One of the main causes of the crash of US Economy in post 2005 period(from which the economy is yet to fully recover)has been speculative real estate investments.A nexus between Banks and real estate business pushed the prices of properties to unrealistic heights.A stage came where prices were at such unrealistic levels that the same could not be supported any longer.Coupled with a slowdown in other sectors of the economy,the prices came tumbling down.Banks found that a substantial part of their funds,invested in projects that were stuck due to tumbling of prices in real estate.This affected the economies of countries which had substantial exposure in US.The setbacks in manufacturing and agricultural sectors accelerated the process and resulted in huge employment losses.
Fortunately India did not get affected because the Banks in US were not operating in a big way in the country-rather they were not allowed to. If anybody has to be thanked for that,it is the Left parties whose support was essential for the UPA 1 Government.Had the left not put their foot down on the issue,Manmohanji would have happily thrown open the windows of Indian Economy to US banks.Indian banks also would have followed their foot steps and the country itself would have gone bankrupt,since major players among banks in India are in public sector .Not that the left parties had the ability to forecast the consequences,but it so happened that their ideological steadfastness made them take a stand and that saved the economy,not by design,but by coincidence
Even petro dollar rich middle east countries suffered due to speculative investment on real estate.The oil rich countries,which has an unending source of money due to the oil prices being high,invested heavily in crazy real estate projects.The crash of US and European economies sent the oil prices crashing,and the real estate was the first victim.Worst sufferers were the Banks who recklessly financed the real estate projects.It appears that the Banks in Middle east do not find any reason for budgeting a growth in business for the next 5 years.This,in spite of their economies having a steady inflow of petro dollars.
India does not seem to have learned any lessons from the examples before them.The present state of real estate markets are speculation driven,and not demand driven.So,this can crash at any time.Indian economy today is surviving mostly on remittances from abroad,be it NRIs,IT Sector,or FDI.any change in one or more of those sectors can send the economy crashing.India has no fall back options,its domestic industry is in doldrums,farming sector in near disaster.Unless better sense prevails on the decision makers,the window dressed Indian Economy can turn out to be a major disaster
Fortunately India did not get affected because the Banks in US were not operating in a big way in the country-rather they were not allowed to. If anybody has to be thanked for that,it is the Left parties whose support was essential for the UPA 1 Government.Had the left not put their foot down on the issue,Manmohanji would have happily thrown open the windows of Indian Economy to US banks.Indian banks also would have followed their foot steps and the country itself would have gone bankrupt,since major players among banks in India are in public sector .Not that the left parties had the ability to forecast the consequences,but it so happened that their ideological steadfastness made them take a stand and that saved the economy,not by design,but by coincidence
Even petro dollar rich middle east countries suffered due to speculative investment on real estate.The oil rich countries,which has an unending source of money due to the oil prices being high,invested heavily in crazy real estate projects.The crash of US and European economies sent the oil prices crashing,and the real estate was the first victim.Worst sufferers were the Banks who recklessly financed the real estate projects.It appears that the Banks in Middle east do not find any reason for budgeting a growth in business for the next 5 years.This,in spite of their economies having a steady inflow of petro dollars.
India does not seem to have learned any lessons from the examples before them.The present state of real estate markets are speculation driven,and not demand driven.So,this can crash at any time.Indian economy today is surviving mostly on remittances from abroad,be it NRIs,IT Sector,or FDI.any change in one or more of those sectors can send the economy crashing.India has no fall back options,its domestic industry is in doldrums,farming sector in near disaster.Unless better sense prevails on the decision makers,the window dressed Indian Economy can turn out to be a major disaster
