If UK is down, are we next?

Yesterday Moody's downgraded Britain's credit rating to Aa1 from AAA because of its huge debt and poor growth prospects. The same problems apply to us, only in our case we will go down from BBB+ to junk grade. India's Trade Deficit was $20 billion for the month of January, which is the second highest after October 2012 when it was $21 billion. " India's widening trade deficit is credit negative....These rising deficits are financed by increased foreign-currency borrowing, raising India's vulnerability to to international financial volatility," warned Moody's. ET, 18 February. The British Sterling is a traded currency but we are depending on borrowed money, which is money invested by foreign investors in shares and bonds, to buy foreign goods, especially oil and gold. The fear is that this money can disappear overnight which is why the Sensex plunged by 300 points and the rupee by 45 paise couple of days ago when the US Federal Reserve indicated that it would start cutting its easy monetary policy, also called Quantitative Easing. In his State of the Union address Obama mentioned his resolve to negotiate a free trade agreement with Europe which we have failed to do for years. This will create a huge free market between NAFTA, which comprises the US, Canada and Mexico, on the one hand and the 27 member Eurozone on the other and is clearly an attempt to bypass Asian economies like China and India. What this will do to our trade and growth is a chilling thought. Our Trade Deficit averaged $13.5 billion per month in 2011 and  $16 billion in 2012. Our foreign currency debt is $365 billion while our foreign currency reserve is $295 billion. Moody's blamed 3 factors for India's problems - 1. Slow global growth hitting our exports, 2. Rising prices of oil and gold and 3. Loose fiscal policy which stimulates local demand and increases imports. There is nothing the government can do about growth in other countries and commodity prices. Indeed if global growth increases price of oil could rise further, although gold could fall a little. The government is culpable for its irresponsible spending on social programs to win elections, leading to fiscal deficit and inflation. " Wider trade deficit can also weaken the currency, raising domestic prices of imported commodities, further fueling India's already high inflation rate," said Atsi Sheth, Vice President Moody's Investor Services. The Prime Minister of Japan, Shinzo Abe is visiting the US to see if Japan could import cheaper shale gas from the US to reduce its deficit. Japan had a deficit of $17.4 billion in January and a total of $78.24 billion in 2012. Japan is worried about its deficit with foreign exchange reserves of $1.268 trillion while we are buying 12 luxury helicopters for Rs 37 billion for our VVIPs. If we are reduced to junk status it will be because our politicians are junk, led by the World Famous Economist.