India has asked the world's rich countries to take measures quickly to cool down volatile financial markets, while apprehending uncertainty in 2008 with turbulence spreading from its epicenter in the US to Europe.
"We urge the advanced economies to take appropriate measures to restore full normalcy in financial markets," Finance Minister P Chidambaram said at a joint meeting of the World Bank and International Monetary Fund in Washington.
He said downside risks have increased due to spreading of turbulence in financial markets. The risks continue to unfold and the prospects for 2008 are somewhat uncertain.
Last week, Chidambaram had said that developed countries had injected a considerable amount of liquidity into their markets to overcome their own problems, part of which had spilled over into India and some other countries.
Referring to the spurt in global food and crude oil prices, he said global imbalances, supply-side inflationary pressures and protectionism continue to pose risks to growth.
Chidambaram's plea found an echo in IMF Managing Director Rodrigo Rato's warning that an "earthquake" in credit markets sparked by rising defaults in the US mortgage market could tip the global economy into recession, ending a five-year boom. Pointing out that China and India continue to remain the engines of global growth he said the world GDP growth is projected to cross 5 per cent this year.
But supply-side inflationary pressures and protectionism continue to pose risks to growth, he said.
Chidambaram said supply side risks called for greater vigil on the part of all countries and a state of readiness to respond with both short and medium term measures. Appreciating the changing role of the World Bank as an aid institution and a knowledge bank, he said the bank should, however, be mindful of concerns of developing countries.
But he expressed India's commitment to bring down carbon emission levels. Referring to Singapore resolution on quota and voice reform in the IMF, he sought more share for developing countries in the two multilateral funding institutions.
A meaningful transfer of shares from developed to developing countries was possible only if GDP (gross domestic product) was computed on PPP (purchasing power parity) terms, he said. Urging advanced nations to take steps before the next meeting of Bank in April 2008, he said, "we are willing to consider a blended GDP as a measure of compromise, so long as the outcome meets our basic objectives".
"Emerging markets as a whole are growing twice as fast as industrial economies, and account for a rising share of global trade and investment," he said, noting that "China, India and Russia presently account for half of global growth". The coordinating role of International Development Association can be more effective with increased IDA funding, he said, adding the donor countries should honour their commitments for poverty free world.
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