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The Long Term Implications

Though the stimulus package has been majorly for the revival from the economic stagnation and recession, it has also real long term implication for the economies. An important part of all stimulus packages has been in the form of infrastructure spending to accelerate growth.

This improved infrastructure is expected to create value much beyond the scope of the package. This is also going to boost foreign investments in the long run in countries like India which are in desperate need of high quality infrastructure. Also the increased spending is expected to create a large number of jobs. This will benefit a large section of unemployed and would boost the consumption demand and disposable income in the long run.

Conclusions

The present signs of revival in the global economy should not be confused with the financial crisis being over and the countries should be ready with policies to sustain the recovery.

The countries around the world need to co-ordinate policies to achieve a global rebalancing and sustain the recovery. This view assumes even more significance in the event of G-20 nations agreeing not to withdraw stimulus packages prematurely and coordinate actions among themselves in this regard. The global activity is now on the rise again, however, the world economic growth is expected to be in the negative zone of 1.1 percent in 2009 as per IMF estimates. Growth of global economy is expected to be around 3% by next year as per the estimates. After a deep recession, global economic growth has turned positive, driven by wide-ranging, co-ordinated public intervention that has supported demand and reduced uncertainty.

However, the recovery is expected to be slow, as financial systems remain impaired and support from public policies will gradually have to be withdrawn. But as of the next year or so the stimulus needs to be continued to ensure that these green shoots are actually converted into trees that can weather tough conditions and stand on their own.

Appendix - 1

Global Stimulus Measures