will
be
doing
a
sort
of
microscopic
analysis
of
the
attributes,
which
set
these
causes.
There
are
6
attributes,
which
have
played
an
important
role
in
setting
the
causes,
which
in
turn
created
the
Eurozone
Crisis.
The
developed
economies
have
accumulated
sizeable
deficit
while
the
developing
countries
have
large
surpluses.ie.
China.
This
made
the
developing
countries
(China)
to
finance
the
developed
ones
(U.S.).
Instead
of
blaming
developing
countries
for
saving
rather
than
over
spending
developed
countries
should
learn
to
manage
their
spending’s.
Developing
countries
measure
their
creditability
by
the
amount
of
foreign
reserve
they
poses
where
else
that
is
not
the
condition
for
developed
countries.
It
appears
that
the
general
trend
was
that
if
GDP
is
sizeable
and
though
a
developed
country
is
running
on
deficient,
banks
and
investors
took
it
for
granted
before
studying
the
basics
of
investments.
There
were
different
rules
for
developed
and
developing
economies
and
this
may
be
one
of
the
attributes.
Second
attribute
is
protectionism
and
in
adequate
financial
help
to
poor
countries.
For
example
protectionism
measures
deeply
penalize
poorer
countries
that
rely
on
a
restricted
number
of
export
products
ie.
Crops
and
minerals.
Third
attribute
is
Loss
in
competitiveness,
Germany
had
improved
in
competitiveness
in
terms
of
changes
in
unit
labor
cost
but
Greece,
Portugal
Ireland,
Italy
and
Spain
lost
it.
Fourth
attribute
can
be
the
lack
of
cross
border
financial
supervision
and
lack
of
fiscal
policy
coordination.
Fifth
attribute
is
the
difference
in
productivity
among
Eurozone
countries
if
we
compare
with
GDP
per
hour
worked
we
can
see
that
countries
like
Slovakia,
Slovenia,
Portugal
and
Greeece
are
below
30
per
hour
worked
and
France,
Belgium
and
Ireland
have
50
Per
hour
worked
.
(Exhibit
3)
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
5
Sixth
attribute
is
the
rice
in
Gini
index
which
shows
the
income
disparity.
The
gap
between
rich
and
poor
is
increasing
the
top
five
countries
where
Gini
index
is
maximum
in
Europe
are
Portugal,
Greece,
Italy,
Spain
and
Ireland.(Exhibit
4)
1.3
Eurozone
Crisis:
Effect
on
European
Economy
The
European
economy
has
contracted
by
about
0.3%
in
2012
and
is
forecasted
to
grow
by
1%
in
2013
similarly
the
unemployment
rate
is
in
2012
is
11%
and
is
expected
to
be
10.3%
in
2013.
(Source
BBC).Bujt
one
important
factor
is
the
rise
in
unemployment
in
the
young
population
,
it
is
at
the
highest
level.
(Exhibit
5
&
6)
1.4
Eurozone
Crisis:
Effect
on
Global
Economy
Eurozone
crisis
is
not
just
affecting
the
economies
of
the17
member
countries
or
European
countries
but
all
the
countries
from
US,
China
to
African
countries.
Eurozone
is
a
big
market
for
US,
China
and
India
the
slowdown
in
Eurozone
will
slowdown
the
economies
or
related
countries
too.
If
the
Euro
collapse
it
will
not
only
affect
322
million
Europeans
but
also
150million
African
countries
whose
currency
is
pegged
to
Euro.
Also
the
world
financial
system
will
collapse
as
many
major
banks
hold
large
amount
of
Euro.
This
may
bring
an
economic
recession
worse
than
what
world
had
experienced
in
2007.
2.1
Chinese
Economy:
Brief
Introduction
China
is
currently
is
second
largest
economy
of
world
having
a
GDP
of
11.29
Trillion
United
States
Dollars
(USD)
as
per
Purchasing
Power
Parity
(PPP).
Its
economic
reform
started
in
1978
and
since
then
it
is
progressing
with
an
average
GDP
growth
rate
of
10%.
Its
had
developed
it
self
as
the
factory
for
the
world.
If
we
consider
the
sector
wise
break
up
of
Chinese
Economy
agriculture:
10.1%,
industry:
46.8%,
services:
43.1%.
The
Industry
and
Services
are
balanced
but
agriculture
is
very
less.
Sectorwise
break-?up
of
Chinese
Economy
Agriculture
Industry
Services
It
has
become
an
export-?oriented
economy
with
surplus
in
terms
of
balance
of
payment.
It
has
a
foreign
reserve
of
more
than
3
trillion
USD.
And
it
is
forecasted
it
will
take
over
US
by
2020.
When
we
consider
China
economy
it
is
keenly
observed
&
controlled
by
government
there
are
nearly
all
large-?scale
business
and
banks
are
SOEs
(State
6
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Owned
Enterprise)
while
medium
to
small-?scale
industry
are
dominated
by
private
players.
Till
now
china
has
protected
its
domestic
companies
from
foreign
competitors.
China
initially
started
as
a
location
for
low
cost
labor
but
with
economic
growth
that
advantage
is
decreasing
also
the
rise
in
the
older
population
is
a
concern.
China
is
now
concentrating
its
focus
on
more
sustainable
industries
such
as
services
&
R&D.
Also
11th
5
year
plan
has
laid
emphasis
on
environmental
aspects
too.
Another
concern
for
China
is
the
rise
in
income
disparity
among
earning
population.
We
should
appreciate
the
commitment
that
the
Chinese
political
leaders
have
towards
economic
growth.
Since
1978
they
have
achieved
all
major
5
year
plan
targets.
They
have
industrialized,
developed
infrastructure
and
acquired
skill
sets
for
human
resource
for
sustaining
this
growth
weather
by
sending
people
outside
for
studies
or
by
developing
Chinese
education
system.
We
can
say
China
is
a
much
healthy
economy
as
the
government
debt
to
GDP
is
about
25%
(Exhibit
7),
Balance
of
trades
is
always
surplus
(Exhibit
8)
and
the
unemployment
rate
is
low
about
4.1%(Exhibit
9).
Another
major
challenge,
which
China
is
facing,
is
the
increasing
disparity
in
income
level.
It
has
a
GINI
index
of
45%
(0.48),
which
can
be
said
alarming.
Initially
China
approached
the
theory
of
“Let
some
people
get
rich
first”
this
has
given
rise
to
such
disparity.
The
costal
provinces
are
very
developed
as
compared
to
the
central
provinces.
The
recent
conflict
arising
with
Japan
related
to
Diaoyu
islands
may
also
slow
down
the
economy
further,
Japan
being
major
trading
partner
for
China.
2.2
Chinese
Economy:
Impact
of
Eurozone
Crisis
As
we
know
that
China
is
basically
an
export-?oriented
economy
and
if
we
see
the
statistics
its
major
export
partner
is
Europe,
it
accounts
of
about
17%
of
Exports
and
8%
imports.
We
can
say
the
Chinese
economy
is
highly
dependent
on
European
market.
Any
slowdown
in
Eurozone
will
affect
Chinese
economy.
We
have
seen
it
during
Eurozone
crisis
when
the
growth
rate
of
China
felled
below
8%
mark
in
months
in
2012
and
Chinese
government
has
revised
real
GDP
growth
rate
at
7.5%.
If
we
see
in
above
graph
there
is
a
significant
slowing
down
of
Chinese
economy
with
the
onset
of
Eurozone
crisis.
Also
there
is
a
problem
of
increase
in
inventory
for
goods
as
the
demand
in
EU
has
reduced
but
production
in
China
haven’t.
This
has
created
problems
for
stockiest
and
dealers.
FDI
in
China
has
also
reduced
by
3.7%
over
all
and
4.1%
from
EU
this
year
and
it
is
attributed
to
the
Eurozone
crisis.
Yuan
is
appreciating
but
there
is
no
problem
of
Unemployment
though
orders
have
reduced
and
industrial
production
has
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
7
slowed
down
seen
due
to
the
crisis.
Also
the
balance
of
trade
has
taken
during
start
of
2012
and
also
the
unemployment
rate
was
nearly
fixed
around
4%
mark.
2.3
Chinese
Economy:
Actions
Taken
In
order
to
fight
the
slowdown
and
to
take
advantage
of
Eurozone
crisis
China
has
taken
following
steps:
1. Focus
has
been
diverted
to
Africa
and
development
of
African
&
Emerging
economies.
2. China
is
investing
directly
or
indirectly
in
Europe
on
the
principle
“Recession
is
the
best
time
to
invest”.
China’s
direct
investment
in
Europe
soars
up
in
second
quarter
of
2012
by
more
than
67%
as
compared
to
last
year.
3. China
is
ready
to
support
or
even
bailout
countries
like
Greece
and
bailing
out
Europe
but
surprisingly
major
Chinese
are
back
away
from
European
lenders
it
appears
as
a
paradox.
4. China
has
cut
down
the
interest
rates
in
May
2012
to
boost
up
industrial
activity.
2.4
Chinese
Economy:
Suggestions
1. China
should
increase
its
domestic
consumption
for
GDP
growth
rather
than
wholly
dependent
on
exports.
2. China
should
diversify
its
exports
to
developed
as
well
as
emerging
and
underdeveloped
countries
so
that
it
can
reduce
the
risk
of
induced
economic
slowdown.
China
has
already
started
this
activity
by
focusing
on
Africa.
3. China
should
increase
its
investment
in
Europe
and
they
are
already
implementing
it.
4. China
should
try
to
stabilize
and
if
possible
bail
out
Europe
so
that
its
economic
growth
is
not
affected.
5. China
should
not
follow
the
western/European
model
of
spending
on
deficient.
6. China
should
focus
more
towards
services
rather
than
industry
as
it
is
slowly
losing
its
advantage
of
low
cost
labor
hub.
7. China
should
focus
in
reducing
its
GINI
index
of
48%
is
a
bit
high.
Chinese
government
is
already
on
action;
it
has
stopped
the
special
benefits
&
tax
holidays,
which
were
earlier
given
in
costal
provinces.
Instead
they
are
encouraging
foreign
companies
to
set-?up
their
plant
in
central
part
of
China
by
granting
them
special
benefits
and
tax
holidays.
3.1
Indian
Economy:
Brief
Introduction
Indian
economy
is
fourth
largest
economy
of
World
with
a
GDP
of
4.457
Trillion
USD
as
per
PPP.
After
China
it
is
Indian
Economy
on
which
on
rapid
growth
among
emerging
economies.
It
is
an
economy
based
on
services.
It
is
also
seen
as
a
lucrative
market,
which
is
highly
dynamic.
If
we
consider
the
break
up
of
Indian
Economy
sector
wise
Agriculture
is
17.2%,
Industry
is
26.4
%
and
services
constitute
56.4%.
8
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Sectorwise
break-?up
of
Indian
Economy
Agriculture
Industry
Services
We
can
observe
that
the
Industry
and
services
are
not
in
balance.
It
is
becoming
a
service
hub.
Especially
IT
&
BPO
(Business
Processed
Outsourcing)
services.
India
is
facing
the
problems
of
Government
debt
and
maintains
balance
of
trade.
The
Government
debt
is
about
68.53%
of
GDP
(Exhibit
13)
and
balance
of
trade
has
always
been
in
deficit
(Exhibit
14).
Major
portion
of
import,
which
India
has,
is
crude
oil.
Even
the
foreign
reserve,
which
India
has,
is
not
too
much.
Its
about
328
billion
USD.
The
major
trade
partners
for
India
is
EU
followed
by
China.
India
has
maximum
trade
deficit
with
China.
The
unemployment
rate
has
sharply
reduced
to
3.8%
from
9.4
%(2010)
(Exhibit
15).
This
is
a
good
sign
as
the
period
of
Eurozone
crisis
when
west
is
facing
high
unemployment
rate
India’s
unemployment
rate
has
reduced
by
one
third.
If
we
consider
the
industry
structure
the
heavy
industry
are
dominated
by
SOEs
but
they
all
are
now
opened
for
domestic
private
players
so
that
the
monopoly
of
SOEs
can
be
removed
and
the
competition
will
allow
SOEs
and
private
players
to
improve.
If
we
compare
to
China,
Indian
government
supports
entrepreneurship
most,
and
then
the
JVs
with
foreign
players.
The
philosophy
behind
this
is
that
a
small
or
medium
scale
enterprise
started
by
an
entrepreneur
provides
much
more
employment,
the
profit
earned
by
that
is
distributed
to
many
individuals
rather
than
in
a
JV
where
the
share
of
profit
goes
out
to
foreign
firm.
India
is
still
relatively
closed
to
China
when
it
comes
to
FDI(Foreign
Direct
Investments)
still
there
are
many
sectors
where
FDI
is
either
restricted
or
very
less.
To
boost
its
economy
India
can
open
the
sectors
and
this
can
attract
foreign
investors.
India
has
a
major
challenge
of
keeping
economic
growth
with
politics.
As
compared
to
China
where
stern
decisions
can
be
taken
by
government
for
economic
development
of
country
in
India
this
is
not
the
same
case.
There
have
been
major
cases
for
example
the
land
acquisition
case
for
POSCO
(Korean
mining
giant)
or
opening
of
FDI
in
retail.
If
we
compare
to
GINI
index,
which
is
38%
(0.38)
for
India,
which
is
marginally
better
than,
China
but
still
it
should
be
ideally
controlled
below
35%(0.35).
3.2
Indian
Economy:
Impact
of
Eurozone
Crisis
Indian
economy
is
much
more
venerable
than
to
China
to
Eurozone
crisis.
One
of
the
reasons
is
services
sector
(IT),
which
is
concentrated
on
US
and
Europe.
Because
of
the
crisis
many
major
European
projects
have
been
paused
while
new
are
not
released.
Though
in
some
cases
Eurozone
can
be
considered
beneficial
for
India,
for
example
the
reduction
in
unemployment
rate
from
9%
to
about
3.8
%(Exhibit
15)
during
Eurozone
crisis
is
due
to
the
factor
that
many
European
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
9
firms
are
improving
their
bottom
line
by
cutting
down
their
expenses.
They
are
outsourcing
many
jobs
related
to
(BPO)
to
India
where
low
cost,
skilled
labor
is
available.
From
the
above
graph
we
can
see
that
the
GDP
growth
has
fallen
below
6%
mark
though
it
is
increasing
now.
Government
of
India
has
reduced
the
GDP
growth
target
for
year
2012-?13
from
7.5%
to
6.5
%.
This
can
be
attributed
to
the
slowdown
caused
by
Eurozone
crisis.
Europe
is
biggest
trading
partner
for
India.
With
exports
accounting
to
about
19%
and
imports
about
14%
.
Even
though
the
exports
to
EU
have
sill
been
positive
Exports
growth
30%
&
Import
Growth
16
%
approx.,
the
fear
of
crisis
deepening
threatens
India.
FDI
investment
inflow
has
increased
by
34%
this
during
year
2011-?12
as
compared
to
year
2010-?11.
Though
the
FDI
during
2011-?12
was
about
46.48
billion
USD
which
is
nearly
one
fourth
of
China’s
FDI
inflow.
And
the
FDI
inflow
during
first
few
months
of
year
2012-?13
is
19.5
billion
USD
as
compared
to
7.1
billion
dollars
last
year.
The
FDI
condition
doesn’t
look
bad
at
present
but
if
this
crisis
deepens
then
it
will
be
tough
for
India
to
attract
foreign
investors.
Meanwhile
the
FDI
outflow
towards
Europe
has
increased
specially
Indian
IT
firms.
But
still
India
is
not
figuring
among
top
10
countries
investing
in
Europe
where
else
China
is
among
them.
The
free
fall
of
rupee
against
USD
is
a
major
concern
for
Indian
Economy.
This
causes
the
Oil
deficit
for
the
country
to
pile
up.
Government
has
taken
some
stringent
actions
to
arrest
this.
10
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
3.3
Indian
Economy:
Actions
Taken
In
order
to
avoid
economic
slow
down
Indian
government
has
taken
following
steps:
1. The
export
focus
has
been
shifted
from
western
countries
to
emerging
economies.
Indian
government
encourages
domestic
companies
to
export
to
African
countries.
This
may
be
one
of
the
reasons
that
even
during
the
Eurozone
crisis
Indian
exports
are
not
hit
much.
2.
Decision
to
open
FDI
upto
51%
in
multiband
retail
is
the
way
of
government
to
attract
foreign
investors
in
India
and
ensure
that
flow
of
FDI
is
continuous.
3. Reduction
in
interest
rates.
During
February
&
March
2012
the
industrial
growth
of
India
was
at
standstill
to
boost
it
government
decreased
the
interest
rates.
4.
In
order
to
reduce
the
government
deficit
it
has
reduced
some
subsidies
on
Oil
&
Gas
products.
5. For
boosting
service
sector
government
has
encouraged
foreign
firms
to
set
up
their
R&D
facility.
3.4
Indian
Economy:
Suggestions
1. India
should
focus
on
emerging
economies
rather
than
developed
countries
for
exports
as
recent
economic
crisis
has
proved
that
western
economic
models
are
not
sustainable.
2. India
should
reduce
its
spending
as
the
deficit
in
terms
of
GDP
is
high
about
68%
though
it
is
continuously
decreasing
from
past
5
years.
3. India
should
spend
more
on
basic
like
primary
&
secondary
education
this
will
generate
more
skilled
manpower
required
for
service
sector.
4. Competitiveness
of
SOEs
should
be
improved
which
government
has
already
done
by
allowing
domestic
players
in
many
sectors
such
as
defense
production.
5. Indian
firms
should
diversify
in
Europe
as
during
recession,
as
it
is
the
right
time
to
invest
and
they
have
capital
to
invest.
6.
India
should
try
to
reduce
the
balance
of
trade
by
exporting
services
to
emerging
economies
as
well.
7. India
should
make
some
strong
laws
regarding
land
acquisition,
which
is
a
concern
for
many
FDI
investors.
8. India
should
try
to
attract
FDI
in
infrastructural
projects.
9. India
should
develop
some
alternative
such
as
biofuel,
which
can
reduce
its
dependency
on
crude
oil,
which
at
present
covers
about
40%
of
its
total
imports.
10. India
should
market
its
handicrafts,
tourism
and
traditional
medication
more
aggressively.
They
can
earn
a
lot
of
foreign
currency
and
improve
standard
of
living
of
masses,
which
in
turn
increases
domestic
consumption.
11. Sustainable
development
should
be
preferred
rather
than
the
rapid
and
unsustainable
growth.
4.1 Conclusion:
In
conclusion
I
will
like
to
say
that
Eurozone
crisis
is
the
outcome
of
an
unstable
economic
structure.
In
order
to
boost
consumption
people
and
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
11
government
were
encouraged
to
spend
on
credit.
And
this
credit
comes
as
a
loan
from
future
and
when
it
reaches
its
tipping
point
we
find
ourselves
in
recession.
Bubbles
are
formed
when
virtual(fake)
demands
are
created
for
short
period
of
time
these
bubbles
can
act
as
a
catalyst
but
they
always
burst
into
recessions.
Hence
I
would
say
for
a
sustainable
development
should
always
take
the
middle
path,
which
is
also
said
as
the
“Mean
way”
according
to
Confucianism.
Eastern
economies
still
follow
the
same
and
now
its
again
the
west
looking
towards
east
for
solutions
and
the
sustainable
structure
of
economy.
Savings
may
be
a
new
term
for
west
but
it
is
built
in
value
in
eastern
culture.
I
still
regard
Korean
model
of
development
much
better
than
the
western
model.
Collectivism
is
any
day
better
than
individualism
otherwise
we
will
be
seeing
“Occupy
Wall
Street”
movements
and
economic
crisis
very
often.
I
think
this
is
the
right
juncture
to
think
and
act,
when
the
fast
developing
economies
should
come
out
from
the
rat
race
of
GDP
growth
but
focus
on
sustainable
development.
One
of
the
reasons
that
India
and
China
were
not
hit
much
in
previous
recession
was
because
they
had
taken
the
“Mean
way”
for
economic
liberation.
-?-?<>-?-?
12
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Exhibit
1
Exhibit
2
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
13
Exhibit
3
GDP
per
Hour
worked
2008
Exhibit
4
Gini’s
Coefficient
(as
%)
Exhibit
5
Unemployment
in
EU
14
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Exhibit
6
Unemployment
Young
population
Exhibit
7
China
Government
Debt
to
GDP.
Exhibit
8
China
Balance
of
Trade
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
15
Exhibit
9
China
Unemployment
rate
Exhibit
10
Trade
of
Goods
EU
with
China
Exhibit
11
Trade
of
Services
EU
with
China
16
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Exhibit
12
FDI
EU
with
China
Exhibit
13
India
Government
debt
to
GDP
(%).
Exhibit
14
India
Balance
of
Trade
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
17
Exhibit
15
India
unemployment
rate
Exhibit
16
Trade
of
Goods
EU
with
India
Exhibit
17
Trade
of
Services
EU
with
India
18
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
Exhibit
18
FDI
with
India
by
EU.
The
Eurozone
Crisis
Impact
on
Chinese
&
Indian
Economies
19
Bibliography
1. The
Lessons
of
the
Eurozone
Crisis
that
should
shape
the
EUs
G20
Stand
by
Yannos
Papantoniou
Former
Economy
&
Finance
Minister
of
Greece.
2. The
Euro
Debt
Crisis
and
Its
Impact
on
the
World
By
Julian
Knight
3. BBC
Business
4. Eurostat
5. Market
watch
6. Financial
news
7. WTO
8. www.tradingecomomies.com
9. The
Economic
Times
10. www.publicserviceeurope.com
11. Wikipedia
doc_990890706.pdf