Govt to take call on stimulus measures after G20 meet

Govt to take call on stimulus measures after G20 meet
The Economic Times, July 23, 2009, Page 9

Gireesh Chandra Prasad NEW DELHI

THE government is likely to take a relook at its strategy of continuing economic stimulus measures after finance ministers and central bank governors from the group of 20 nations (G20) meet in September to assess whether the green shoots of economic recovery are real.

The government, which had said in the budget that it would continue to provide further stimulus to the economy as there were still uncertainties on the revival of the global economy, will have a clearer picture when world leaders assess the situation at the Pittsburgh summit in September, said a government official, who is privy to the thinking. Rolling back the stimulus measures and cutting fiscal deficit are essential as many economists have pointed out that systemic risks have now migrated from the private sector to national governments due to historic gaps in receipts and spending.

“The G20 will assess whether the green shoots of recovery are real, whether it is time to exit from the economic stimulus measures and whether there would be inflationary pressure if growth starts picking up,” the official said. Ben Bernanke, chairman of the US Federal Reserve, on Tuesday said there were signs that the world’s largest economy was starting to stabilise. The worldover, governments are now contemplating how to exit from stimulus measures—tax cuts and lower interest rates—without disrupting economic revival.

The forthcoming meetings of the G20 leaders in July and September are also likely to look at the contentious issue of climate change finance. “For adaptation and mitigation, we need funding. The deliberations are likely to examine how funds can be mobilised for this,” the official said. Part of the funding would come from the market through carbon trading.

The government will also take a call on regulating certain financial sector entities such as credit rating agencies and merchant banks, taking inputs from a G20 task force comprising global associations of accounting and securities market regulators. The International Accounting Standards Board and International Organisation of Securities Commissions are working out the details now.