The world is drown in debt, due to high debt & high interest cost, world economies are going into high budgetary deficits. Spendthrift budgets, high subsidies,huge social expenses & incapable government policies are also equally responsible for such high deficits. This further leads to decline in foreign reserves & devaluation of local currency. If we broadly see, world is divided into three parts, first are the economies, where there is huge foreign reserves availability,like China,who is capable of bailing out the local firms.There is stagnancy due dumping issues, No one actually knows what is happening inside China, it is a country, where real situation is very difficult to judge. Second are the countries, having less availability of reserves, incapable of bailing out,like Brazil. They end up on high debt bond issuance & resulting in downgrading of rating by agencies. Third are the emerging markets, they either sink or sail through this phase.
Majorly depending on government stability/discipline & pattern of consumption. India is one of sailing ones. Population is proving to be a boon for us, our consumption, due to such a huge population, is boosting our economy. On the other hand, US has started performing. Increase in interest rates & reduction in unemployment, giving a positive sign of growth. It has started performing after sub prime crisis, prevalent since 2008. They are also giving tough time to Saudi, Middle East & Russia due to oil price war. These economies are majorly running on crude oil sell. Saudi & Middle East have chopped off their own feet, in oil price war, they have hit fiscal deficit to 15% of GDP, whereas Russia is stagnant on growth path due to reduced oil exporting income. In turn, oil war is helping India in improving deficit & growth numbers. A study says, reduction in oil price by 10% can lead to GDP growth from 0.1-0.5%, India is taking full advantage of this.
Broadly saying this is going to be an Indo-US decade, where India will be growing like never before due to own consumption, very active & thoughtful governance whereas US has started bouncing back after a decade & recovering after a bad economic patch.
It's time to get set & go,let's unite together to be the part of this growth trajectory & help our government to the utmost possible extent.
Regards,
Nirav Ajmera
