Standards global, regulation national: FM
New global regulatory standards, prudential norms, greater surveillance mechanism and reform of the IMF are among the key points that the Indian contingent will raise on November 15 at the Summit, reports Gautam Chikermane.business Updated: Nov 14, 2008 09:53 IST
New global regulatory standards, prudential norms, greater surveillance mechanism and reform of the IMF are among the key points that the Indian contingent will raise on November 15 at the Summit on Financial Markets and the World Economy in Washington DC, Finance Minister P Chidambaram told reporters.
Most important among these, in terms of having a widespread impact, will be the setting up of common regulatory and accounting standards across the globe or at least for G20 nations. "We must have convergence of accounting standards," Chidambaram said.
The politics of a process that will be put in place in the November 15 Summit will not be restricted by the soon-to-change leaderships in the US and India, said Finance Minister P. Chidambaram.
"The resolution of this crisis will take us to a point of time well beyond January 20, 2009 (that's when President-elect Barack Obama will take charge as President)," he said. "Likewise, it will take us to a point of time well beyond May 22, 2009 (when a new government takes charge in India). So I don't think we are going to take a election-constricted point of view.
He pointed out that US President George Bush and Obama are reported to have talked about these issues are great lengths only two days ago. "I think Obama inputs will be there in whatever President Bush presents."
Briefing reporters on the impact of the crisis on India, Finance Minister P. Chidambaram repeated what is now getting to be a somewhat permanent government line: "We will be indirectly impacted. Our growth, our exports and currency flows will be affected. We can weather the crisis and still return a decent growth in 2008-09," he added.
"Even the IMF's last week's assessment places India's growth rate in the current fiscal at 7.8 per cent."
But he dismissed the idea of a common global regulator saying, "I don't think regulation can be raised to a global regulator. That's too ambitious, and perhaps not possible in today's circumstances. Regulation must be national."
The need for global standards goes hand in hand with IMF reforms. "IMF," Chidambaram said, "was unable to provide the early warning signals to the crisis." That does not mean the creation of new multilateral agencies and financial institutions, informally being called Bretton Woods II, he added. "But surely IMF must begin to discuss within itself governance reforms."
"We need to put in place a surveillance mechanism that would have identified the huge risks being taken by some financial entities," Chidambaram said, adding that an "agreeable entity" is needed. "This is what we talked about in Sao Paulo and this is what we'll talk about in the Summit."
Coming four days after finance ministers and central bank governors of G20 countries met in Sao Paulo and two days before the US President George Bush-initiated Summit, Prime Minister Manmohan Singh has the Indian agenda laid out.
"I will put forward our views on the need for greater inclusivity in the international financial system, the need to ensure that growth prospects of developing countries do not suffer, and the need to avoid protectionist tendencies," Singh said in a November 13 departure statement.
"Today there are only a handful of economies that are driving global economic growth," Chidambaram said. "These include China, India and few others. It is very important that the few countries that are able to drive economic growth should not suffer. More resources should be made available to these countries."
On that front, he clarified that India did not seek IMF funds. "We don't need an IMF programme," he said. "We need a development programme. So if World Bank is willing to give us more, we will be happy to take it."
The new financial order, the seeds for which will be laid in the Summit, needs to become more inclusive, Chidambaram said. "G7 is too small. It must expand." G20, perhaps, represents the new grouping.
Among the new prudential norms that are needed, Chidambaram listed common norms for capital adequacy, risk assessment and risk weights.
Taking Singh's anti-protectionist agenda forward, Chidambaram said the crisis should not lead to the creation of "protectionist cocoons. We must now try to ensure free flow of goods and services, capital." Which echoes one part of what George Bush wrote in his October 22 letter inviting the heads of state of G20 for the Summit, sources
Apart from G20 leaders, IMF managing director Dominique Strauss-Kahn, World Bank president Robert B. Zoellick, the United Nations secretary-general Ban Ki-moon, and Financial Stability Forum chairman Mario Draghi have also been invited.