India is against any global approach to capital controls and thinks it is up to individual countries to manage their inflows, finance minister Pranab Mukherjee said on Friday.
“Our position is that we do not want any arbitrary mechanism to discourage capital inflows. We have stated that this decision should be left to the discretion of individual countries,” Mukherjee told reporters as policymakers gathered for G20 talks on global economic imbalances.
Mukherjee also said that the government will return to fiscal discipline in the coming Budget, after following policies of stimulus and expansion in the last two years. He said fiscal expansionary policies were required in the past, in the wake of global financial crisis.
With the growth returning to high trajectory, “we should come back to the path of fiscal consolidation. We are following that,” he said.
Fiscal deficit in the budget had ballooned to 6.8% of the GDP in 2009-10 and was pegged quite high at 5.5% for the current fiscal, as the government had to provide stimulus dose worth billions of dollars to the economy. He said stimulus package helped India to grow by 6.8% in 2008-09 and by 8% in 2009-10.
“When the financial crisis started, most of the countries resorted to expansion of financial space. As a result, the deficit in Budget increased substantially and it got reflected in the current account balance,” the finance minister said.
The stimulus package helped India to grow by 6.8% in 2008-09 and by 8% in 2009-10, he added.
He also said that food prices at “dangerous levels” posed a major threat to the international community. “International commodity prices are rising. Food situation is a major issue which is going to affect the international economy and trade. (It) is going to be discussed.”
According to the World Bank, the global food price index has climbed 15% between October 2010 and January 2011.
“Global food prices are rising to dangerous levels and threaten tens of millions of poor people around the world,” World Bank president Robert B Zoellick had said.
He, however, said that currency war, which was a major issue at G20 meetings in South Korea last year, will take a back seat this time.
Currency war refers to competitive devaluation of currency by certain countries to keep their exports competitive.
“I don't think it (currency war) is going to be that prominent in this meeting of the G-20. It was exhaustively and extensively discussed during the last meeting (in South Korea),” the finance minister said.