Waking up one morning in September to the news of the biggest bankruptcy of 158-year-old, historical, Lehman Brothers Holdings Inc., the fourth-largest US investment bank succumbing to the subprime mortgage crisis, did not bother everyone in general. It was surprising and shocking, but then there was least anticipation about the sequential effects. It was the ripple effect that sent waves of worry to other economies of the world. Acquisition of Merrill Lynch by Bank of America, bankruptcy of Iceland, downfall in stock indices in various corners of the world, the rupee getting weaker, increasing inflation rates, announcement of reduction in number of employees by Jet Airways, Kingfisher, etc., Morgan Stanley selling shares of Rs. 871 cr and such other `tsunamic' happenings have drastically affected not only the global economy but also our own. We have also witnessed the serpent movement of SENSEX and loss of lakhs and crores of rupees of the investors. All such happenings are creating panic economically. It seems difficult to achieve the previously shown economic development growth rates, may it be GDP or some other indicator of the Indian economy. Global meltdown is significantly affecting the world economy multidimensionally and since individual economies are interdependent, the ripple effect cannot be avoided.
None of the economies exist in a cocoon. They are affected by the happenings in other economies and vice versa. Global meltdown, as it is being referred to in this article, is nothing but bankruptcy and closure of gigantic global corporations serving internationally scattered markets. Huge amounts were held by these corporations and their titanic end has disrupted global economy. It is because of the spread of the business of these corporations on the globe as well as the quantum of funds disbursed by these firms as loans, etc. The crisis swelled up with the accumulation of investment in non-productive assets and debts turning bad. The global meltdown has sent a wave of panic throughout world economy. The danger of being affected has frightened most of the economies, which have started to scrutinize their strengths and weaknesses in today's context. This panicky situation has led to the wastage of organizational resources in discussions and deliberations, which could have been utilized for other purposes.
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