India will pitch for a common prudential and regulatory standards for all financial institutions in the world and a convergence of accounting standards to prevent collapse of global financial institutions at the summit of world leaders on global economic and financial crisis in Washington tomorrow.
Prime Minister Manmohan Singh will articulate India's views at the summit called by US President George W Bush which will also be attended by leaders of developed countries like France, Germany, Britain and Japan and those from the developing world like China and Brazil.
Finance Minister P Chidambaram told reporters on board the Prime Minister's special aircraft India feels there was a need for the world to move towards a new order of global investment which is possible only by greater inclusivity in the international financial system.
"In many ways the International Monetary Fund (IMF) has been unable to be an early warning system. The G-7 is too narrow and too small. An inclusive system which can serve as a global oversight and serve as an early warning system is needed," he said.
Asked if he was talking about a global regulator, Chidambaram said regulation in the present context was a function that national regulators would be loathe to give up.
"That is why regulation must be national. If we can agree upon a common prudential and regulatory standards and then ask national regulators to apply those standards, there can be some kind of a global oversight, where the national regulators are doing their job."
"I don't think regulation could be raised to a global level. That will be too ambitious and perhaps not not possible in today's context," he said adding there must be some ways by which countries would have a global oversight with commonly accepted regulatory and prudential standards overseen by national regulators.
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"These are things that are to be talked to. These are formative ideas."
Chidambaram said in retrospect it is clear that if there had been effective surveillance mechanism, it could have identified the huge risks that had been taken by some international financial institutions. In the absence of such a surveillance or oversight mechanism these financial institutions, some of which collapsed, took unacceptable risks that caused a crisis in the US, which is the epicentre of the global meltdown.
"So what we talked about in Sao Paulo (in Brazil at the meeting of the G-20 Finance Ministers) or what we will talk about in Washington and can agree upon is such a global oversight mechanism. I don't know what shape it will take. But we need to talk about it," he said.
Asked if it will be global standards and local regulation, the finance minister said "that is what I think will happen".
Referring to Prime Minister's departure statement, he said there were three points which he had dealt with -- first the need for greater inclusivity in the international financial systems and second the need to ensure that the growth prospects of the developing countries do not not suffer.
And third, avoid protectionist tendencies. "The key point is we must move towards a new order of global investment. This can become possible only by greater inclusivity in the international financial system."
He said while the world grapples with the economic crisis, the countries most affected by it find their growth prospects hampered. We must not not forget that there are only a handful of economies that are driving the world's economic growth.
Among them are China and India and a few other countries. Some others have the ability to become drivers of growth, but they are also affected by the economic crisis.
"It is very important that the few countries that can drive economic growth and other countries which have got on to the bandwagon of development should not suffer. These countries should not not be made to suffer. More resources must be made available to these countries, including India, so that they continue to grow and drive others' development.
"The crisis should not not be an excuse to go into protectionist cocoon. That will be the worst way to resolve the crisis. We must try to encourage free flow of goods and services and we must continue to enhance the flow of capital."
Excepting for increasing the free flow of goods, services and capital there is no no way in which the world will recover and get back to the growth path.
"So, that is the Prime Minister emphasises that this is not the time to adopt protectionist policies. This would require deep thought and deliberation and quick agreement among the leaders."
He said nations should agree to locate resources and agree upon the channels through which this resource would be made available and diverted to the developing countries.
These could be existing multinational institutions or we could devise an ad-hoc fund dispersing mechanism and finally the international institution, which constitute the global financial architecture, must be reformed.
Replying to a query whether non-attendance of Obama in the Washington summit would be a dampener, he said "that's for Obama to decide. I think he made a politically very correct statement when he said that the US has only one President at any given time.
About resources from IMF and World Bank, the finance minister said India did not need an IMF programme but money through the World Bank for development.
"And if you ask me to pick up an institution that I would say that if World Bank can give us more then we will happily accept that for our programmes and projects. Our requirement is for project-oriented and programme-oriented funds."
World Bank was now giving funds to the order of about USD three billion and that can be raised. It can finance more projects which have been pushed to next year and thereafter. We would be happy if World Bank was to raise its development assistance.