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Following is the text of Union Finance Minister's Interventions/remarks made during the First Session of G-20 Finance Ministers' and Central Bank Governors' Meeting in Paris on 18th February,2011.
Since 2008 the G 20 process has been driven by the objective of arriving at coordinated responses to the challenges emerging out of an unprecedented global financial and economic crisis, and more recently of safeguarding the process of economic recovery. 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 and high inflation in some economies, and difficulties in formulating medium-term fiscal consolidation plans. Nevertheless, the coordinated response in the aftermath of the global crisis, and the resultant recovery, even if it is not complete, has clearly demonstrated the merits of a coordinated approach. A new style of economic governance appropriate to a rapidly integrating global economy is being born.
Underpinning the effort to take forward the cooperation to address structural problems in the global economy has been the G20 Framework for Strong, Sustainable and Balanced growth. Our leaders at theSeoulsummit had underscored the centrality of the MAP process and the need to enhance this multilateral process to promote external sustainability, by pursuing the full range of policies conducive to reducing excessive imbalances and maintaining current account balances at sustainable levels. Persistently large imbalances are to be assessed against indicative guidelines in terms of their nature and the root causes of the impediments to adjustment, while remaining cognizant of national or regional circumstances.
At this juncture I would like to highlight a few key words in the leader’s declaration at the Seoulsummit. The focus was clearly on ‘promoting external sustainability’ within the spirit of multilateral cooperation. Our leaders were careful to recognise that such an exercise should focus on persistent and excessive imbalances.
I welcome the progress made so far by the G20 Framework Working Group in the difficult task of working towards an agreed set of indicators and towards framing guidelines for addressing persistent imbalances. I hope that the remaining differences would be ironed out during this meeting. I would like to emphasise that the task of preparing guidelines, and the ensuing MAP process, should not be seen by members as one of fabricating an iron casket or a mould that would be used to shape country specific policies in a manner that one size would fit all. The objective is clearly of arriving at a consensus on a set of ‘indicative’ guidelines that could reduce excessive external imbalances. It would be difficult to realize our objective according to the agreed timelines if we cannot agree on indicators during this meeting. Therefore , I would strongly urge my colleagues at the table to reach a consensus on the indicators during today’s deliberations. I would like to emphasis that the Framework is a joint effort of the G 20 to arrive at a road map to deal with problem of global imbalances. A positive outcome is needed to provide a signal that the G 20 is serious on ensuring strong sustainable and balanced growth for the World economy and addressing structural problems in the global economy and that it is not simply a crisis-fighting forum.
We need to proceed in a spirit of multilateral cooperation, recognising that the guidelines arrived at are not only be in the interest of the global economy, but also in the interest of individual economies regardless of their size or their current rate of growth. In this context I would like to reiterate my Prime Minister’s suggestion at the Seoul Summit that a way must be found of channelling global savings to regions where huge investments are required for development and infrastructure.
The position ofIndiain this regard is that it did not (and does not) contribute either to the buildup, or to the persistence of global imbalances. Nor does it contribute to the volatility that we have been witnessing in several of the international markets, including commodity markets. According to latest estimates, the Indian economy is estimated to have grown by 8.6% in 2010-11 and the Indian growth story remains robust.
A large emerging economy likeIndiais vulnerable to seasonal factors and their effect on the food prices. As a result of vagaries of weather,Indiahas witnessed a high and unsustainable inflation on the food items. The food inflation has also been accentuated by structural changes in the consumption pattern thanks to our growth. Such high food inflation has a tendency to feed into general inflation throwing challenges at our macroeconomic management. The high and persisting international prices of food commodities do not give us room for comfort in tackling food inflation inIndia.
We are also fortunate that the 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. Nevertheless, we have our 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. Some of these uncertainties also derive from the aggressive macro-economic policy response to the global crisis itself. Despite the two-speed global recovery, we live in a world which is becoming more integrated rather than decoupled. Any sustainable recovery must necessarily be global, where trade and capital will need to flow in a stable manner and where benefits accrue across the board by creating employment and well being without destroying livelihoods.
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(Release ID :69915)
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