India and G-20 Meeting
Indian Prime Minister made two announcements at London. One , India has no plans to approach the IMF for support. He said, "We do not
visualise any need in the near future to go to the IMF." Second, he said India would, instead, consider raising its contribution to the Fund in proportion to the
enhanced quota. Thus, India has voluntarily abdicated its rights and privilege
of getting IMF funds which has seen strong accretion due to contributions from
the EU, Japan and China, among others.
Aside from these two announcements, the Government
plans tighter regulation of the financial services sector to eliminate
conflicts of interest and unhealthy compensation schemes, to meet the
bench-mark planning by G-20. India is a member of the Financial Stability Board
set up by G-20 and would be involved in drafting global benchmarks for
financial sector regulation. "We would set the global regulatory
benchmarks and would also implement them in India, said Ashok Chawla,
Secretary, Department of Economic Affairs. In fact, a G-20 statement earlier
this month and a report by Reserve Bank of India Deputy Governor Rakesh Mohan
had highlighted the need for addressing crucial problems plaguing the financial
services sector. Following its pledge at G-20 Summit, India may also have to
rewrite its company laws to ensure that pay for senior company executives
relate to their performance.
Underscoring the role of countries like India China
and Brazil with that of the developed world to tackle the economic crisis,
Obama said at the conclusion of the Summit: "We felt that it was very
important to strengthen our international financial institutions because
developing countries, emerging markets are threatened-even though they may not
have been cause of this crisis-they are threatened by capital flight; they are
threatened by reduced trade finance, drops in consumer demand in developed
countries that were their export markets."
Apart from the two announcements that Manmohan Singh
made at London, RBI is likely to come up with the next round of rate cuts as a
part of fiscal stimulus, as a fall-out of commitments made by India at G-20
Summit. RBI is slated to announce its monetary policy review on April 21st,
when the further rate cuts of interest could be announced. The fall in
inflation to 0.8% gives RBI greater room to cut key rates, although bankers
expect it to maintain status quo in the near term. ADB had said in its 2009
outlook that India has no scope for another fiscal stimulus, but Planning
Commission Deputy Chairman Montek Singh Ahluwalia said recently that the
economy might need "some more stimuli". Some more relief in terms of
further cuts in the interest rates is in the offing.
What Future Holds Forth for the World?
I would expect that there is a rational chance of the
world trade picking up, based on the encouraging reports of the US economy,
showing signs of recovery as read by its President Obama and others, with the
initial support of $750 billion injection in the US economy, though the actual
requirement of funds may work out to be many times more. Similarly other stimulus
packages offered by several governments-all totally $5 trillion -, the general
demand and world trade in various products is likely to look up, while the
developing countries will also be given help through International Monetary
Fund and other multi-lateral arms. Once the recession weakens and the demand
for goods and services picks up, which is most likely in view of pump priming
by financial institutions, the world trade should pick up -and so will Indian
exports, which hinge and rest on pall of recession being lifted both in the
developed and developing countries.
Reference:
http://www.ft.com/cms/s/0/02ba6b90-1f61-11de-a7a5-00144feabdc0.html
