US Decision on Increasing Debt Ceiling will help world economy: PHD Chamber

The calibrated decision in terms of increase in debt ceiling by the US Congress would not only help world's largest economy, the US, but help emerging and developing economies too in terms of liquidity concerns, said Mr. Suman Jyoti Khaitan, President, PHD Chamber.

Recovery in the US economy is critical to revival of growth in the World economy as US is a major exports destination for many emerging economies like India. Any trouble in the US economy hits hard through various trade and finance channels, added Mr. Khaitan.

Our economic growth models are highly synchronized with advanced economies and convergence of business cycles is highly correlated, he added. It is evident from the Post-Lehman Crisis period (2009-13) that we are not decoupled from the developments in US economy. Following the great crisis, the growth of real GDP fell to 7.2% (annual average) during FY2009 to FY2013 period from Pre-Crisis period of 8.7%(annual average) during high growth FY2004 to FY2008 period, he said.

The US President, has signed the Debt Deal to end a disruptive 16-day Government shutdown and increase the current debt ceiling of $16.7 trillion to prevent the country from a debt default with potential cascading effects on the world economy. The deal, however, offers only a temporary fix and does not resolve the fundamental issues of spending and deficits. It funds the government until 15 January 2014 and raises the debt ceiling until 7 February 2014.

In addition to lifting the federal debt limit, the deal calls for creating a House-Senate bipartisan commission to try to come up with long-term deficit-reduction ideas that would have to be approved by the full Congress. Their work would have to be completed by 13 December 2013. The agreement also includes some income verification procedures for those seeking subsidies under the 2010 healthcare law.

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