The US economy may be already under recession with a decline in the gross domestic product (GDP) growth in the last quarter of the current financial year, Morgan Stanley Asia chairman Stephen S Roach said at the India Economic Summit, 2007, in a discussion on shifting power equations and its implications for India.
"The US could already be in a recession right now. Production may have declined or have not grown at all in the current financial quarter that is coming to an end (October-December)," Roach said.
Economists have already forecast that the economy may grow at less than 1 per cent in the fourth quarter in 2007. The economy grew 4.9 per cent in the third quarter.
Expressing fear that the current crisis in the home loan sector may spill over to the consumer sector, Roach said property value of the whole country had declined as a whole, which last happened during the Great Depression days in 1933.
Holding that the homebuilding sector was the least globalised sector in the US, Roach said, "The current economic crisis in the US will move to the consumer sector, which constitutes 72 per cent of the US economy."
On the decoupling debate, Roach said, "I don't buy the idea that Asia has miraculously decoupled from the American consumer. If the US consumer sector is affected, Japan will be most exposed to it. China's growth may also slow down from the current 11 per cent to 8-9 per cent."
He said India would largely remain unaffected. Explaining why there is so much opposition to globalisation in the US now, Roach said, "The real wages of the US workers have not increased since a decade, though they were assured by politicians that they have nothing to worry."
"They are not saying no to India but to globalisation as told to them," he added.
Speaking at the summit, Mukesh Ambani, chairman, Reliance Industries, said, "The biggest change in the 21st century is the shift from geo-politics to geo-economics. The world is attracted towards India due to its peace and stability and a developmental growth model. We have proved to the world that we are a digested democracy. The real challenge before us is, however, to substantially eliminate poverty in coming two decades."
We need to create 100 million new jobs in next 15 years, he said, adding that for this, we needed to engage with global capital and talent.
Upbeat about the country's high growth rate, Ambani said, "The rest of the world has grown with a lower level of oil prices. But India will grow at a high rate even with a reasonably high oil prices."
Holding that India's growth would be good for the whole world, Anand Mahindra, vice-chairman and managing director, Mahindra and Mahindra, said, "This is because India does not have the history of ever colonising in any part of the world. We will never acquire power by flexing our muscle."
The world wanted to engage with India due to its democracy, demography and durability, he said. |
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