With Brexit creating global uncertainties, India has called for a judicious mix of fiscal, monetary and structural policies by major economies to mitigate risks to economic growth. “Governments, central banks and regulators have to mitigate the pressure of such vulnerabilities through judicious mix of fiscal, monetary and structural policies,” Jaitley said in a written speech read out at the first annual meeting of the Board of Governors of the New Development Bank (NDB) held in Shanghai on Wednesday.
The $50-billion NDB, better known as Brics bank, was operationalised in early 2016. The second annual meeting of NDB will be held in India in 2017 under its chairmanship.Delving into Brexit, a term used to describe Britain’s decision to exit from the European Union (EU), Jaitley said the development has further intensified uncertainty, market volatility and risk-averse behaviour in the world.
The current global economic context is marked by a modest pick-up in some advanced economies from their low levels of growth; decline in growth in emerging market and developing economies; increased financial sector volatility; and, in general, a downward revision of global growth projections by the International Monetary Fund.
On July 19, the Fund trimmed its earlier global growth forecast by 0.1 percentage point to 3.1% in 2016 and 3.4% in 2017. It also revised down India’s FY17 and FY18 growth projections by 0.1 percentage point to 7.4%. Jaitley said the structural problems of Emerging Markets and Developing Economies (EMDEs) continue to affect their growth. The sluggish global trade and low commodity prices have also adversely affected commodity-exporting EMDEs by aggravating their corporate and other economic vulnerabilities, he said. India, Jaitley said, is following the approach of ‘Reform to Transform’ through far-reaching structural reforms. “We have taken several initiatives to boost investment climate and improve the ease of doing business,” he said.
Among others, India’s key initiatives include setting up National Infrastructure Investment Fund to stimulate investment in infrastructure as well as the Insolvency and Bankruptcy Code for easier exit of companies. Besides, programmes such as Make in India, Start-up India, and Skill India are focused on encouraging innovation, entrepreneurship and job creation. The government has also launched a massive financial inclusion programme and more than 20 crore bank accounts have been opened for the unbanked persons.
The minister highlighted India’s use of Aadhaar, a unique identification system, for targeted delivery of financial and other subsidies, benefits and service. Jaitley asked the NDB to focus on making a strong pipeline of projects in the infrastructure sector which can play a catalytic role in promoting inclusive growth. He also advised the multilateral agency to focus on projects in energy generation, transport and urban sector infrastructure.