The ministers from world’s top economies are engaged in intense talks to arrive at an agreement on measuring global economic imbalances amidst a tough resistance from China, and with India saying it does not want a ‘one size fits all deal.’
“India did not (and does not) contribute either to the buildup, or to the persistence of global imbalances...Nor does it contribute to the volatility in several international markets, including commodity markets,” Finance Minister Pranab Mukherjee said at the G-20 Finance Ministers meeting here.
The G20 developed and developing countries, including India, China, Russia, Brazil, US, UK, Germany and France, had formed an working group to decide on such indicators.
There have been proposals to frame indicators based on pubic sector debt, private savings, real effective foreign exchange rates and foreign exchange reserves. China, sitting over large foreign exchange reserve of nearly US$3 trillion and having a big current account surplus, is fiercely opposed to these indices. It, instead, wants trade surplus to be taken into account.
India, on its part, has suggested that further efforts should be made to reach a consensus on the contentious issues, saying if there is no unanimity, “then that part of the communique can be deferred.”
Seasonal factors
Mukherjee told reporters that efforts were still underway to arrive at a common ground. Earlier, in his speech he said India is vulnerable to seasonal factors and their effect on the food prices.
“As a result of vagaries of weather, India has witnessed a high and unsustainable inflation on the food items,” Mukherjee said, adding persistent high prices of food and commodities globally “do not give us room for comfort in tackling food inflation in India.”
India’s current phase of growth has been more or less evenly balanced between consumption and investment on the one hand, and between domestic demand and external demand on the other.
However, India has its own “share of concerns arising from elevated commodity and asset prices and economic problems of a more structural nature that underlie the uncertainties in the global economy,” he said.
Some of these uncertainties also derive from the aggressive macro-economic policy response to the global crisis itself, he said. Mukherjee said the global recovery is fragile and there are significant downside risks of tensions in the euro area periphery spreading to other regions. Asked whether India is following US in regulating commodity prices, amid a spike in food costs, Mukherjee said: “We are not moving towards anybody (US. What we are interested in is that there should be a balanced growth.”
“We would like to ensure flow of (funds) from surplus countries to developing countries for improvement of infrastructure facilities in the developing economies,” he added.
Mukherjee said there are risks due to high commodity prices, volatility in exchange rates and high unemployment. “The global recovery remains fragile, uneven and is fraught with significant downside risks arising from the volatility in exchange rates, high commodity prices, persistently high unemployment, high inflation in some economies and difficulties in formulating medium-term fiscal consolidation plans,” he added.
Experts are of the view that recent debt crisis in Europe, especially in Ireland and Greece, had even threatened to derail the fragile global economic recovery.