Dragon may drag its feet, India could feel the heat

Stop worrying about anti-outsourcing sentiments in America. Real trouble for the Indian economy, says Stephen S. Roach, chief economist at g...

Stop worrying about anti-outsourcing sentiments in America. Real trouble for the Indian economy, says Stephen S. Roach, chief economist at global research firm Morgan Stanley, is brewing in China.

The combined impact of explicit protectionist “remedies” in the United States and a “over-heated” Chinese economy will be to slow down the world’s economy, Roach prophesised on Monday during his first visit to India.

The well-known economist, a specialist in international economy, has travelled to China 25 times, once just last week. “India cannot ignore anti-outsourcing sentiments in the US, but a far greater threat is posed by China, which is determined to slow down… But imagine what would happen if both the manufacturing and service hubs of the world economy slow down,” Roach said.

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He also predicted a far greater impact of the US anti-BPO sentiments on China than on India. “China is now concerned about the over-heating of its economy due to the credit boom that fuelled excess spending on infrastructure. The Chinese economy actually has far greater chances of bringing about a slowdown than anti-BPO laws,” Roach offered.

On America, Roach said the country needs to save more if they are to have any say in the global economy. “Guns and butter led America to the post-Vietnam seventies – its’ worst times ever. Now that the US is geopolitically stronger far more productive, its back to the old guns and butter logic – We’re going back to Mars and health reforms and at times, I’m really concerned,” Roach claimed.