PM leaves for G20 summit in Russia tomorrow
Prime Minister Manmohan Singh leaves for St. Petersburg on Thursday to attend the eighth G20 Summit during which he is expected to push for a coordinated plan to avoid disruption in India and other large developing economies by imminent phasing out of fiscal stimulus by US Federal Reserve.
New Delhi: Prime Minister Manmohan Singh leaves for St. Petersburg on Thursday to attend the eighth G20 Summit during which he is expected to push for a coordinated plan to avoid disruption in India and other large developing economies by imminent phasing out of fiscal stimulus by US Federal Reserve.
While the dispute between Russia and the US over the conflict in Syria is likely to overshadow the two-day summit starting Thursday in the Russian city, splits between emerging markets and the US over its winding down of stimulus and the slowing growth of India and other four BRICS countries are expected to remain in focus.
Brazil, India, Russia, China and South Africa--grouped in the informal BRICS bloc seen as an alternative economic powerhouse--all go into the meeting experiencing slowing growth, embattled currencies and huge capital outflows.
The Indian rupee has lost one-fifth of its value against the US dollar this year following major capital outflows triggered mainly due to the moves by the Fed Reserve.
India is also suffering a decade-low growth and GDP rose just 4.4 per cent in the first quarter this fiscal, the weakest performance since 2009.
There has been deep concern in BRICS bloc over the plans to wind down the programme of quantitative easing(QE) which helped their economies expand fast in the last few years after it was launched in the midst of the financial crisis in 2008.
Prime Minister Singh, who said in the Rajya Sabha last week that he commands certain respect in the councils of the G20 in the face of the BJP attack over the economic situation in the country, will deliberate with fellow G20 leaders on how best the reduction of US stimulus cane be handled without causing undue damage.
Singh had said he would urge the G20 to formulate a coordinated plan to ensure that the winding down of the cheap money policy in the US, under which the Fed buys bonds worth 85 billion USD every month, doesn't cause massive disruption in the economies of the developing nations.
Singh, who has attended all the previous G20 summits since the first meet in Washington in 2008, is due to return home on Saturday.
For India, officials said the topmost priority would be to focus on issues of growth and financing investment to protect its economy from the spillover effects of the QE.
According to some analysts, Syria is a very divisive issue but the whole QE programme is probably even more divisive.
Besides market volatily, tax evasion, an action plan to boost jobs and growth while re-balancing global demand and debt will also be on the agenda of the leaders of the powerful and developing economies under the Russian Presidency.
The G20 acounts for 90 percent of the global economy, 75 percent of global trade and two-third of the world population. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Indonesia, India, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the UK, the US and European Union.
India's concern over the rout of the rupee is to some extent reflected by its efforts to seek support from other emerging economies for coordinated intervention in offshore foreign exchange markets.
On the sidelines of the St. Petersburg summit, the BRICS leaders are expected to work for a consensus on creating a USD 100 billion currency reserve fund to help ease short-term liquidity pressure and safeguard financial stability of major emerging economies.
The BRICS bloc is also reported to have agreed on the capital structure for a proposed development bank that aims to reduce their reliance on Western financial institutions. The bank is likely to have 50 billion USD as initial capital.
Planning Commission Deputy Chairman Montek Singh Ahluwalia, however, said an announcement by BRICS on the bank is unlikely at the summit.
He said the St. Petersburg Action Plan is expected to commit the G20 countries to a range of policy measures and structural reforms for a strong, sustainable and balanced growth and also address key risks to the global economy in the near term.
Ahluwalia, who will be India's 'sherpa' at the G20 summit, said currency volatility will also form important part of the deliberations.