PM for a more calibrated exit from global stimulus

TORONTO, JUNE 27
As differences persisted among the G-20 countries on the exit policy, India today warned developed countries against cutting back on public spending in the wake of the European crisis, saying it could trigger a “double dip recession”.
Advocating a “much more calibrated” exit from the global stimulus, Prime Minister Manmohan Singh told the G-20 Summit here that the global recovery “is still very fragile” and therefore there was need to give primacy to consolidating the recovery while taking measured steps to deal with the sovereign debt problems.
The economist-prime minister also called for firmly resisting threats of new protectionist measures in industrialised countries and existing barriers to trade, especially those affecting developing countries.
There is no unanimity on when and how to withdraw the stimulus for global recovery that was agreed in London last year at the summit, the fourth of its kind in two years starting from Washington at the height of the financial crisis in 2008, with the theme Recovery: New beginnings.
Countries like Britain, France and Germany want a quick end to the stimulus so that government deficit does not  shoot through the roof but nations like India and the United States are favouring a calibrated exit.
There is also no consensus on the proposal for a tax to fund bail out of banks, a move India is opposed to. While Britain has already levied a tax, France and Germany are pushing for it.
Calling for a much more calibrated exit from stimulus by other advanced countries, Singh favoured a “carefully differentiated” approach reflecting the circumstances of individual countries saying “we have a much greater risk of deflation than inflation”.
“The central problems we face today is how to ensure protection of global growth in a situation where markets have become very nervous about debt sustainability, especially in some countries in the Euro Zone.
“Concerns about debt sustainability normally suggest a need for fiscal contraction. But circumstances are not normal. The recovery is still fragile and private demand in the industrialised countries simultaneously, could provoke a double dip recession,” he said.
His speech was heard with rapt attention at the summit being attended by world leaders.