New York (PTI): The 2008 Nobel Economics Prize winner Paul Krugman, who on Monday compared the current global economic meltdown with the East Asian Financial crisis in 1997, once said that weak banks in India should be closed.

The US economist and a celebrated New York Times Op-Ed columnist during his visit to India when the Asian crisis was at its peak was of the view that unsound financial institutions cannot be kept operating in the country simply because they provide jobs. He had also advocated that serious capital requirements should be imposed on the strong banks.

He had also underscored the need for prudent capital controls for emerging economies as a measure of abundant caution. "With great hesitation I have arrived at this conclusion that there is no other plausible answer other than temporary capital controls. Otherwise, staying the course looks impossible," said the fierce critic of Washington's economic policies,

"I would much want to maintain, for the long term, prudential inward capital controls. Outward controls are all right, but inward controls are useful for the long term," he had said.

His lessons for India during the Asian crisis suggested during his visit to the country was adequately capitalising banks, closing down weak ones and leaving the convertibility programme where it is.

"It(closing weak banks) may sound hard-hearted, but you cannot keep unsound financial institutions operating simply because they provide jobs. There can be a huge amount of damage a bad bank can create. There is a cruelty to our market system, but that cruelty cannot be eliminated. The alternative is fraught with danger, that of carrying on with the weak banks," he said.

On the impact of the Asian crisis on India, Krugman had said India had avoided the worst partly in the fact that the restrictions discouraged both inflows and outflows of short-term capital.

"No developing country with large-scale mobility in short-term capital is immune to these crises. India, fortunately, did not make the same mistakes. Had the crisis come, there would have been economic devastation, and the crisis would have fed on itself," according to Krugman.

About prospects of currency convertibility in India, Krugman's advice was "leave currency convertibility where it is. It's an extremely dangerous world out there. The risks of getting caught in the pinball game are too high.