Page 4 - IACC Newsletter June 2013 Issue 11

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President’s Message
World Economic situation is in a precarious position. The US economy is showing strong signs of recovery riding on the
back of better performing manufacturing sector, pick up in employment growth and stabilized macroeconomic
fundamentals, such as moderate inflation, manageable current account deficit and the like. Exploitation of shale gas is
scripting a new paradigm in the US energy matrix. Growth forecast is encouraging both for 2013 and 2014 at 2.5 per
cent and 3.5 per cent respectively.
There are two schools of thought that hold diametrically opposite views about the achievement of the forecast. The
protagonists of the sustained growth argue that the US recovery phase has achieved a critical mass that it can fuel self-
growth triggered by the increasing domestic consumer demand. But the overwhelming opinion seems to be ion the
contrary. How can the US economy grow ridden with traumatic developments in other developed economies in Europe
and lackadaisical growth in emerging economies like China and India? In the medium and long run, they argue that there
cannot be islands of prosperity in the midst of galloping sluggishness.
Being a part of the emerging group of economies, India’s predicament is far from buoyant. Macroeconomic
fundamentals have to be reined in. Rupee breached
`
60 mark against the greenback. Current account deficit is
increasing on account of the higher import bill necessitated by the steep rupee depreciation. The initial advantages of
the exporting community are short-lived on account of the fact that a sizeable portion of India’s export is import linked.
Also, a volatile rupee sparks severest type of uncertainties among all stakeholders. In the long run such spells are zero
sum games, apart from its distortionary impact on the economy as a whole. The Chinese economy has also entered a lull
phase.
Difficult situations open up new calculus for growth and opportunities Economic history is replete with such examples.
Tightening of the fiscal system in the US in the recent years is on account of the fiscal profligacy practiced in the earlier
years. Admittedly, no country can afford to be inward looking since the external environment will impact them sooner
or later.
Significantly, the recent strategic dialogue between India and the US had directly or indirectly addressed many of these
concerns. The tier one dialogue-between the two administrations-covered a lot of space including articulation of the
top leadership to engage themselves in diverse areas like infrastructure, manufacturing, education, agriculture and
importantly aviation. Areas of co-operation were delineated between the two countries. Foremost among them is
infrastructure, wherein, the Indian government has committed an additional investment of more than
`
1.1 lakh crore in
the near future. The US was invited to invest in this critical segment, which can help them to reap rich dividends. Also,
there is an increasing realization that there is a need for policy relaxation in the case of retail, allowing them the
investors more freedom in sourcing goods. The secretaries committee set up by the government has recommended