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Be wary of US capitalism- Stiglitz to India
January 15, 2013, 10:15 am

US President Barack Obama on a trip to India. [Getty Images]

US President Barack Obama on a trip to India. [Getty Images]

Joseph Stiglitz has issued a 5-point prescription for the Indian economy, emphasising that prevention is better than cure and warned India against mindlessly aping American capitalism.

Economist and Nobel laureate Joseph Stiglitz has said that India needs to tread carefully on the path of foreign direct investment.

He was speaking at ‘Redefining Capitalism,’ a conference organised by the Asian Development Research Institute in the east Indian state of Bihar.

Foreign direct investment needs to be carefully screened by the country according to Professor Stiglitz.

He said the essential purpose of FDI was to reap “capital, technology, access to markets and training.”

Stressing on the unique position India is in, the Nobel laureate said it was “unclear” what the foreign investor could offer India.

He also spoke on the need to up savings rate. “Right now India is exporting capital. It needs to increase its savings rate more.”

Stiglitz argued that India should promote its entrepreneurs: “India has a very large supply of entrepreneurs. It is exporting entrepreneurs to America and countries all over the world. Within the country too there is strong entrepreneurship.”

The American model of capitalism holds many pitfalls, according to Stiglitz, warning India against trying to emulate the US.

“Societies with great inequalities are not likely to function well. Many economies are trying to imitate the American model. If they imitate too well, they will end up like America, with large inequalities.”

Talking about financial products, Stiglitz said, “India has to ask before opening its markets to financial products, what they are going to do for promoting growth.

The evidence is so overwhelming that these instruments will promote instability that a lot of caution is needed.”

The BRICS Post