New Delhi: India will need to introduce further measures to stimulate growth, said Montek Singh Ahluwalia, deputy chairman of the nation’s Planning Commission, ahead of a Group of Twenty meeting on the global economic crisis.
The new government that takes over in May after general elections will need to take steps to try and maintain the current year’s economic growth, Ahluwalia said at the Confederation of Indian Industry’s annual conference in New Delhi on Friday.
Prime Minister Manmohan Singh is heading to London next week to attend a meeting where leaders of the 20 major economies will discuss ways of spurring global growth. The International Monetary Fund has urged countries to spend at least 2% of gross domestic product (GDP) on stimulus, estimating that only Saudi Arabia, Australia, China, Spain and the US will introduce budget boosts worth that much this year.
Fighting slowdown: Montek Singh Ahluwalia. Kamal Singh / PTI
The government has injected about Rs4.3 trillion into the economy since September, India’s cabinet secretary K.M. Chandrasekhar, said at the same meeting on Friday. The impact of the global financial crisis was first felt in India in that month with a freeze in the credit market.
The new government must spend as much as 1% of GDP as extra stimulus, Ahluwalia said earlier. Election results will be announced on 16 May.
The government expects India’s economy to expand 7.1% in the year ending 31 March. IMF estimates growth will be 6.3% in the current fiscal year and will slow to 5.3% in the year starting 1 April.
The impact of fiscal and monetary steps already taken by India may be seen in the first three months of the new financial year, Ahluwalia said. Still, India’s economic woes may not be resolved in the next 12 months, during which growth may be slower than in the current year, he said.
The global recession is also disruptive, Ahluwalia said. This is such a huge shock, it will push us off our underlying growth process of just under 9%, he said.