India needs to focus on social expenditure as it improves the quality of life and helps in expanding demand, said Nobel laureate Amartya Sen.

"There have to be an intelligence balance between social expenditure and the need to look at other things. Social expenditure is important because it creates good life, expands demand and also creates economic ability," he said while speaking at the Delhi Economics Conclave here on Wednesday.

Sen said this while responding to queries on the importance of raising government expenditure for combating the impact of the slowdown.

A lot will depend on the understanding of Indian government of the issues behind the economic slowdown, he said, adding "I don't think, it is a very tight financial situation (in India). We have four times more public revenue now than we had 20 years ago."

While formulating plans for economic revival, he said the government will have to locate issues like increasing funding for sectors like food and health care.

India's economic growth is likely to moderate to 7.5 per cent in current fiscal, from 8.5 per cent in 2010-11, mainly due to the impact of global slowdown and high inflation.

Industrial production has turned negative after a gap of over two years registering a fall of 5.1 per cent in October.

On the impact of euro zone crisis on India and other developing countries, Sen said, "there is risk. It will depend on how intelligent our policy is. Can we avert it? Yes".

Answering questions of rupee depreciation, Sen said "some countries have followed a policy of weaker local currency with a view to increase exports. The idea devaluation has worked in China...whether it will work in India...we will have to study it".

The rupee has declined to all time low of below 53 to a dollar adversely impacting the import bill, though it might provide some relief to the exporters.