Market reactions, TV debates, newspaper articles are creating a kind of panic on the apprehended repercussions on global economy as a result of the downgrading of the credit rating of the USA by S & P. There should be no reason for any alarm. America was and shall remain the leading economy of the world. America derives its economic strength not from any colonial past but its own prowess. That makes it different from European countries and others. No doubt China is the biggest holder of the American Treasury Securities, yet it is nowhere near the US inherent economic strength. China is only the supplier: America the consumer. There lies the American strength and Chinese weakness. There is nothing basically wrong with the American economic situation, only it has tripped on foreign policy post WW-II. Where was the need for America to squander the tax-payers’ money on a misguided war in Iraq or Afghanistan when better options could help it achieve the same goals at cheaper costs and lesser time? Why should America continue with its space programme? Can Planet Earth take the weight of all the mineral wealth of the other members of the solar system or other stars that it continues with its exploration missions? Opulence, wealth, riches or economic well being does not mean wastage of resources. Advances in science and technology are welcome, but only so long they contribute to the improvement of living standards of the people. Had that been the case, the great meltdown of 2008, affecting the world economy, would not have occurred. Unrestrained spending creates situations America is facing today. How does it matter that it has suffered a downgrade after 96 years? Didn’t Britannia rule the world once? Change is natural. America has taken so long to achieve this downgrade, but others would have taken less. It should make the Americans think over their policies and decide on course correction. It can’t assert that all its policies are always right. America should be happy that it has contributed to the spread of democracy over large parts of the globe. If the US learns to respect the sovereign rights of other countries, irrespective whether they are big or small, and respects the principle of peaceful co-existence, it can achieve greater growth rates to regain its credit rating of AAA.
The world economic order is bound to change in the next 25 years. European countries have lived beyond their means for long. Colonies have gained independence. Economic developments in other countries have shrunken the markets for them. Shrunken markets will affect America also. China will continue to depend on export earnings from American and European markets. India, however, need have no worry. We hardly export any manufactured goods worth the name. We don’t have many patents to our credit. Our exports are basically of commodities, farm produce, handicrafts and small scale industry products and talent. By and large, we continue to import plant and machinery. Moreover, Indian economy is not nascent—it is an old economy. Even when the British ruled this country, they had taken huge loans from Indians (some are still being repaid by the successor government, that is, the Government Of India). It is a very strong economy. It has unbelievable resilience. It can not only take shocks but also give shocks. Unfortunately, corruption has affected the economy very badly since 1947, but mostly in the past 7 years of historic scams of corruption. India has vast & diversified market, which can absorb very high quantities of products and services and still leave scope for others to serve it to some extent. We are not an export dependent economy. In so far as the stock markets are concerned, they have been the playground for speculation for too long. Correction in the stock market is overdue. Had the Indian stock market been based on sound economic parameters, all the money invested in gold, silver and real estate would have been invested in it by now. But the stock market remains the last choice for discerning Indian investor even in 2011. That remains one of the strongest reasons of the American rating downgrading not affecting India. Moreover, downgrading doesn’t mean America has suddenly become poor. It is a rich country,that is bound to gain its number one position soon after it corrects policies leading to wasteful expenditure.
Nothing to worry yet!