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Sep 17, 2010, 11.57 AM IST | Source: Reuters

India infrastructure boom to boost world growth: Adviser

India can showcase its massive infrastructure spending and a wider current account deficit at the next G20 summit as its contribution to reviving global economic demand, a senior adviser to the government said on Thursday.

India infrastructure boom to boost world growth: Adviser

India can showcase its massive infrastructure spending and a wider current account deficit at the next G20 summit as its contribution to reviving global economic demand, a senior adviser to the government said on Thursday.

Montek Singh Ahluwalia, the deputy head of the Planning Commission, said India's current account deficit could reach 3 percent in the fiscal year ending March 2011 but the higher figure could be financed by increased capital flows.

Asia's third-largest economy is looking overseas to import equipment to help build infrastructure projects worth a planned USD 1.5 trillion in the ten years to 2017.

Imports will likely increase in the coming years especially for higher end projects such as airports and power plants, Ahluwalia said.

"It is important for each country to say what it is going to do to stimulate demand," Ahluwalia told reporters, when asked what India could bring to the table at the November summit of the Group of 20 leading countries in Seoul.

"As far as India is concerned, we are doing exactly what is necessary to stimulate global domand because our internal strategy is based on accelerating domestic investment in infrastructure," he added.

India is planning to spend USD 1.5 trillion on infrastructure in the ten years to 2017 to overhaul its creaking road, railway and power sectors, long seen as a drag on growth in Asia's third-largest economy.

The country's August trade deficit widened to a 23-month high, putting pressure on the current account deficit and prompting a top trade official to raise his forecast for the full year trade deficit figure.

"Investment in infrastructure is more import intensive. So it is our expectation that if we follow that approach, even though exports will be a little depressed compared to what they would have been in a booming situation, the current account deficit may widen," Ahluwalia said.

"We are willing to live with that. We think we'll be able to finance it, so it's not actually a big problem, but the key to financing it is that there should be stability and an element of certainty in the global financial system, especially as far as flows to emerging market countries are concerned."

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