Rely Less on Exports More on Domestic Demand: PM, India Focusing on Domestic Markets, Focus on Domestic Markets Will Help The Developing Economics, Manmohan Singh in G-20 Summit in Toronto

Manmohan Singh attending the Opening Plenary Session of the G-20 Summit.

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SME Times News Bureau | 28 Jun, 2010
Focusing more on domestic demand rather than exports will help the developing economies to counter the global uncertainties, Prime Minister Manmohan Singh said at the G-20 Summit in Toronto on Sunday.

"Developing countries need to rebalance their strategies to rely less upon exports and more on domestic demand. In many developing countries, this is best done through increased investment directed to infrastructure. This will sustain growth in the short run by offsetting the contractionary effect of lower exports. It will also increase growth potential in the medium term, by addressing the supply side constraints," Singh said.

He added that higher levels of investment despite lower export growth is likely to generate larger current account deficits. "This will help rebalance global demand, but it requires an environment in which the higher current account deficits of developing countries can be financed. This requires an expansion in both multilateral and private capital flows," he said.

Singh pointed out that the central problem the global economy face today is how to ensure protect global growth in a situation where markets have become very nervous about debt sustainability, especially in some countries in the Eurozone.

He warned against a double dip recession as there was a danger that different countries might go different ways.

"Contractionary policies, if followed by many industrialized countries simultaneously, could provoke a double dip recession. This would have very negative effects on developing countries, and on the prospects for achieving the Millennium Development Goals.” he told the gathering of leaders whose countries account for 85 per cent of the world GDP.

Striking the right balance in a climate of uncertainty was not easy, he said emphasizing on adopting a carefully differentiated approach, reflecting the circumstances of individual countries.

"Fiscal consolidation must obviously have high priority in those advanced deficit countries that are experiencing exceptional fiscal stress and where markets have signaled serious concern, he said.

However, he added, other advanced countries should opt for a much more calibrated exit from stimulus. We should adopt a carefully differentiated approach, reflecting the circumstances of individual countries.

He viewed that growth in developing countries would be greatly helped if threats of new protectionist measures in industrialized countries are firmly resisted and existing barriers to trade, especially those affecting developing countries, are reduced.

"In this context, a successful completion of the Doha Development Round is imperative, the prime minister added.

Singh said that India has already started the process of reversing the fiscal stimulus which the nation had introduced to deal with the crisis. He added that the economy is expected to grow by 8.5 percent in 2010-11 and go back to 9 percent by 2011-12.