Prime Minister Manmohan Singh has echoed China?s proposal for a new global currency to replace the dollar, pointing out that moving to a neutral reserve asset has been discussed since the 1970s. However, he said it is too early to discuss the issue at the one-day G-20 summit in London on Thursday, as it needs ?a lot of preparation?.
The power to issue money is an indication of the power of a country and no one gives up power voluntarily. So, these are complicated issues, depending on the power balance,? Singh told a British daily. ?There are virtuous technical solutions, but these are not issues that can be resolved through technical analysis,? he said.
The subject of an alternative to the US dollar has cropped up as Washington has issued massive amounts of currency to finance bailouts for its domestic financial system. The excess flow has reduced the dollar?s exchange rate against the euro and Japanese yen. Lower dollar rates mean forex reserves of countries like China and India are worth less. Data put out by RBI on Tuesday said India lost $33 billion due to such valuation losses from April to December 2008.
Singh arrived late on Tuesday for the meeting of the G-20, which is torn by deep divisions on almost all issues, even though US President Barack Obama said on Wednesday there was ?enormous consensus? between the largest developed and emerging economies on plans to haul the world out of the deepest downturn since the 1930s.
Obama played down reported differences with France and Germany to say G-20 countries must agree on measures to tighten financial regulation and crack down on tax havens rather than simply make promises. Addressing a joint press conference with British Prime Minister Gordon Brown, Obama brushed aside suggestions the summit would falter because countries were split over the importance of regulation versus new stimulus packages.
French President Nicholas Sarkozy earlier threatened to disassociate himself from any ?false compromises? at the summit, the second such meeting of world leaders to try to tackle the problems created by the credit crunch. German Chancellor Angela Merkel supported Sarkozy?s stance, saying she would make sure concrete decisions were taken.
Singh also acknowledged that world leaders could not resolve all issues in one day. It was important for all major economies to do their bit for ?credible fiscal stimulus? and resumption of credit flows, he said. Pointing to sharp declines in trade credit and capital flows, the PM said, ?We in the developing countries see the effect of the stoppage of credit flows much more. The decline should be made good by providing adequate resources to international financial institutions to come to the rescue of emerging and low-income countries.?
Terming the action by banks in developed countries to withdraw capital resources from developing nations as ?worrisome?, Singh said protectionism of any sort, be it on goods, services or financial protectionism, ?has to be avoided?.
From January 2009 to March 2009, FIIs have pulled $3.23 billion out of Indian stock markets, while exports dropped 21.7% in February.
As a result, India?s balance of payments position worsened sharply between October and December 2008, with the current account deficit touching $14.6 billion 2008, the highest quarterly deficit since 1990. But Singh said, ?We do not expect problems in managing the balance of payments.?
Echoing the PM?s concerns, World Trade Organisation director-general Pascal Lamy warned G-20 leaders that though ?high-intensity protectionism? like in the 1930s is unlikely in today?s world, ?low-intensity protectionism? that takes advantage of the flexibility offered under existing WTO rules for global trade is a risk.
?If G-20 leaders prohibit the use of this flexibility, it will allow me to push for the conclusion of the WTO?s long-stalled Doha round trade talks, launched in 2001,? Lamy wrote in a French daily.
Singh asserted that there is ?no truth to the charge? by countries like the US that India is to blame for the deadlock in the Doha round. ?While public attention focuses on points of disagreement, we should remember that a great deal of work has been done to narrow differences. The negotiators just did not have enough time,? the PM argued.
Singh met with British PM Brown at his official residence at 10, Downing Street on Wednesday and is slated to meet with President Obama on the sidelines of the summit on Thursday.