There are two sets of impacts of the US financial crisis. Internally, though the threat of a total financial collapse has receded, the real economy is starting to show the impacts of the rapid financial deleveraging now taking place: A sharp, and possibly prolonged, recession is going to happen. Globally, other economies are starting to see the same processes at work in their financial sectors and in real economic activity. Providing ample liquidity avoids creating artificial insolvencies, but some institutions may genuinely have to go to the wall if their assets, properly valued, do not cover liabilities. One area of vulnerability is the real estate sector. Other sectors where investment has been aggressive may also see weaker firms face problems. India has no proper bankruptcy laws. A potential crisis may be an opportunity to create some streamlined procedures for restructuring. There will be secondary effects on the banking sector if real estate and other loans start going bad, and loosening monetary policy may provide a cushion   more »