Jun 10, 2009|
'India can grow at 9%'
9% GDP growth could still be achieved
If Dr. Manmohan Singh, India's prime minister is to be believed, India is capable of growing by 8%-9%, even after the recent global financial meltdown. And the reason it can do so is because of its high savings rate. "Since our savings rate is as high as 35%... if all work together, we can achieve a growth rate of 8%-9%, even if the world economy does not improve", is how the man, who many consider as the architect of India's modern reforms, chose to put it across. He further added that the country is expected to log in a growth rate of 7% this fiscal, a number which is good enough given the turmoil the rest of the world, especially the developed world is into.
Indeed, with a savings rate of such a magnitude, India has to rely very little on external sources of capital and can thus, undertake big ticket projects on its own, without worrying about the global economic environment. Although the ability to do the same has been impaired a bit on account of the high fiscal deficit, Mr. Singh is of the opinion that there is still considerable scope for increasing public expenditure, particularly on infrastructure projects. Are we in for some big bang announcements during the upcoming budget? Well, only time will tell.
China may overtake US sooner than imagined
Jim o'Neill, Chief economist of Goldman Sachs and the one who became famous for coining the term BRIC has now made another bold prediction. He believes that the Chinese economy could become bigger than the US in 20 years, much before the earlier prediction of 30 years. Speaking to a leading business daily, he also opined that the current crisis has actually done China some good in the sense that it has made the Chinese authorities realize that it cannot rely on an export driven model alone if it were to chart its next stage of growth. And the country has already started taking measures as it unveiled a huge stimulus package of the magnitude of US$ 586 bn to offset the slump in demand from exports. Little wonder, experts are still gung ho about the Chinese economy and believe that it will sustain a growth of 9%-10% well into the distant future.
The US on the other hand may be undergoing a structural downward shift in its economic growth. Years of excesses has left both its government as well as its citizens knee deep in debt and thus, it could see economic pain for years to come as its citizens cut back on spending and the government becomes frugal. Infact, Bill Gross, one of the world's foremost bond experts has gone to the extent of saying that the era of 3% economic growth in the US could be a thing of the past and growth of 1%-2% is likely to be the new standard. Thus, with US economic growth contracting and that of China remaining constant and may be even increasing, it looks quite possible that China could overtake US earlier than expected.
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