World Bank chief economist wants India to boost spending

14 March 2009

India has scope for more monetary measures and enough fiscal space to boost spending, according to World Bank chief economist Justin Yifu Lin.

 Countries should not worry about the deficit levels during the present economic crisis and should instead step up spending on bottleneck-removing projects, Lin told reporters in New Delhi.

''India has a lot of bottlenecks. If India can use the opportunity to invest in bottleneck-removing projects, it will generate demand, create jobs and a growth of 5-6 per cent will be maintained. After the crisis, 9-10 per cent growth can be maintained for decades,'' said Lin.

 ''Apart from sources such as World Bank, it (India) still has some scope from the fiscal channel. If you invest, deficit will increase but it will increase growth and generate revenue. Deficit will be a short-term phenomenon,''Lin said.

He said the other option was to use forex reserves of close to $250 billion, especially because inflationary pressures have eased. ''The returns will be higher as (input) costs have come down,'' he added.

''In my view, 2009 is shaping up to be a very dangerous year. I think we need to expect that we will face waves of challenges,  World Bank Group president Robert B Zoellick said in London yesterday.