Don’t cut funding over fiscal consolidation: Pranab tells G20

NEW DELHI - Major economies of the world need to invest in the infrastructure and human resources of developing countries so that such nations can become drivers of global growth, Finance Minister Pranab Mukherjee said Saturday.

Speaking at the G-20 finance ministers meet in Busan, South Korea, Mukherjee said official assistance to developing nations should not be sacrificed in the name of fiscal deficit correction, though getting out of high debt situation was paramount on the list of economies.

“We need investments in human resource development and infrastructure in developing countries so that they can become new nodes of sustainable high growth. We must reassure the world that this will not be sacrificed at the altar of fiscal consolidation,” Mukherjee said in his speech, the text of which was released by the finance ministry here.

He also said the only way to get out of the debt trap that many economies were headed towards was to grow and create more jobs, something which the recent economic recovery had failed to do.

“Structural reforms are the single most effective policy tool for addressing imbalances and raising growth. I fear that they cannot be sold unless they are seen to be creating jobs on a vast scale, as much of the recovery has been jobless in several parts of the world,” he said.

The G-20 finance minister’s meet, which ends Saturday, deliberated on a whole set of issues ranging from financial system reforms to bridging fiscal deficit of many nations, vital to the global economy.

Mukherjee cautioned against the rush to withdraw stimulus measures,

saying each country needed to time the rollback so that economic recovery was not endangered.

“The market is sending strong signals that the fiscal situation is a matter of concern. While we should all not rush to fiscal exit at the same time so as not to undermine the recovery, those countries that have market compulsions may need start the consolidation now,” he said.

He said fiscal consolidation was a natural corollary of the recovery process and countries could only grow their way out of high levels of public debt.