The world economy is caught in one of the worst crises and the end is not yet in sight. The situation continues to worsen despite trillions of dollars of stimulus and bailouts. India is not completely immune to the global economic downturn as it is more integrated into the world economy today than at the time of the Asian crisis. India too has to weather the negative impact of the global financial turmoil. Though India's growth is not so dependent on the West, the service and manufacturing sectors would be adversely impacted; and on the stock market front, there has been a net outflow from the country as the global turmoil drags on.

After years of rapid growth, current fiscal will prove a testing year for policy makers. They are now concerned with the unsustainable fiscal situation, going by the sharp reduction in exports and the dramatic slowdown in the domestic economy. Corporate India is troubled by liquidity concerns and tight access to credit. As per revised estimates, fiscal deficit surged to 6% of GDP for FY09 against the budget estimates of 2.5% on account of large rise in government expenditure, coupled with significant decline in tax revenue collection.

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