Like every year, the end of 2013 provides an opportunity to reflect on what has transpired and what comes next. On the macroeconomic front, the most noteworthy development in 2013 was the elevated Current Account Deficit (CAD) in the first half of the year and its consequences in the second half. A lot of the narrative surrounding it has focussed on the Indian appetite for gold and its contribution to economic stress. Consequently, managing this appetite has been the focus of our remedial efforts as well. And while visible stress on the current account has reduced, without sustained initiatives to address the underlying causes, this is not a cure.
Since CAD is broadly equal to capital inflows, it can also be seen as the gap between domestic savings and investments.
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(This story appears in the 24 January, 2014 issue of Forbes India. To visit our Archives, click here.)
US economy has debt which is almost proportional to it\'s GDP of the order of $12 trillion. If we take into account all the promised future payments that it has commited, it is close to $205 trillion. The debt of the country is just related to sentiment of the economy. If the economy is growing at steady rate, fiscal deficit of the government will not be a concern. If the government is stagnating due to high inflation and low growth, the sentiments reverse and then it\'s cause of concern. Also, there is nothing to say that so much dept is bad debt. Economists like paul krugman, insist that US Govt continue with stimulus to keep it running. If we look from that perspective, we should say US economy is in coma and is being stimulated through these stimulus. Why can\'t India economy be stimulated the same way? After all, in the long run, as keynes would say, we are all dead!
on Jan 16, 2014