Finance Minister P Chidambaram has asked the US and Europe to “set their house in order” to reverse the impact of the financial crisis on economies worldwide and help capital flow back to developing nations.
“If they (US and Europe) set their house in order, surely capital will flow back to developing countries...Credit will flow back and things will be much better”, he said in an interview to a private television channel ahead of the G-20 Summit here.
“What India wants is that the country where this crisis originated...the US and some countries in Europe must do all that is necessary to reverse the impact of the crisis of the global economy, especially the economies of the developing countries”.
Asked about ways to encourage capital flows back to developing countries, Chidambaram said, “We do not have to do anything more. What we have had in place was enough to attract capital in the last three years. What is happening now is because of what is happening in their countries.”
Chidambaram said unfreezing of credit in the west was necessary to ensure flow of funds to developing countries. “If they set their house in order, capital will find its way to attractive destinations where returns are adequate and attractive ... India is such a destination,” he said.
On his messsage to US Treasury Secretary Henry Paulson, Chidambaram said, “I will tell him what we have been telling him at the IMF for the last 4-5 years ...get your imbalances right. You cannot live with such huge imbalances in your economy.”
The US government, he added, needed to encourage its people to save more, in addition to improving its financial institutions.
“Regulate your financial institutions, especially systemically important institutions, which have a global footprint ... Regulate them better,” he said.
The Indian Finance Minister also asked the US government to put in place capital adequacy norms and risk aseessment procedures to improve the health of the financial system.
He said things would improve “if they do what sound and sensible bankers do, and I am sure they have the capacity to do it...They have done in the past. They seem to have relaxed their visuals in the past 10-15 years.”
Prime Minister Manmohan Singh is leading the Indian delegation to the G-20. The delegation includes, apart from Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia.
