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India worried over declining aid; asks IMF to help spur growth

India on Monday asked the World Bank and the International Monetary Fund to work out an action programme to 'rejuvenate' economic growth in developing countries in the face of global economic slowdown and set appropriate framework along with WTO for 'free and fair' global trade.

"To my mind, the primary task before this assembly is to work out an action programme aimed at rejuvenation and renewal of hope for the future with massive thrust for economic growth and development," Union Finance Minister Yashwant Sinha told a joint meeting of International Monetary and Financial Committee and Development Committee.

Sinha is joint chairman of the committee along with British Chancellor of the Exchequer Gordon Brown.

Articulating the concern aired by developing nations, Sinha cautioned against declining development assistance and denial of market access by continued practice of non-trade barriers.

"A number of developing countries, including India, have removed all quantitative restrictions, but the developed countries continue to build non-trade barriers," Sinha told a joint meeting of International Monetary and Financial Committee and Development Committee.

Asking IMF and World Bank to set appropriate ground rules along with WTO for free and fair trade, Sinha said: "We have to ensure that multi-lateralism and movement toward global free trade is at the centre of trade negotiations."

"The IMF should become a stronger voice in terms of promoting further trade liberalisation on multilateral basis," he said.

Sinha listed textiles, garments and agriculture as areas of concern where non-trade barriers were being maintained to create unfavourable trade conditions for developing countries.

Sinha listed textiles, garments and agriculture as areas of concern where non-trade barriers were being maintained to create unfavourable trade conditions for developing countries.

Regretting that development assistance had gone down drastically by 40 per cent in the 1990s, Sinha said that there had to be much higher aid flow, particularly for poverty-reduction programmes in countries like India who had managed their economies and debts well.

"We support the issues raised by African leaders during this visit and are pleased that the critical concerns of market opening, enhancing overseas development and aligning it with poverty reduction strategy objectives find strong support from both the institutions as well as the country leaders," he said.

Sinha said that developed countries must agree to increase their level of Overseas Development Assistance flows.

Asserting the need for an action programme to spur growth, Sinha said this was necessary to deal with downside risks of globalisation with adverse effects particularly on the developing countries.

Referring to the financial crisis that had occurred in different parts of the world in the nineties, he said that they originated as an incipient crisis in the foreign exchange market and quickly spread to the financial and banking sectors and then to the economy.

It was in this scenario, Sinha said: "We definitely need a more stable and better managed exchange rate system for the world economy. I find it hard to understand why inadequate attention has been given to this problem despite the experience of the 1990s."

Though India and China were doing well among the emerging economies, the US downturn and happenings in the American technology sector were already causing turmoil, he said.

"We see it in the stock markets where upheavals in Nasdaq get reflected."

Noting that financial and banking sector reforms were also crucial, Sinha said they were unlikely to be sustainable without an upsurge in economic activity supported by surplus capital which is currently available in some G-7 countries.

The financial crisis also highlighted the need for having proper capital account regulatory framework, he said, adding that massive injection of official capital in developing countries should be contemplated if there was deficiency of demand worldwide, while there was excess capacity in some parts of the world.

The ODA/GDP ratio for all developing African countries has decreased to around 0.24 per cent in the 1990s, well below the 0.33 per cent maintained in the 70s and 80s.

"Sustaining sound macroeconomic policy and structural reforms must be accompanied by higher aid flows for a successful anti-poverty programme to be in place," he said.

Elaborating on India's experience, Sinha said that the fight against poverty is not going to be short. "Nor is it going to be won by being dogmatic and prescriptive."

Low-income countries have the responsibility to implement sound policies and nurture an environment conducive to growth, while the developed countries should open up their markets and increase aid volumes, he said.

The development challenges could not be overcome by poor nations in the fast globalising world of today without being helped by multilateral agencies and bilateral donors, he said.

"We, therefore, support the move by both the institutions to strengthen the twin-pillar strategy as part of this challenging endeavour," he said.

Sinha also wanted multilateral agencies to adopt a "flexible" approach instead of being rigid as at present so that there was a conducive atmosphere in promoting partnership building and effecting fiscal discipline in national economies besides better monitoring and reporting.

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