Search the Internet          Tips  Sites: Finance, Investment

India seeks global funds to help nations in crises

Surojit Gupta in New Delhi

The Reserve Bank of India Governor Bimal Jalan sought more automatic access on Saturday to global funds for countries facing financial crises and urged the international community to play a supportive role.

"This is essential since even if a country was cautious and careful, and had strong macro-economic fundamentals, it might still be affected by crisis because of events beyond its control," Bimal Jalan told a meeting of the Group of 20 nations in New Delhi.

"This could be the result of contagion or an unexpected upsurge in oil price or disruption in trade due to external events," Jalan said.

India is hosting the annual summit of finance ministers and central bank chiefs from the Group of 20 countries. The meeting is discussing how to cut off funds for terrorism, boost global trade and combat financial crises.

The G-20 was established in 1999 in the wake of the emerging markets financial crises of the late 1990s.

The group -- 19 nations plus the European Union as well as the World Bank and the International Monetary Fund -- accounts for more than three quarters of the world's people and gross domestic product.

Increase lendable reserves

The central bank Governor said it was also necessary to substantially increase the lendable reserves available with the IMF in line with the increase in the size of international capital flows in the 1990s.

Jalan said short-term banking capital should be avoided for financing investments and growth, while foreign direct investment and portfolio investment needed to be encouraged in capital account management.

The G-20 finance ministers and central bank chiefs are discussing a communique which is to be finalised and issued at the end of the summit later on Saturday.

Jalan said each country needed to take measures to build its own safety walls by providing for a stable macro-economic environment, higher reserves, more realistic policies to regulate capital flows, and monitoring of foreign exchange markets.

He said India met all parameters of a stable macro-economic environment with inflation around three percent, current account deficit below one percent, and growth above five per cent.

The summit has given India an opportunity to showcase the attractiveness of Asia's third largest economy for some of the richest countries in the group.

Economists say reforms are crucial if India is to increase its annual growth from 5.4 per cent and cut poverty in a country whose population of more than a billion is second only to China, which is expected to post eight per cent growth this year.

China attracts $30-40 billion of foreign investment a year. In contrast, India draws just $3-4 billion.

ALSO READ:
More Money Headlines