With the US economy wobbling, Obama should stop lecturing India

Business

oi-Sunil

By Sunil Fernandes

Updated: Monday, July 16, 2012, 9:57 [IST]

With a host of foreign investors and fund managers lampooning India's investment climate, the US President has now joined the chorus. Obama has cautioned on India's own investment climate and said that India needs to ensure a next wave of reforms.

True, the Indian government is suffering from a policy inertia, but if you compare India to the US, we are doing far better on several parameters. Our budget deficits and GDP growth rates are way ahead of the US. In fact, India will clock a GDP growth rate of more than 6%, while the US is still teetering at 2%. Our GDP growth rates are in fact, next only to China and India still remains amongst the fastest growing economies in the world.

The unemployment levels in the US at 8.2%, is at best shameful for a developed economy. Our fiscal deficit is 5.9% of GDP, while that of the US is 8% of GDP.

In fact, the US fiscal deficit has reached such alarming proportions that analysts are worried that the US may become another Greece if the nation is not careful.

US Federal Reserve Chairman, Ben Bernanke had this to comment recently with regards to the huge fiscal problem being faced in the US, which many are hoping does not turn into a Greece like situation.

"It is very important to say that if no action were to be taken by the fiscal authorities, the size of the fiscal cliff is such that there is, I think, absolutely no chance that the Federal Reserve could or would have any ability whatsoever to offset that effect on the economy."

Now the stern warning of the deficit that too from an eminent person like the Federal Reserve Chairman says it all, regarding the fiscal cliff that the US faces.

Last year, S&P downgraded for the first time the triple-A rating the U.S. had held for the last 70 years, saying the nation did not do enough to address the gloomy outlook for America's finances. It downgraded long-term U.S debt to AA+, a score that ranks below more than a dozen governments. With the downgrade, US treasuries are now no longer the safest investment bets.

An article in Forbes rightly argues that if politicians do not come together the US will be facing the biggest predictable crisis in history. "Our fiscal path is not sustainable. Bowles compares deficits to cancer, over time they will destroy America from within."

This is what Jesus had to say in the gospel of Mathew taken from the Holy Bible on being judgemental, "Why do you look at the speck of sawdust in your brother's eye and pay no attention to the plank in your own eye? How can you say to your brother, ‘Let me take the speck out of your eye,' when all the time there is a plank in your own eye? You hypocrite, first take the plank out of your own eye, and then you will see clearly to remove the speck from your brother's eye."

So much so for cautioning India on its investment climate.

GoodReturns.in