As an uncertain global economic environment continues to trouble Indian and other markets, finance minister Arun Jaitley has asked the International Monetary Fund (IMF) to beef-up its resources to ensure ‘future-proofing’ against recurrence of financial crises.
Jaitley also asked advanced economies to be “mindful” of the spillover effect of their policies on the rest of the world.
Speaking at the meeting of the International Monetary and Financial Committee (IMFC) on Saturday, Jaitley said flagging trade volumes, softening commodity prices, idle capacities and anemic economic fundamentals, particularly in a number of large EMEs are increasingly impairing their ability to sustain economic and financial resilience against rising risks.
“In this milieu crisis-affected and low-income countries require the support of a credible multilateral safety net to provide financing necessary to prevent contagion. The IMF is in unique position to take this responsibility but needs to be strengthened further through reforms in its governance,” the finance minister said.
“At the same time, the IMF should also examine adequacy of its own resources and whether they are sufficient for ‘future proofing’ the global economy against recurrence of financial crisis,” Jaitley added.
Stating that unconventional monetary policies (UMPs) have added huge uncertainty to financial markets and are harming the prospect of maintaining financial stability, Jaitley said.
“Low and/or negative policy interest rates in many advanced economies have increased the risks of volatility in asset prices and capital flows, while increasing the propensity for competitive currency devaluations. UMPs targeted at reviving growth create disruptive spillovers given the growing inter-connectedness of the global financial system,” he added.
About India, Jaitley said the government is following the mantra of “Reform to Transform India” and has embarked on a path of far reaching structural reforms to foster strong and sustainable growth. He said the Indian economy has managed to put across a “credible” performance with an estimated growth rate of 7.6% in the just concluded fiscal 2015-16, as against 7.2% in the previous year.
Jaitley, who is on a week-long visit to the US, said the Indian government is taking steps to reform institutions, simplify procedures, repeal obsolete laws and put in place a progressive and non-adversarial tax regime incorporating best global practices.
On China (box)
“While the economy is slowing down, its structure and quality have improved ... The growth drivers have remained strong and sound fundamentals will continue to support long-term growth.”
Xiaochuan Zhou, governor, Central Bank of China
“This rebalancing, which is being implemented in a resolute manner, inevitably affects China’s economic partners, even if it is still too early to determine its precise impact.”
Michel Sapin, finance minister, France
“This slowdown is related to the necessary ongoing transition of the Chinese economy, to lower commodity prices, to earlier exaggerations and domestic shortcomings in some countries, such as insufficient structural reforms.”
Wolfgang Schauble, finance minister, Germany
“Structural measures such as state-owned enterprise and financial sector reforms and steps to reduce excess capacity will support China’s economic transition.”
Jacob Lew, treasury secretary, US