Economics Nobel laureate Prof Joseph Stiglitz is optimistic about India’s growth rate, in sharp contrast to his economic outlook for the US and Europe.
“You (India) have a vast internal market. You should be able to grow at a reasonable rate given the right macro-economic push,” he said after receiving the degree of Doctor of Science at the University of Hyderabad today.
He felt that India should focus on domestic market and increase the purchasing power of Indians.
He was, however, not optimistic on the outlook of the European economy, predicting that Europe will continue to be in the grip of recession at least for another year. “The Euro framework is fundamentally flawed, the economic framework is unstable. The austerity measures will add to the recessionary trends,” he said.
On the US economy, the Nobel Laureate said the prospects of a smooth transition by US from a manufacturing to a service sector economy appeared bleak, which could deepen the unemployment problem. Deficit was a problem in the US, but more than fiscal deficit, it was a political problem, he said, adding that the deficit did not cause the recession, but it was the recession that was causing the deficit.
On the flaws in the US banking system, Prof Stiglitz said the banks brought out new products that made owning homes riskier. “Seven million Americans had lost their homes. Several more will continue (to lose homes). The new products increased transaction costs,” he said.
On the central banks, he said the global economic crisis had shown that countries with more independent central banks did worse than other countries with less independent central banks, such as India and China.