The risk free. The rating agencies claimed those

The year was 2008 when what it seemed to be the safest economy in the world became vulnerable. Because times were good, small local banks were giving out mortgages without considering risk, and packaging low risk mortgages with subprime ones. Furthermore, they were selling financial derivatives backed by those mortgage packages to bigger banks, and the process went on until the underlying assets’ risk was practically invisible due to the high complexity of the spreadsheets. As soon as banks realized that they could lend money to anyone, no matter their income or their job they started lending out easy money because within the minute, a bigger bank would have bought the loan and the bank that issued the loan became risk free. The rating agencies claimed those packages were AAA because they were diversivied, but although the packages were diversified, the risk was higher than they thought, and as mortgage default rates rose, the scheme’s danger became evident.As the underlying asset was defaulting, and the mortgage-backed securities lost value, banks started selling them all at once and in terms of days their price plummeted. This caused several banks to crash and a near-financial system collapse. America was in trouble, and because of our globalized world its impact was quick to spread. The first countries to get hit were America’s main trading partners, and those whose banks owned american assets, like european countries. As the world’s biggest economies slowed down, they started importing less from developing countries like us in India, which had repercussions in our income anHaving an 8,5% GDP growth of our economy during the past year (2008) and an unemployment rate of 4,15% which decreased by a small margin since 2005, the delegation of India claims that its economy is solid.  But still, the economic crisis affected us in many ways. The Indian currency (the Rupee), suffered a depreciation against the strongest currencies, these being the British Pound, the United States Dollar, the Euro and the currencies fixed to them. Although India has enough liquidity to pay their debts, the Rupee’s depreciation means that India’s sovereign debt becomes more expensive for the country to repay.  Furthermore, the indian financial system decelerated its the credit growth, partly because of recessions in Indian trade partners’ economies. In theory, the depreciation of a currency would trigger an exports growth, but in this case most of the developed world was experiencing financial restrictions, so less buyers could afford our products and demand dried up.Because of the United States’ crisis, our exports registered a decline of about 30%. India’s ability to avoid economic disasters was helped by the fact that are relatively less dependent than other countries and by having a broad economy on global flows of trade and capital. Trade is a small component of our economy, and we have a robust domestic economy. During this period India has visibly prospered and despite population growth, per capita income has grown faster, and to a great level than ever before.With respect to currency manipulation, India stands as a supporter of floating currencies. We believe on the equilibrium between supply and demand, and the self-valuation of all currencies. However,  when the Reserve Bank of India (RBI) considers that our currency is being either extremely overvalued or extremely undervalued, it is allowed to intervene. The impact of sharp currency depreciation in a country whose population is 1.2 billion people, and in which six out of ten people are in poverty by international standards, is lot harsher than in one without overpopulation and poverty. In India, a currency depreciation means that a bigger percentage of its population would not get to eat three times a day and a bigger percentage of its population would fall under poverty.  In a hypothetical country without the big struggles that India has, the impact would be a lot smoother, for example, the regular middle class worker would have to make a few budget cuts in things that some people may call luxuries, such as not getting the newest phone or getting a smaller TV . Concerning trade, India is protectionist in some sectors, applies trade barriers and cares for the food security of the country. India’s agriculture sector employs a great number of Indians around the country, and although the GDP per share of the agricultural sector in India has been decreasing (from having a 40% share in the 1980s to having a current 15% share in the overall GDP of the Indian economy) because of non-agricultural growth in the country in the twenty first century, the agriculture sector is still the biggest employer in India, employing over 50% of the Indian population. Any impact that may affect India’s agriculture sector has an immediate social impact within the Indian population, this is why it is highly important for us to keep our food and agriculture products well positioned against their foreign competitors, this being in the local market as well as outside of our country for the products that are exported. These measures taken have brought nothing but positive effects on our agriculture, making us the biggest exporter of cashew and spices in the world. The delegation of the Republic of India looks forward for the implementation of temporary regulatory measures regarding the world’s economy until it is stable and safe. India believes that economies must have a free market, but these are not normal times. The situation we are living right now requires international action, and with that, a walk-along process of reforming the system, not just corruption wise but improving what we may call the “rules of the game”. The reform of the system that the Republic of India is proposing will be based principally on protection, not just for the banks but focusing our actions on the common people and acting as a trustful insurance for their actives. If this plan is applied, the banks will not be granted as much liberty as they used to have, we will not give the banks ground or space for another Troubled Asset Relief Program (TARP) incident to happen, where banks where trusted with the government’s money to loan it and they kept it to pay their own debts. In one of the many sectors where banks will have less freedom will be how they manage their liquidity and solvency percentages. India, for example, for the security of its economy, will ask its banks for a higher percentage of liquidity stored in their vaults for protection, this way being prepared for a hypothetical future crisis. The banks are not the only ones to blame for this catastrophe, this is something in which the whole system is involved and this time, the system broke down. Measures like the Troubled Asset Relief Program have failed, but in order to make our measures more effective we need to find consensus between the countries and their central banks.  

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