Manmohan seeks break with developed world’s policies

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MANMOHANNew Delhi, September 4; Amid imminent phasing out of the fiscal stimulus by U.S. Federal Reserve, Prime Minister Manmohan Singh on Wednesday called for an “orderly exit” from unconventional monetary policies being pursued by the developed world for the last few years to avoid damaging growth prospects of the developing world.

In a statement before leaving for the 8th G20 Summit in the Russian city of St. Petersburg, he also underscored the importance of the grouping of industrialised and major developing economies to promotes policy coordination among major economies in a manner that provides for a broad based and sustained global economic recovery and growth.

The Prime Minister made a reference to an orderly exit from unconventional monetary policies in the backdrop of splits between emerging markets and the U.S. over its winding down of stimulus and the slowing growth of India and other four BRICS countries.

Dr. Singh said though there are encouraging signs of growth in industrialised countries, there is also a slowdown in emerging economies which are facing the adverse impact of significant capital outflow.

“I will emphasise in St. Petersburg the need for an orderly exit from the unconventional monetary policies being pursued by the developed world for the last few years so as to avoid damaging the growth prospects of the developing world,” he said.

Brazil, India, Russia, China and South Africa — grouped in the BRICS bloc seen as an alternative economic powerhouse — all go into the meeting experiencing slowing growth, embattled currencies and huge capital outflows.

The Indian rupee has lost one-fifth of its value against the US dollar this year following major capital outflows triggered mainly due to the moves by the Fed Reserve.

India is also suffering a decade-low growth and GDP rose just 4.4 per cent in the first quarter this fiscal, the weakest performance since 2009.

Dr. Singh said he will once again emphasise at the Summit that the G20 should ensure primacy of the development dimension in his deliberation, focus on job creation, promote investment in infrastructure as the means of stimulating global growth and create potential in developing countries to sustain higher growth in the medium term.

The Prime Minister said it is also important that G20 encourages and promotes policy coordination among major economies in a manner that provides for a broad-based and sustained global economic recovery and growth.

India has been an active participant in this endeavour as co-chair of the Working Group on the “Framework for Strong, Sustainable and Balanced Growth”.

“There is also an urgent need to reform institutions of global political and economic governance. I am happy that the Russian Presidency has paid special attention to these issues in the G20 agenda this year, particularly through a new financing for investment initiative,” he said.

Dr. Singh noted that the Summit comes at a time when India has introduced several reform measures and taken steps to strengthen macro-economic stability, stabilise the Rupee and create a more investor-friendly environment.

“At the same time, a stable and supportive external economic environment is also required to revive economic growth. The G20 Summit, therefore, is an important forum to seek an international climate that is beneficial for all countries,” he said.

The G20 accounts for 90 per cent of the global economy, 75 per cent of global trade and two-thirds of the world population. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Indonesia, India, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the UK, the US and European Union.

India’s concern over the rout of the rupee is to some extent reflected by its efforts to seek support from other emerging economies for coordinated intervention in offshore foreign exchange markets.

On the sidelines of the St. Petersburg summit, the BRICS leaders are expected to work for a consensus on creating a $100 billion currency reserve fund to help ease short-term liquidity pressure and safeguard financial stability of major emerging economies.

The BRICS bloc is also reported to have agreed on the capital structure for a proposed development bank that aims to reduce their reliance on Western financial institutions. The bank is likely to have $50 billion as initial capital.

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