Prime Minister Manmohan Singh today warned against any premature withdrawal of stimulus by the developed world and said the collapse in the export market makes it very important for all to avoid protectionism that restricted market access for developing countries. The time is not right now (for planning an orderly exit). The global economy may be bottoming out,but it is not expected to reach 3 per cent growth until the end of 2010, Singh said addressing the Plenary Session of the G20 Summit on the Global Financial Crisis and the World Economy. Ensuring the quickest possible return to normalcy required a commitment not to undertake any premature withdrawal of stimulus,he stressed. Singh drew the world leaders attention to the sharply deteriorating growth prospects of the developing countries whose GDP is likely to grow a meager 1.5 per cent in 2009 from an average 6.5 per cent over the last seven years. The Prime Minister said the World Bank and other regional development banks must boost lending to such countries since the crisis was definitely not of their making. Singh pitched hard for doubling the World Banks capital base so that it could lend $100 billion over the next three years without compressing it at the end. Compressing lending at the end of the three-year period will take it to the pre-crisis level and this is surely not acceptable, he said. Sensing hesitation by some developed countries in committing extra public resources for capitalisation of the Bank,he said,We must keep in mind that what is needed for these institutions is small compared to the massive scale of public money used to stabilise the private financial system in industrialized countries. According to Singh,the sharp fall in the growth rate for developing countries as a whole to 1.5 per cent,will push an estimated 90 million people below the poverty line. Lower revenues will also lead to lower levels of expenditure on rural infrastructure,health and education. Social and political tensions could increase,undermining the national consensus in support of much-needed structural reforms and adjustment, he warned. Exports of non-oil developing countries are expected to decline by about $900 billion in 2009 compared with the previous year. They will remain well below the trajectory earlier projected for several years. This is bound to reduce production,incomes and employment in the developing countries, he said,adding that the scale of transfers planned by the G20 will not counter the loss of exports. The Prime Minister said to resuscitate growth in such countries and replace lost export demand is to expand components of domestic demand. The best option is to expand investment in infrastructure energy,transport and other infrastructure for public services, Singh said,adding these can be made ahead of requirements such that they take an ideal form of counter-cyclical activity. Singh said though India was affected because of the global crisis,it weathered it relatively well. India was expected to grow by around 6.3 per cent in 2009-10 and then recover to 7-7.5 per cent growth next year. This relatively strong performance is partly due to the strong stimulus measures introduced in the second half of 2008-09,which have been continued in the current financial year, he said.
