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FM Arun Jaitley calls for higher public spending to overcome global slump

Jaitley said India needs to increase public spending into social infrastructure and rural sector to boost domestic demand in order to overcome the slump in consumer spending worldwide.

, ET Bureau|
Updated: Jan 08, 2016, 05.30 PM IST
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Jaitley said India needs to increase public spending into social infrastructure and rural sector to boost domestic demand in order to overcome the slump in consumer spending worldwide.
Jaitley said India needs to increase public spending into social infrastructure and rural sector to boost domestic demand in order to overcome the slump in consumer spending worldwide.
KOLKATA: Union Finance Minister Arun Jaitley on Friday said India needs to increase public spending into social infrastructure and rural sector to boost domestic demand in order to overcome the slump in consumer spending worldwide.

The global economy is facing a prolonged slowdown with less-than-expected economic recovery in the US and Europe and deeper fall in outfall in Brazil and Russia. This prompted the World Bank to cut its global growth forecast in 2016 by 0.4 percentage point to 2.9%.

"India still manages a faster growth. But it is important to see how do we improve our growth rate a little faster," Jaitley said in Kolkata. "India needs to invest a lot more in infrastructure, increase public spending into social infrastructure and raise spending into rural sectors like irrigation and rural roads. These spending brings immediate results," he said.

Indian economy is projected to grow 7.4-7.5% in 2016 but the sluggish world demand may impact exports adversely and pull down growth of factory output. India's industrial production grew at 9.8% in October on Diwali sales but the high IIP growth may not sustain with researchers predicting it below 4% in November.

"The world is passing through critical moments. With global economy so critically integrated, volatility is the new norm. In this crisis, India is fighting its way to improve," Jaitley said. The fall in global crude prices along with the crash in China's stock market leading to a currency crisis forcing investors to withdraw investment from emerging economies.

Jaitley, who was speaking at the Bengal Global Business Summit, the state's marquee event to lure investors, said that the central government follows a policy of making eastern India grow faster in order to boost the national GDP growth.

"We will work hand-in-hand with the state not only to ensure that investments come into the state, but to ensure that growth rate in this part of the country is much faster," Jaitley said, adding that to enhance GDP by 1-2 percentage point, the east need to contribute substantially. West Bengal, for instance, contributed 6-7% to the country's GDP.

"If Bengal follows a policy which is investment- and business-friendly, I have not the least of doubts that the original glory which belonged to the state can always be restored," he said, assuring that the issues pending with the Bengal government were attended "extremely expeditiously" so that the industrial projects in the state can be expedited.

"I have come here to assure the Bengal government that all policy initiatives that it is going to take for the industrial growth of West Bengal, the central government will support as part of its constitutional obligation," he said.

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