Date:14/11/2008 URL: http://www.thehindu.com/2008/11/14/stories/2008111456491200.htm

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India wants World Bank and IMF strengthened

Sandeep Dikshit

To minimise impact of global crises on developing countries

G-20 summit an opportunity to probe meltdown
It must consider corrective steps to prevent recurrence

NEW DELHI: India will call for strengthening multilateral financial institutions such as the World Bank and the International Monetary Fund to ensure that the fallout of the global crises on developing countries is minimal.

“I will [also] put forward our views on the need for greater inclusivity in the international financial system and the need to avoid protectionist tendencies,” Prime Minister Manmohan Singh said before his departure to attend the G-20 summit on financial markets and the world economy in Washington on Saturday.

“This gathering of world leaders takes place against the backdrop of the financial crisis that emanated in the U.S. and Europe. It has become clear over the last several weeks that the effects of the crisis are spreading. In varying degrees, all countries will be impacted. We are facing the prospect of a global economic slowdown,” he cautioned.

Dr. Singh viewed the summit as an opportunity for exchanging views on the reasons behind the crises and considering measures that should be taken by the world community to arrest the negative fallout. “The summit also has an important role to play in considering corrective measures to prevent future recurrence of such events. The issues involved are complex and will require sustained deliberation over a period of time.”

Asked about the global financial crises at the end of the BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) summit, the Prime Minister said the impact was relatively less on developing countries. “Our banks and financial institutions are relatively well regulated. We have adequate capital asset ratios. Therefore, there is no danger to the health of the financial institutions of BIMSTEC members.”

Exports may fall

But he feared a drop in exports by developing countries because of a contraction in demand in the West. Some slowdown in economic activity could be expected because of the reluctance of banks and financial institutions to lend to developing countries. This, in turn, could create problems in balance of payment for some developing countries.

“If the flow of resources is less, that would affect the effective implementation of Millennium Development Goals (MDG). Therefore, the message [at the G-20 summit] is we must do everything in our power to ensure that the implementation of MDG is not adversely affected,” he said.

Senior officials said India would cooperate with other emerging countries such as China, Brazil and Russia while engaging with developed countries at the summit. Finance Minister P. Chidambaram discussed the possibility of these countries acting in a coordinated manner during the recent meeting of G-20 Finance Ministers in Sao Paulo last week.

Set up about a decade ago, the G-20 is an informal grouping of developed and emerging countries aimed at facilitating dialogue. These countries account for two-thirds of the world’s population and over three-fourths of the world economy.