Financial Crisis and Its Impact on the Economies of China and India

Abstract

The study will focus on the current financial crisis and its impact on the growth, trade and employment in emerging market economies (EMEs) namely China and India. The emerging market economies are characterized as transitional, which means that they are in the process of moving from a closed to an open market economy. It is said that by adoption of neoliberal policies, the economy will suppose to lead to a better economic performance levels, as well as transparency and efficiency in the capital market. The proponents of the 'neoliberal economic policies' always maintained that it is working and as a consequence, for example, the Indian economy is growing at high rates, the stock market is booming, foreign reserve is at a comfortably high level. The 'free trade' policy is making availability of a variety of goods unimaginable earlier as a mark of the benefits of globalization. The 'invisible hand' of the market, tries to pretend that market operates in isolation. On the basis most recent available data and studies the author has examined the impact of financial crisis on the economic growth and various sectors of the economies in China and India. Finally, the author finds the argument that China emerging as the alterative engine of growth for the world economy is too ambitious. Some have suggested that a 'decoupled Asia' through its own growth and expanding domestic demands would ensure higher imports demands for its growing economies and thus limit the economic slowdown in the developed economies. But this is unlikely due to: the US, EU and Japan together account for more than half of China's exports, and as recession deepens, it is bound to affect export sector and overall economic activity in China. Keywords: Financial crisis, emerging market economies, India, China, neo-liberalism, FDI, growth rates and economic crisis.