US maintaining a high budget deficit could have negative repercussions in future: Fund Manager &. Author Ruchir Sharma
“Substantial reforms only occur in the wake of the crisis. The US and other Western countries may confront deeper systematic issues before changes occur. The US was moving away from the low and sustainable budget deficits it maintained for a long time. It could have negative repercussions in the future,” said author and investment banker Ruchir Sharma in conversation with Infosys co-founder Nandan Nilekhani in Bengaluru.
Sharma warned that the US is maintaining high budget deficits in comparison to its GDP. He mentioned the shift from a sustainable deficit to a current 6% deficit that is higher than other developed countries. He discussed the impact of asset price inflation and the constraints on housing supply in the US.
Later speaking at the Bangalore International Centre about his book “What Went Wrong with Capitalism”, he raised concerns about the concentration of billionaire wealth in India and for economic freedom and regulation requested for a more balanced approach. He mentioned a shift from capitalism’s principles of clash to a system increasingly skewed in favour of big businesses and rooted interests. Sharma emphasized how government bailouts and regulatory changes have contributed to the zombification of capitalism. He said this keeps inefficient companies in the market and discourages new companies leading to a more inequitable economic landscape.
Sharma pointed out the 2008 financial crisis and the COVID-19 pandemic and said that these crises generated substantial wealth for the rich. He was optimistic about India which has shown positive trends. India is moving toward capitalism and needs to learn from the Western disillusionment with Capitalism.
