Tuesday, September 20, 2011

Impact of Credit

Even as stock markets in India began giving indications of stabilization, IMF has bowled another googly.

IMF has raised an alarm over the debt situation in Europe and lowered growth projections for the 17-nation Eurozone to 1.6% in 2011 and 1.1% in 2012, from its earlier predictions.

The old saying in India - चितनी चादर उतना पैर पसारो (spread your feet depending on the amount of space available), in other words spend only what you can afford.  Taking loan to buy luxuries is the sure-shot recipe for disaster. US has experienced it, now the Europe is going through the same experience.

Excessive loan leads to non-repayment - causing either the borrower or the lender to suffer.

We can only hope that the Indian government takes note and exercises caution with its policy of targeting growth on borrowed money.

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