Montek opposes ‘austerity for all’ policy at G20

The tilt towards growth-oriented policies was evident at last month's G8 summit at Camp David, where US President Barack Obama backed French president Francois Hollande's demand for an economic stimulus for recession-hit Europe.

The G8 declaration was widely seen as a snub for German Chancellor Angela Merkel, who has refused to take her eyes off austerity and has steadfastly opposed the idea of joint safe assets for the euro zone through debt mutualisation. Prime Minister Manmohan Singh is scheduled to meet Merkel on the sidelines of the summit tomorrow. Singh may also meet Obama in a pull-aside, although no formal meeting was planned, official sources said.

Arriving at this resort town at the southern tip of Mexico's Baja California peninsula earlier in the day, Singh had said the world economy was "in deep trouble" and hoped the G20 would generate constructive proposals to get the world out of the crisis. Stating that IMF's enhanced capacity to help troubled countries was created out of funds from emerging economies as well, Ahluwalia, who is India's chief interlocutor at G20, said: "When global demand is weak for a variety of reasons, stimuli for global growth can come from rapid growth in developing countries... Shouldn't we also be doing something to (find) finances for developing countries' demand impetus?"

Ahluwalia said that when several large economies are facing debt problems, coordinated bids for austerity won't help. He, however, admitted that India had little fiscal room for another counter-cyclical stimulus. (The combined fiscal deficit of the Centre and states has already crossed 10 per cent.) The message is clear: countries that can afford a slightly higher amount of public spending should do so right now to revive global demand, without straying from medium-term fiscal consolidation plans.

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