At the forthcoming G20 meeting in London, India will pitch for a new international financial architecture, raise its concerns on the impact of ?protectionist provisions? in the multi-billion dollar stimulus packages of the developed countries on global trade and also highlight the non-tariff barriers of the West that are curbing exports from developing countries.
It is understood that during the Summit, beginning April 2, Prime Minister Manmohan Singh would also put forward suggestions on a mechanism to monitor the stimulus packages of different countries to ensure that they are compatible with World Trade Organisation (WTO) norms.
?It is all right if the stimulus package helps in nursing certain sick sectors in rich countries back to good health. But we will be worried if the bail-out packages, through their financial institutions, result in dumping of cheap and subsidised goods by those rich countries in developing countries,? a senior official told FE.
Singh is also likely to raise India?s objections regarding certain restrictions imposed by countries including the US on outsourcing and on movement of contractual workers and skilled professionals from India.
Besides, India would call for reforms of World Bank and International Monetary Fund by demanding more representation of members from developing countries in these international financial institutions. New Delhi will also pitch for more financial muscle to IMF and World Bank.
Though India was criticised by some countries including the US on taking protectionist measures like increasing in import duties of certain items like steel, officials here defended such decisions saying India?s applied tariffs (decided by the government) on items are much lower than its bound tariffs (tariffs that India has committed in the WTO).?
Meanwhile, US exhorted all G20 member countries to ?unite? in taking actions to fight protectionism and in ensuring that systemic risks do not happen again. Brazil has warned that the increasing trend of protectionism would cause difficulties in taking the Doha round of world trade talks, while Russia demanded that emerging countries should have more say in global finance. Experts said India should focus on making an intellectual contribution to the proceedings, rather than taking up the oft-repeated issues like protectionism.
Rajiv Kumar, director and chief executive, Indian Council Of Research in International Economic Relations (ICRIER), said, ?We should push for institutionalisation of G20 and the replacement of G7 by G20. We should also offer concrete solutions to improve the working of the global financial sector. For instance, we should pitch for a thorough review and simplification of Basel-II norms. It is important to note that the current regulatory system does not allow risks to be allocated appropriately.?
Kumar added that what the system needs is contra-cyclical capital, where with banks lending more, they should be asked to make higher provisions. Abheek Barua, chief economist, HDFC Bank, said ?though this time the G20 meet is mostly about sorting out the stress between the US and Europe on a globally coordinated regulatory and economic structure, India also needs to make its presence felt by ensuring that its agenda is put across.?
He said India should make a contribution to finding a solution to the manner of regulatory coordination to keep a check on certain asset markets like realty and commodities that have a tendency to get overheated.
?We should moot a dynamic supervision and regulation of these markets. Current regulation calls for a static level of capital adequacy. But we should have a band (of capital adequacy norms) that moves with the cycle,? Barua said.
Meanwhile, foreign secretary Shivshankar Menon said total transparency in the regulatory mechanisms is important to tackle the problems following the collapse of financial institutions. He said India would also call for greater transparency on tax havens.?
The Indian team for the Summit includes planning commission deputy chairperson Montek Singh Ahluwlia as well as officials from the finance and external affairs ministries. Singh, who is expected to leave on Tuesday, is likely to be back on Friday to attend to matters connected to the forthcoming general elections. During his stay in London, Singh would call on the leaders of US, Europe and Brazil.