It’s a well-known fact that the US economy is in trouble. A rising mountain of debt has consumers and markets spooked alike. The medium-term growth prospects of the US economy, too, look dim. The International Monetary Fund recently estimated that the US economy will grow by only 2.7% in 2012. Even by 2016, growth will be only 2.8%. This is a sad state of affairs for the world’s biggest economy. The cumulative burden of weakness in the housing market and fiscal risks add to this dismal outlook.
This has consequences for the world, India included. The US is no longer the consumption engine that powers global growth. The danger from this situation is that in the garb of “rebalancing”, the world is turning into a protectionist place. At the moment, the world is in a crisis-avoiding mood, but it soon needs to awaken to this much bigger problem.