The advance estimates for the US economy indicates that GDP growth slowed further in the third quarter of calendar 2006. The changes are more dramatic if measured quarter-to-quarter, rather than on year-on-year basis. Using the former measure, annualised growth in the third quarter was down to 1.6% compared to 2.6% in the second and 5.6% in the first. The wise men estimate that the fourth quarter will be a tad better at 2.5%. On year-on-year basis, the third quarter growth is estimated at 2.9% compared to 3.5% in the second and 3.7% in the first. Thus for ?06 as a whole growth may end up somewhere about 3.3%, which will be above the revised number for ?05. In fact, revised estimates suggest that the US economy actually grew slower than what had been generally believed not just for ?05, but for ?04 as well.

Several features of the numerical moonscape need emphasis. First, the US economy was not running quite as far ahead of its long-term trend rate of growth (believed to be around 3%); second, private business investment has continued to expand robustly (average 7.5%); third, personal consumption expenditure has not taken a hit (average 3.1%); fourth, external trade continues to expand and import growth has recovered in the third quarter. The monetary policy of the US Fed had been about moderating growth (or rather demand) to curb inflation. The first-order impact seems to have been somewhat disproportionate across components of aggregate demand.

The main story of the slowing is about the sharp deceleration in residential home construction, which gained huge momentum since the last quarter of ?05. If this were to continue, home prices might begin to slip, eroding home-owners? equity, which when combined with the low level of personal savings, may pose a different kind of structural problem.

This year has been good for the European economy. Growth in the Euro-zone countries has accelerated in the second quarter, relative to a good first quarter. Overall growth in the first half of ?06 is closer to 3% than the 2% target, which the region was under-achieving in previous years. With the exception of Italy, all other members seem to be in fairly good health. The current account deficit in the European Union (EU-25) widened significantly to above 1% in the first half of ?06.

Was it the long awaited second engine firing up? With most of the rise due to more expensive energy imports from Russia and greater volume of manufactured imports from China, it may not be the great re-balancing act.

There?s great potential for India?s advancement. But making headway here is difficult, as it means dealing with an army of naysayers. There is, however, no available course but to press on, and at a faster pace

Japan too has been doing well in calendar ?06. Growth slowed somewhat in the second quarter, but mostly due to a big drop in public spending and some reversal in the private residential sector. Business investment actually accelerated and private consumption spending did not weaken. Exports and imports have been stable and external demand does not seem to have been a factor in the sustenance of growth this year.

Having said all this, economic growth per se can?t have the same centrality in an industrialised country with a per capita income of $40,000, as in a developing one with incomes in hundreds of dollars. But what happens to demand growth in the former has much bearing on the latter.

Positive economic conditions generate import demand for manufactures, commodities and services. It powers the urge for tourism. Both put income into the developing world. The dynamics of competing in this market help emerging market firms lift their technological and managerial abilities to world class standards. Positive economic sentiment improves the confidence to invest in emerging market firms. It drives the networked global economy into more complex weave of common ownership over economic outcomes.

China has been the single greatest beneficiary of this. In the first nine months of calendar 2006, her economy grew by 10.7%, faster than the 9.9% in the comparable period of ?05. She has become the second most important trading partner with the EU-25 (after the US) and has displaced Mexico to become the second most important trading partner with the US, too. China?s rise over the past 28 years has been thanks to its remarkable fusion of pragmatic policy, energetic execution of projects and policy, with little time wasted in waffling?characteristic of many others, ourselves included.

If the world economy were to begin sputtering, those most dependent on it would be the most affected. It might be tempting to draw comfort from India?s smaller degree of involvement with world trade in the event of a global slowing. Such temptation is cold comfort, and of a particularly rotten and perverse variety. Indeed, better insulation against global economic turmoil might be achieved by living out a brutish and short life in a stone-age village.

In any case, the global economy is not slowing much. The future holds many challenges, which we must manage well to tap the great potential for India?s development?not least for the economically weaker sections. It is just that making headway in this country is difficult, not just because of the specificity of the task at hand, but because it means also dealing with the army of naysayers who seemingly live out a pleasant life in uninterrupted praise of the deities of failure. There is, however, no other available course but to press on, and at a faster pace so that we can reap a larger share of the benefits of global growth.

?The writer is economic advisor, Icra