A plane with two engines

A plane with two engines

The world economy has often been described as a plane driven by two powerful engines: American consumption and Chinese investment.

Both these engines have run into trouble and need oiling. The problems in the US are well known: falling real estate prices, indebted households, a public finance mess and a financial sector that is in deep trouble. American consumption has started falling.

Now there are growing signs that the second engine, too, has stopped whirring at top speed. The World Bank expects China to grow at its slowest rate in nearly two decades. China has already announced a $586 billion spending plan to boost local demand. And the People’s Bank of China announced on Wednesday the deepest interest rate cut in a decade.

And what about India? We have our own problems, such as high fiscal deficits and a slowing economy. But this is the time to test an old belief—that India can weather a global slowdown better than China, because we are less dependent on American consumers for growth.