PM says 'calibrated attempt' needed at fiscal consolidation

Prime minister Manmohan Singh today said that "one-size-fits-all"
should not be the approach for controlling government expenditure among G-20 countries.

Instead, the exit strategy from stimulus should be left to individuals nations, he said.

"What is needed is a calibrated attempt at fiscal consolidation rather than one-size-fits-all sort of action," he told reporters in his special aircraft, summing up the decisions of the just-concluded G20 summit in Toronto.

He said even those countries which want to go ahead with fiscal consolidation, should do it without compromising growth.

"I think the caveat is that this must be done in a growth-friendly manner," the prime minister said. 

He felt even those European countries, with targets at fiscal consolidation, have been going about their business with due caution.

"In that way, the Summit has played a useful role in clarifying what is the scope for fiscal consolidation and what manner the process of consolidation should be funded," he said.

Referring to the debate on the levy on financial institution for funding future bailouts, Singh said that as far as India is concerned, its banking system remained well-managed.

The economy was growing at a rate of 8.5% per annum. Though the fiscal situation was a cause for concern, when compared with the fiscal deficit or the GDP-debt ratio of major developed countries, India came out much better, he said.

He said the Toronto Summit was in some way a preparation
for the next meeting in Seoul in November.

On India's concerns with regard to the euro zone crisis and the stability of the banking system in Europe, there was agreement that the recovery over the last year was rather fragile.

He said in an increasingly inter-dependent world, there is need for greater coordination of the macro-policy. 

"People have talked about macro-economic coordination that the consolidation of the financial system, the fiscal consolidation must be undertaken in a manner that is growth-friendly," he said.

The prime minister said the IMF would come out with its assessment of finances of each of the 20 countries.

It would be only then that the people would be able to judge how far countries were willing to subordinate their sovereignty to the needs of managing an increasingly dependent world.

As far as BRIC (Brazil, Russia, India and China forum) is concerned, Singh said that India would like the BRIC countries to consult each other on all the issues which have a bearing on the global economic management.

As far as expansion of its membership is concerned, he said it was a matter that had to be discussed by the members themselves.

"It is not not proper for me to make any public comment," he said in reply to a question on the proposed expansion of BRIC.

On the relevance of G-8 and G-20, the prime minister said
that it has been agreed that the G-20 would be the premier
forum for discussion on international economic issues.
On G-8, he said it was up to the members to decide.

"I talked to Canadian prime minister Stephen Harper who said that hereafter the G-8 will probably deal with security issues much more vigorously than it has been doing thus far in the past," he said.