The G-20 nations are expected to create a market-linked mechanism to finance infrastructure projects in developing countries as a means to push global growth and find a way to provide stable capital flows across the globe. The outcome will help India and other emerging economies with large current account deficits to cushion such deficits.
Indian official sources said the details would have to be hammered out, but the final communiqu? would mean the developing world would be weaned away from aid into a market-linked capital transfer mechanism. They said this could also include private equity ? means which were mostly out of bounds in development plans.
Just a mile away, the B-20 ? a summit of global CEOs ? will also heave a sigh of relief. Attendees include Kris Gopalakrishnan, CEO, Infosys and Vikram Pandit of Citibank. For them, the prospect of bar on capital flows to check ?global imbalances? is plainly uncomfortable.
Angel Gurria, secretary-general of the Organization for Economic Co-operation and Development, told reporters that G-20 will endorse what he called ?Seoul Development Consensus for Shared Growth,? which is built on an emphasis on infrastructure investment to achieve sustainable growth in developing countries. ?This is really going to change the way in which we address development,? he added.
Some sources said following the final G20 communiqu?, a high-level body could be set up to work out the mechanisms. In a way, the proposal is a strong endorsement of the development agenda that, among others, Prime Minister Manmohan Singh has called the group that accounts for over 80% of the world GDP to focus on.
This will also mean the end of plans to check capital flows by either capping current account deficits exercising capital controls. This is a position India is uncomfortable with as it wants the inflows to finance its massive infrastructure needs, which is projected at $1 trillion by 2017. Planning Commission deputy chairman Montek Singh Ahluwalia said India already has quantitative limits on debt inflows, which enable the economy to tolerate fluctuations.
At a dinner on Thursday, Singh and Obama were seated almost adjacent to each other, with Argentine President Cristina Fernandez, between the two.