There is nothing special about having the highest growth rate in the world. In the past several countries had similar growth rates before biting the dust due to mounting trade deficits. During the 1990s and before their economic collapse, Thailand, Malaysia and Indonesia, having the highest growth rates in the world, were hailed as the East Asian Miracles, but after the 1997 economic crisis they are nowhere near the top of the global economy.
India can never become a super-power without generating trade surplus for a decade or more to amass sizeable FOREX, like China has. The US went in plus from 1945 till 1971, and other economic superpowers, China, Germany and Japan have done so for the last 25 years. Even after 26 years of liberalization, India does not have trade surplus because of the Anglo-US 'Imported' economists, who have had been deciding the Indian economic policy. They come to India for only 3 to 5 years and enforce the disastrous "Reaganomics" policy.
"Reaganomics" the economic policy followed by the US since 1980s, has bankrupted the US and also transferred nearly all national manufacturing and service sector -jobs to other countries. US-based "Imported" economists always talk about "Growth Rate" and never talk about "Trade Surplus"- if they would, their career in the US would be finished.
Due to the "Reaganomics" economic theory in India, India has jobless growth which the US has been experiencing since 2000.
The US Dollar is a Ponzi scheme. Taking advantage of its currency being the global currency, the US just "prints" it currency to pay for its import from China and other countries and then in return such exporting countries, including India, deposit those dollars in US in government bonds and in the US share market. Unlike the US, India cannot print its currency to fund its deficits.
During World War II, the US enticed other countries to keep their FOREX in dollars and do transactions in dollars. Under the 1944 Bretton Woods Accord, which made the US dollar the global currency, the US was obliged to give one ounce of gold for $35. But in 1971, the US delinked the dollar with the gold and since then the US has been just printing its currency, whenever it wants, to fund its trade deficits and budget deficits. From 1945 till 1971, the US had trade surplus and thereafter it has trade deficit every year. According to economist Allan H. Meltzer at Carnegie Mellon University :
-We [United States] get cheap goods in exchange for pieces of paper, which we can print at a great rate.
US economists, management gurus and Wall Street have created the Frankenstein China and sold the US to it.
China has generated trade surplus since the 1990s into $4 trillion FOREX, hence it is now on the verge of replacing the US dollar with its currency Yuan as the global currency.
Both China and India started the economic liberalization nearly at the same time in the early 1990s. But China is now the global economic leader whereas India is nowhere in the global economy.
There is a fundamental difference between the growth rates of India and China.
Behind India's phenomenal growth rate, the country has trade deficit year on year for more than two decades whereas China has trade surplus in the same period, enabling it to amass four trillion dollars FOREX, making it the undisputed country to replace the US as the world's number one economic superpower.
Till now India is barely able to pay for its trade deficit with the NRI remittance and FDI.
Due to the influence of the US based economists, India has never given top priority to have trade surplus and also India has only 1.7% share of world export market of goods and services as compared to the Chinese share of l5%. These economists have stifled the natural economic growth of India to become an economic super-power despite having all the required qualifications for a super-power.
Susmit Kumar obtained his doctorate from Pennsylvania State University, US. Before coming to the United States, he was selected in the prestigious India Administrative Service (lAS). He is also the author of Modernization of Islam and the Creation of a Multipolar World Order (2008) and Casino Capitalism (2012). In a 1995 article published in Global Times. Denmark, he predicted the global rise of Islamic militancy.
Between March 2017 and August 2017, I wrote several articles, which are there on my website, on the Indian economy. By providing several charts and tables, I showed that since the economic liberalization in 1991, Indian economy was going into wrong direction, mainly due to influence of Anglo-US Indian origin (or "Imported") economists who have had occupied top administrative posts to decide the Indian economic policies.
On May 20, 2017, I sent a 37-page summing up article, “Niti Aayog: Why does it need new direction and a new leadership?" (available at my website, www.susmitkumar.net) to 200+ officials at Niti Aayog and to another 100 top bureaucrats in Finance, Ministry of External Affairs, and Commerce & Trade departments. To these officials, I had sent all my articles since March 2017. The dispatched 37 page comprehensive article contained 14 charts and 7 tables with enough economic data to provide documentary proof of my critical points regarding the ongoing economic mishandling of Niti Aayog. As per a senior BJP member, PM Modi personally read some of my articles himself and circulated them among people in his contact list. It is said that then NITI Aayog vice chairman Arvind Panagariya submitted his resignation to PM Modi in last week of May 2017. It was not just a coincidence that Dr. Panagariya submitted his resignation to PM Modi a week or so after receiving my substantial paper on the malfunctioning of Niti Aayog.
This book is mainly based on my articles on Indian economy, written in 2017. I take pleasure in acknowledging the generous help of Trond Overland in editing this book, Professor Raj N. Singh of Oklahoma State University and Professor Dinesh Agrawal of Pennsylvania State University for their helpful discussions in writing it. I am always thankful to my PhD advisor, Professor Stewart K. Kurtz of Pennsylvania State University, who taught me how to do research and also how to write a research paper/article. I would like to also thank my brother Bijay Kumar and my nephews Abhinav Kumar and Kunal Kumar for their help in proof reading I am grateful to my mother, who inspired and guided me in more ways than I can ever say.
By WATCHING THE GRAND show of China's OBOR (One Belt One Road) Summit in May 2017, attended by 65 countries, including US and Japan, all Indians are feeling dejected. This was one more step taken by China in its goal to replace the US as the super-power. Under the OBOR (One Belt One Road) project, China is planning to spend more than $1 trillion to reshape the global economy, trying to convert significant number of countries all over the world like colonies of the East India Company, by providing them loans which they would not be able to payback at all.
Both China and India started the economic liberalization nearly at the same time in the early 1990s. Initially India was far ahead of China in terms of scientific and technical resources required for economic development because China was only at its early stages of creating scientific and technical manpower as all the colleges and universities were closed from 1966 till 1972 due to the brutal Cultural Revolution. It was only in 1977 when the university entrance examination system was restored. But China is now the global economic leader whereas India is nowhere in the global economy.
In recent years, India has been boasting about its economic growth rate, projecting it to be the highest in the world, surpassing that of China. All over the world economists are predicting that India's growth rate would now surpass that of China for next several years, resulting in India's GDP to be the second largest in the world by 2040, behind China and surpassing the US. Indians use this data as a ticket to super-power status. But there is a fundamental difference between the growth rates of India and China. Behind India's phenomenal growth rate, the country has trade deficit year on year for more than two decades whereas China has trade surplus in the same period, enabling it to amass four trillion dollars FOREX, making it the undisputed country to replace the US as the world's number one economic superpower. Till now India is barely able to pay for its trade deficit with the NRI (Non-Resident Indian) remittance and FDI (Foreign Direct Investment).
There is nothing special about having the highest growth rate in the world. Yes, it is a new phenomenon for India but in the past several countries had similar growth rates before biting the dust due to mounting trade deficits. During the 1990s and before their economic collapse, Thailand, Malaysia and Indonesia were hailed as the East Asian Miracles, but after the 1997 economic crisis they are nowhere in the global economy. After the 1997 crisis, the stock markets of these countries dropped by 50 to 84 percent. Due to the steep devaluation of Asian currencies, prices of essential items in these countries increased significantly. For example, in Indonesia the price of rice increased by about 36 percent, electricity by 200 percent, milk by 50 percent, and cooking oil by 40 percent. It was poor people who suffered the most. They also faced layoffs due to the closure of massive infrastructure projects. The country's stock markets crash wiped out a huge amount of money and the devaluation of its currency resulted in drastic decreases in the entire wealth of the country, such as real estate, minerals and labor, and vis-a-vis other currencies, which finally resulted in inflation.
In this book, we will see that even before thinking to become a super-power, a country needs to have trade surplus for significant number of years, which the US had for more than 25 years after World War II, China since 1990s, and both Germany and Japan for last several decades. Also large trade deficits, not being offset by the NRI remittance and FDI, for few years can ruin the country's economy for a number of years to come.
We will discuss the US economy in detail because after the economic liberalization in 1991, the Indian government opted to appoint Anglo-US "Imported" economists to decide the economic policy of the country. We will see that the US economy is special, in the sense that the US can print its currency to fund its trade and budget deficits whereas any developing country, which includes India also, cannot do the same. Therefore, it was mistake on the part of the successive Indian administrations to bring the Anglo-US economists to hold top administrative positions. It is worth noting that due to Margaret Thatcher, British Prime Minister during 1979-90 and considered as political soulmate of the US President Ronald Reagan, the UK has been following the Reaganomics, the economic policy being followed by the US since 1980s. After holding three to five years tenure in India, eventually the US-based economists have to go back to the US, and hence they just implement the disastrous Reaganomics which has bankrupted the US. They misled and mismanaged the Indian economy. These economists have stifled the natural economic growth of India to become an economic super-power despite having all the required qualifications for a super-power. It is mainly due to these economists that even after twenty-six years of economic liberalization (in 1991), India still does not have trade surplus and also India has only 1.7% share of world export market of goods and services as compared to the Chinese share of 15%.
We will see that in 2017, the Indian economy has been reeling under five different shocks - 2011-13 Current Account Deficit (CAD) shock, Outsourcing shock, Niti Aayog shock (too much privatization), Demonetization shock and GST shock. The last two shocks are short-term and in long-term, these two would be helpful in increasing the economic growth.
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