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This has reference to the article ‘G-20: Taking stock at London’ (Business Line, September 14).

The article rightly analyses the recent stance taken by the major economies of the world at the G-20 Summit in London.

The fiscal stimulus needs to be continued for some more time and withdrawn at an appropriate moment. That is the gist of this all-important summit.

But what is important is the target of the stimulus. The situation is quite different as far as the developed and developing economies are concerned.

The developed countries probably need to enhance their consumer spending to boost their economies.

However, the problem with a developing economy like India is that the effect of the financial crisis in developed countries has choked money flow into infrastructure, industry and the funding of welfare and development programmes that go to help huge population at the base, that is, the poor.

To add to this problem, drought conditions are prevailing in the country.

Apart from the stimulus, the huge fiscal deficit is a result of a lot of factors, such as the cost of elections and burgeoning government expenditure.

Hence, at this point in time, India needs to target its fiscal stimulus in the right way to fund the different facets of development.

Apart from NREGS and infrastructure spending, on highways for instance, there is need to spend appropriately on healthcare, primary education, agricultural innovation and such important areas in an earmarked and planned manner if the country has to grow, in spite of the continuing worldwide economic turbulence.

Trade deficit and lower FDI and FII flows may continue for a longer time, but we must sustain the underlying growth pattern of our economy.

Amitava Banik e-mail

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