Indian Economy and US Dollar

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So long as the US Dollar is considered as a world currency, the US can continue to live on the borrowed money. The US cannot sustain US$16 trillion debt for a long time. Once Euro or Yuan get accepted as trading currencies, the Japanese, Chinese and other creditors will shift their funds from the US. The US will also face the same problem that Greece, Spain, Italy and other European countries with very high level of debt are facing today once its debt/GDP ratio reaches these nations. The common economic sense demands that like individuals/families, every country has to live within its own means. The Japan’s problem is basically its high internal debt but it has a very large foreign exchange reserves and favorable trade balance and therefore Japan will not collapse.

India’s economic problems have nothing to do with its rate of savings. It is the corrupt and criminal politicians who have messed up the Indian economy. India has a huge internal demand which gets constrained by lack of  the supply side, viz. essential commodities like food etc. More than 50% of people live below the poverty line and the money poured into different government welfare schemes is eaten up by the corrupt and criminal politicians and bureaucrats instead of reaching the poor & hungry people. Besides, a lot of subsidies are given by GOI because it is politically popular and which brings in votes for the ruling party. This has resulted in a large internal deficit leading to high inflation and slowing the economy.  

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