Given the recent devaluation of major currencies roiling markets, finance minister Arun Jaitley will likely flag the rising risk of competitive devaluations of currencies in the meeting of G20 finance ministers and central bank governors being held in Turkey’s capital Ankara on September 4 and 5.
“Competitive currency devaluations, at a time when global demand is sluggish, is a major threat to stability in the global economy. The attempt in Ankara would be to analyse the situation and consider collaborative measures like developing global safety nets to protect countries from negative spillovers arising from domestic actions,” India’s finance ministry said in a statement.
Jaitley left for Turkey on Thursday to participate in the G20 meeting, being held to review ongoing global economic developments, growth prospects, investment and infrastructure, international financial architecture and international tax issues.
Rating agency Moody’s has revised downward its forecast for GDP growth in the G20 economies to 2.8% in 2016, from 3.1%. Moody’s says that the revision mainly reflects the impact of a more marked slowdown now forecast in China and more prolonged negative effects of low commodity prices on G20 producers than earlier expected.
The yuan’s devaluation and growing fears about China’s economy have caused large falls across emerging markets, including India, pushing the rupee to a two-year low of 66.78 to the dollar on August 24.
However, India is not in favour of depreciating the rupee and joining a global wave of monetary measures that have weakened currencies globally because of actions taken in the euro zone, Japan and, most recently, China.
The moves in the yuan, which were followed by China’s latest cut in interest rates, have also roiled the Indian equity markets. Worried foreign institutional investors pulled out a net Rs 16,877 crore from India in August.
During his visit, Jaitley will also attend the first meeting of the governing council of BRICS Contingent Reserve Arrangement (CRA). CRA has been conceived as an additional safety net by the BRICS nations to meet the short-term liquidity needs that may arise in face of volatile capital flows. The total corpus of CRA is $100 billion.