Washington: Pitching for more coordinated effort by G20 to boost global growth, Finance Minister Arun Jaitley has said that countries must avoid trade protectionist measures and refrain from competitive devaluations of currency as greater focus must be on public investment.
The efficacy of monetary policy instruments has reached its limits and its pass through has not been seamless, he said in an intervention yesterday at the G20 Finance Ministers' and Central Bank Governors' meeting here.
"The time is ripe for a re-evaluation of the fiscal policy space, with a greater focus placed on public investment," he said.
Stating that declines in both imports and exports were recorded in all G20 economies in 2015, he said there is a need to articulate an effective and tangible policy response to revive the trade engine of the global economy.
"Countries must avoid trade protectionist measures, and refrain from competitive devaluations," he said.
Also, he added, the asymmetry in the global financial safety net has to be taken note of.
Jaitley further said: "While advanced economies have access to swap lines in order to smooth currency shocks, emerging market economies, which are highly dependent on reserve currencies both for borrowing and for international transactions, do not have recourse to these.
"Global and regional financial safety net and oversight needs to be augmented, including through new financing mechanisms."
A balance has to be maintained between addressing domestic priorities of member countries with the international role that each G20 member has to play, he said.
"Therefore, we should also consider undertaking an analysis of the possible negative spillovers of policy actions. At the moment, the recent use of negative interest rate policies has been identified as an area of concern by members," he said.
Jaitley said that in order to move out of the current equilibrium of low global growth, it was important to correctly identify and remove vulnerabilities and build a resilient set of institutions.
"Timely and coordinated efforts by all G20 members can have a positive impact by preventing further deterioration in the economic outlook and creating conditions which will be conducive for higher global growth," he said.
While the nations have agreed on a set of priority areas of structural reform, the point of difference remains regarding the approach to be adopted for formulating the G20 Structural Reform Indicators.
"While some of the members are of the view that a top down approach has to be formulated, India, along with other members, believes that we need a country led process," he said.
Finance Ministers of the world's top 20 economies (G20) had in February committed to doing more to boost global growth amid mounting concerns over the potency of monetary policy.
After a two-day meeting in Shanghai, the ministers and the governors had also doubled down on a line from their last gathering that "monetary policy alone cannot lead to balanced growth".
Jaitley, who is on a seven-day visit to the US, said individual and collective efforts to restore growth back to pre-crisis levels have met with limited success.
"The distribution of risks to the global economic outlook continues to remain tilted to the downside, and global growth continues to disappoint. Even the projection of future global growth has been subject to recurring downward revisions," he said.
While India has consistently recorded the highest growth figures in the world for the last three quarters, he expected the momentum to continue, assuming a normal monsoon rainfall.
"That being said, the fading impact of lower input costs on value addition in manufacturing, persisting corporate sector stress and risk aversion in the banking system, and the weaker global growth and trade outlook pose as downside risks to India's growth outlook," he said.
Stating that the government was dealing with these challenges through various policy measures, he said the key downside risks which could derail the fragile global recovery are ? weak demand, tighter financial markets, softening trade and volatile capital flows.
"India has always emphasised the need for globally co-ordinated policy decisions to remedy the global economic turbulence," he said.
New Delhi, he said, appreciates the efforts being undertaken by the Chinese government in rebalancing the economy and in particular in reducing excess capacity in several sectors. This would create space for manufacturing activity in other countries.