There is no threat that India’s swelling budget deficits will crowd out private borrowers as liquidity is ample and stimulus spending just makes up for a drop in private investment, RBI deputy governor Rakesh Mohan said.

Mohan, who will resign on June 10 to take up an assignment as a professor at Stanford University, told Reuters in an interview increased budget spending was needed to support the slowing economy. “The question of crowding out effect does not arise because the current liquidity in the system is not being used despite high government borrowings,” the 61-year-old said. “There is no crowding out there because people are not investing and if you have crowding out, you won’t find the liquidity,” Mohan, deputy governor since July 2005, said.

Mohan who recently co-chaired a G20 working group on financial oversight said it was too early to talk about a sustained revival in capital flows or a lasting global recovery.