US Economic Growth: A cause for concern

May 2, 2014 | Posted by bobbysrinivasan << back to blog

29/4/2014

In the US, with the help of QE₁, QE₂ and QE₃ which brought nearly 2.5 trillion dollars into the economy, the economist believed that this infusion of capital would jump, start the economy and push its growth rate to 3 percent. The data that is currently released is telling a different story. The US economy grew 0.1 percent annual rate in the first quarter of this year. This is a sharp pull back from the fourth quarter’s 2.6 percent pace. Economists were expecting at least a growth rate of 1.2 percent. This is really a bad news. The Federal Reserve was counting on withdrawing QE₃ by slow tapering. This is not going to happen. On the contrary, more and more money need to be pumped in to keep the economic growth from heading into a recession.

What could be the reason for the sudden slowdown? Is it due to unusually cold and disruptive winter which could have delayed business spending and home building? The new unemployment figures to be released on May 2 will tell the story.

There is a lesson for India here. We have massive trade deficits of above 180 billion dollars. Our exports of merchandise were around 320 bln dollars as against 500 bln dollars of imports. Slowdown in Europe and the US is not good news for Indian exporters. This will definitely affect our future growth rates.

Wake up India. We are counting on 6.5 percent growth in 2014-15. At this point it appears like a distant dream. The new government should turn all its attention to convert the expectation into reality. The opposition parties who ever they are should support the government in achieving the target. If they use the parliament time settling scores, creating new scandals, then the citizens will be left high and dry. We need growth which will create jobs. Please don’t let us down.

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