China’s economic crisis: An opportunity for India?

On August 24, India’s stock markets witnessed a Black Monday with the Sensex falling over 1,600 points. Panic did strike the markets and the depreciation of the rupee only added to the worries. India’s Finance Minister Arun Jaitley and Governor of Reserve Bank of India Raghuram Rajan came out to reassure the investors that it is only a temporary pain that India had to endure. Overall, the fundamentals were very strong and the market mayhem was more due to the ongoing economic crisis in China, they said.

In today’s global integrated markets any crisis in any part of the world is likely to impact markets world over. The impact of such a crisis on different markets varies from country to country, based on their exposure to the crisis-hit markets. China has been seeing its stock markets and real economy slump over the past few weeks. And when the world’s second largest economy took a hit and witnessed a steep fall in recent times, it was bound to create panic across the global markets.

China’s surprise move to devaluate its currency sent ripples across markets. The Shanghai Composite Index dropped 8.5 percent that led to sell off in stocks and commodities around the markets in the world. During the 2008 global financial crisis China was seen as a shock absorber and even India did well to weather the crisis at that point of time. Both the countries were cited as examples of resilience to global shocks worldwide.

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