One will be able to recollect the period during the 1929 depression with a similar torrid situation. The current era of economic and financial downturns is now prevalent on a global scale with most of the countries who deem themselves as superpowers feeling the bite with perhaps the most painful sensation. USA is one of them, and is also the perhaps the breeding ground of this crisis due to the 'not so efficient' management of its lending business. Certain brainchild of Wall Street which were supposed to be quite effective and, therefore, ended up in swelling the liquidity of the American economy. These were the mortgage based securities and collateral based obligations which increased the process of boom and led to lenders having a reduction in the degree of their caution. The resultant sub prime crisis which is a mayhem generated as a result of mismanagement of bad credit home loans has led to this global turmoil. The whole economy strings its tunes to some extent with the happenings in the US economy and, therefore, this era of recession has taken place. The Indian economy has also felt the brunt of this recession specially in the sector of home loans where floating rates rose to unmanageable levels. The situation is, however, not hopeless due to the steps that are being taken by the Indian government. One of the major steps has been the reduction in the repo rate as well as the cash reserve ratio, which has started to the process of improvement in this sector. Along with this, many other steps have also been taken to increase the liquidity factor. The situation in the economy has , therefore, taken the path of improvement once, again. Another notable factor is the relatively less degree of aftermaths being felt by the Indian financial system, when compared with the dwindling economies of most of the major developing nations and with the developed nations also being in major problems. This, therefore, justifies the the strength of the Indian economy which has been devised in a wonderful manner by our first financial thinkers of our nation.