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Rupee has lost 1/5th of its value against dollar: PM
Setting the tone on a key issue of concern for India at the G20 summit, Prime Minister Manmohan Singh on wednesday pushed for an "orderly exit" from unconventional monetary policies being pursued by the developed world to avoid "damaging" growth prospects of the developing world.
With India hit by a declining value of rupee, widening Current Account Deficit (CAD) and stunted growth, the country's anxiety over imminent phasing out of the fiscal stimulus by US Federal Reserve was reflected by the prime minister on the eve of the eighth summit of the group of industrialised and major emerging economies.
Singh arrived here this evening to participate in the two-day summit which is expected to focus on current market volatility and currency concerns in the emerging economies including the five-nation BRICS bloc.
Besides India, the other member countries are Brazil, Russia, China and South Africa.
"I will emphasise in St Petersburg the need for an orderly exit from the unconventional monetary policies being pursued by the developed world for the last few years so as to avoid damaging the growth prospects of the developing world," Singh said in a statement ahead of the summit.
He also underscored the importance of G20 to promote policy coordination among major economies in a manner that provides for a broad-based and sustained global economic recovery and growth.
The prime minister made a reference to orderly exit from unconventional monetary policies in the backdrop of splits between emerging markets and the US over its winding down of stimulus and the slowing growth of BRICS nations.
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Rupee has lost 1/5th of its value against dollar: PM
Singh said though there are encouraging signs of growth in industrialised countries, there is also a slowdown in emerging economies which are facing the adverse impact of significant capital outflow.
BRICS bloc seen as an alternative economic powerhouse, all go into the meeting after experiencing slowing growth, embattled currencies and huge capital outflows.
Economic Affairs Secretary Arvind Mayaram during a media interaction said there should be a measure of "predictability" on the Quantitative Easing (QE) by the US Federal Reserve so that the spillover does not disrupt the emerging economies.
The stimulus was introduced by the US in 2008 at the height of the financial crisis creating liquidity which helped the big emerging markets.
"There should be a measure of absolute predictability (on QE issue)," Mayaram said.
The Indian rupee has lost one-fifth of its value against the US dollar this year following major capital outflows triggered mainly due to the moves by the Federal Reserve.
India is also suffering a decade-low growth and GDP rose just 4.4 per cent in the first quarter this fiscal, the weakest performance since 2009.
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Rupee has lost 1/5th of its value against dollar: PM
Singh said he will once again emphasise at the Summit that the G20 should ensure primacy of the development dimension in its deliberation, focus on job creation, promote investment in infrastructure as the means of stimulating global growth and create potential in developing countries to sustain higher growth in the medium term.
The prime minister said it is also important that G-20 encourages and promotes policy coordination among major economies in a manner that provides for a broad-based and sustained global economic recovery and growth.
India has been an active participant in this endeavour as co-Chair of the Working Group on the "Framework for Strong, Sustainable and Balanced Growth".
"There is also an urgent need to reform institutions of global political and economic governance. I am happy that the Russian Presidency has paid special attention to these issues in the G-20 agenda this year, particularly through a new financing for investment initiative," he said.
Singh noted that the Summit comes at a time when India has introduced several reform measures and taken steps to strengthen macro-economic stability, stabilise the rupee and create a more investor-friendly environment.
"At the same time, a stable and supportive external economic environment is also required to revive economic growth. The G20 Summit, therefore, is an important forum to seek an international climate that is beneficial for all countries," he said.
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Rupee has lost 1/5th of its value against dollar: PM
The G20 accounts for 90 per cent of the global economy, 75 per cent of global trade and two-third of the world population.
Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Indonesia, India, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the UK, the US and European Union.
India's concern over the rout of the rupee is to some extent reflected by its efforts to seek support from other emerging economies for coordinated intervention in offshore foreign exchange markets.
On the sidelines of the St. Petersburg summit, the BRICS leaders are expected to work for a consensus on creating a $100 billion currency reserve fund to help ease short-term liquidity pressure and safeguard financial stability of major emerging economies.
The BRICS bloc is also reported to have agreed on the capital structure for a proposed development bank that aims to reduce their reliance on Western financial institutions. The bank is likely to have $50 billion as initial capital.