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Fragile world economy needs more stimulus spending: PM

Prime Minister Manmohan Singh said today that the fragile world economy needs more stimulus spending and not cutbacks to ensure a sustained recovery.

world Updated: Jun 26, 2010 21:56 IST

Prime Minister Manmohan Singh said today that the fragile world economy needs more stimulus spending and not cutbacks to ensure a sustained recovery.

"The purpose of G-20 should be to ensure that the momentum of recovery is sustained and enhanced in the years to come," the Prime Minister told the Toronto Star in an interview published today, shortly before his arrival for the G-20 summit in Toronto over the weekend.

He said that the Group of 20 major and emerging economies should not rein in budget deficits too fast but coordinate policy to ensure a sustained economic recovery.

"But right now, the danger of deflation in the global economy is, in my view, much greater than the danger of inflation," the economist-Prime Minister said.

Wading into the hottest topic of the G-20 summit, Singh said that he sided with US President Barack Obama against German Chancellor Angela Merkel and Britain's Prime Minister David Cameron, who have both launched cutbacks and austerity programmes to control mounting deficits and debts.

Without taking names, Singh made it clear where he stands, "My own feeling is that early fiscal retrenchment carries very considerable global risks" of jeopardising worldwide economic recovery.

Singh complained of "Sikh extremism" in Canada, and charged that Canadian Sikh extremists "have links to or are themselves wedded to terrorism."

He will be raising the issue with Canadian Prime Minister Stephen Harper tomorrow. Singh suggested that Canada and other NATO members should not abandon Afghanistan next year.

Doing so would "only embolden the radical forces opposed to the emergence of a peaceful, pluralistic and democratic Afghanistan."

He praised Canada's "well-governed economy," its "exemplary" banking system and strong financial regulatory regime.

That allowed Canada to escape the financial crisis relatively unscathed, just like India. Both can now contribute to the world economic recovery.