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The impact of the US sub prime crisis on the Indian economy with specific reference to the service industry

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  1. Introduction
  2. Objectives of the study
  3. Methodology of the study
  4. A study on sub prime
    1. Causes for the sub prime mortgage crisis
    2. Impact of Sub prime crisis in US economy
  5. Various case studies
  6. Sub prime mortgage crisis impact on Indian service industry
    1. Sector wise case studies
  7. Conclusion

The main objective of the project is to study the ripple effect of the sub prime mortgage crisis in US and its impact on Indian service industry. The paper includes a study on sub prime, causes for the sub prime mortgage crisis, effect of the crisis on the American economy accompanied by an illustration. Its affect on inflation will also be examined just before looking at the affect on the Indian service industry. The main sources of information for the project are the secondary source like business magazines, newspapers and websites. Another thing that will be examined is the ripple effect that the crisis had which included situations like increased government debts, downward pressure on dollar leading to inflation, etc.

[...] The Reserve Bank of India, in its latest progress report on banking in India, noted that some Indian banks with overseas operations do have some exposure to credit derivatives and there could be some losses due to mark- to-market impact. However, it said such exposure was "very limited" and that banks did not have any direct exposure to the US subprime market, it said. The main variants of credit derivatives include collateralized debt obligations and credit default swaps. CDOs are securities backed by pools of other securities and bought by investors wanting exposure to the income from a set of loans or bonds but not direct exposure to them. [...]

[...] Sub prime credit cards: Credit card companies in the United States began offering subprime credit cards to borrowers with low credit scores and a history of defaults or bankruptcy in the 1990s when usury laws were relaxed. These cards usually begin with low credit limits and usually carry extremely high fees and interest rates as high as 30% or more. In 2007, many new subprime credit cards began to sprout forth in the market. As more vendors emerged, the market became more competitive, forcing issuers to make the cards more attractive to consumers. [...]

[...] In Q1/2007, S&P/Case-Shiller house price index records first year-over-year decline in nationwide house prices since 1991.The subprime mortgage industry collapses, and a surge of foreclosure activity (twice as bad as 2006) and rising interest rates threaten to depress prices further as problems in the subprime markets spread to the near-prime and prime mortgage markets. The U.S. Treasury secretary calls the bursting housing bubble "the most significant risk to our economy." February?March: Subprime industry collapse; more than 25 subprime lenders declaring bankruptcy, announcing significant losses, or putting themselves up for sale. [...]

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