India wants World Bank to step in

Exports aren’t coming back soon, PM Manmohan Singh warned his fellow Group of 20 leaders, and India sees the World Bank as the white knight for the millions of poor whose livelihood depended on overseas demand, reports Pramit Pal Chaudhuri.

Exports aren’t coming back soon, Prime Minister Manmohan Singh warned his fellow Group of 20 leaders, and India sees the World Bank as the white knight for the millions of poor whose livelihood depended on overseas demand.

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The World Bank should invest in infrastructure to compensate but needs a lot more money. “There is, therefore, an overwhelming case for doubling the capital of the (World Bank).”

In keeping with the general sentiment among G-20 nations, Singh warned rich countries against “premature withdrawal of stimulus”. An exit strategy, of rolling back the billions governments have poured into the world system, will be appropriate some time “but not now”.

But most of his statement focused on the depressed state of world trade. Minus oil-exporters, the developing world will export $900 billion (Rs 43,20,000 crore) less in 2009.

Singh argued trade would not recover soon. “We have to replace lost export demand by expanding other components of domestic demand.”

And the best way to boost demand is to invest in infrastructure. This would not merely help an infrastructure-starved country like India, but because such investments have a high import content it would also give a fillip to the global economy.

However, Singh noted, though the World Bank has announced it would increase its lending by $100 billion (Rs 4,80,000 crore) over the next three years, this would not be enough. Hence, India’s call for the bank and its sister development banks to have their capital base doubled.