Calibrated attempts needed for fiscal recovery: PM

Exit strategy from stimulus should be left to individuals nations, says Manmohan Singh

V S Chandrasekar/PTI | June 29, 2010



Prime minister Manmohan Singh today said that "one-size-fits-all" should not be the approach for controlling government expenditure among G-20 countries.

Instead, the exit strategy from stimulus should be left to individuals nations, he said.

"What is needed is a calibrated attempt at fiscal consolidation rather than one-size-fits-all sort of action," he told reporters in his special aircraft, summing up the decisions of the just-concluded G20 summit in Toronto.

He said even those countries which want to go ahead with fiscal consolidation, should do it without compromising growth.

"I think the caveat is that this must be done in a growth-friendly manner," the Prime Minister said.

He felt even those European countries, with targets at fiscal consolidation, have been going about their business with due caution.

"In that way, the Summit has played a useful role in clarifying what is the scope for fiscal consolidation and what manner the process of consolidation should be funded," he said.

Referring to the debate on the levy on financial institution for funding future bailouts, Singh said that as far as India is concerned, its banking system remained well-managed.

The economy was growing at a rate of 8.5 per cent per annum. Though the fiscal situation was a cause for concern , when compared with the fiscal deficit or the GDP-debt ratio of major developed countries, India came out much better, he said.

He said the Toronto Summit was in some way a preparation for the next meeting in Seoul in November.

On India's concerns with regard to the euro zone crisis and the stability of the banking system in Europe, there was agreement that the recovery over the last year was rather fragile.

He said in an increasingly inter-dependent world, there is need for greater coordination of the macro-policy.

"People have talked about macro-economic coordination that the consolidation of the financial system, the fiscal consolidation must be undertaken in a manner that is growth- friendly," he said.

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