Mumbai: India, China and other emerging economies will feel the effects of the global financial turmoil "sooner rather than later" as it spreads to the real economy, IMF managing director Dominique Strauss-Kahn said.

While monetary policy was the first line of defence, governments must be ready to unleash temporary spending boosts to shore up economies, Strauss-Kahn told a conference organised by the Indian Council for Research on International Economic Relations.

Emerging markets needed to consider how much scope there was for monetary easing or fiscal stimulus, he said, although not all emerging economies should loosen fiscal policy.

Major central banks were doing their part in providing liquidity and monetary easing, but governments whose finances were in good shape should be ready to raise spending in a targeted way to support private consumption. 

But any fiscal boost should be temporary, as discipline remained important.

India, for instance, had very high growth and a still-high public debt, with fiscal consolidation remaining a priority, he noted. "In a sense, medium term fiscal policy is all about saving for a rainy day. It is now raining," he said.

"This has become a global problem that requires a global solution," he said, adding, "Emerging markets need to join industrial countries in the macroeconomic and regulatory policy responses."

He said rapid growth in countries such as China and India had not decoupled them from industrial economies and economies must follow a collaborative approach to ensure global economic stability.

The two sides were like horses yoked together. "If one is tired, the other can take up more of the strain for a while. But if one stops in its tracks neither is going to get very far," he said.

Emerging markets needed to consider how much scope there was for monetary easing or fiscal stimulus, he said, although not all emerging economies should loosen fiscal policy.

"There is also a broader role that some emerging economies can play to help support global growth -- through policies to strengthen their domestic demand as a growth engine, including greater exchange rate flexibility."

The crisis arising from problems in the US housing market had already lowered growth there and the effects would increasingly be felt in Europe and other countries.

In the past, a 1 per cent decline in US growth had led to growth in emerging economies slowing between 0.5 to 1 per cent, depending on trade and financial links with the United States, Strauss-Kahn said.