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With the wobbly rupee in mind, Prime Minister Manmohan Singh will prod US President Barack Obama to go for an orderly exit from the monetary stimulus programme, instead of a sudden withdrawal, at the G-20 meeting at St Petersburg in Russia to be held on Thursday and Friday. India will also make it clear that the country gives national treatment to foreign investors, but not special consideration and as such these firms will have to pay taxes like their domestic peers.
Before leaving for the Russian city to take part in the two-day G-20 Leadership Summit, Singh said on Wednesday: “I will emphasise in St Petersburg the need for orderly exit from the unconventional monetary policies being pursued by the developed world for the last few years so as to avoid damaging the growth prospects of the developing world.”
Ever since US Federal Reserve chairman Ben Bernanke hinted at tapering of the stimulus programme, known as quantitative easing, India’s capital markets have been witnessing sharp fluctuations and the rupee has been depreciating against the dollar. Ditto with other developing countries.
“India has emphasised there has to be a predictability about the withdrawal as it has a spill-over impact on the emerging markets,” Economic Affairs Secretary Arvind Mayaram said.
Asked whether India would take steps to protect its interests, he said the situation did not warrant any drastic measures, but G20 should make a strong statement on impact of tapering on emerging economies.
Ahead of the summit, even China, which had less impact on its currency compared to other emerging countries, has asked the US to consider the spill-over effect of its monetary policy, especially the “opportunity and rhythm of its exit from the ultra-loose monetary policy”.
On tax issues, India will also emphasise on having new standards which are developed through consensus to keep integration across borders and ensure countries do not lose out tax that is due to them.
“All we are saying is pay your taxes. We give national treatment to foreign investors, not special treatment. If our own companies are paying taxes they should also pay,” Mayaram said.
The statement came even as India offered conciliation to Vodafone for a Rs 11,000 crore tax row. The offer is yet to be accepted by Vodafone.
The Prime Minister said he would emphasise that G20 countries should ensure primacy of development dimension in its deliberations, focus on job creation, and promote investment to stimulate global growth and create potential in the developing countries to sustain high growth in the medium-term.
“There is also an urgent need to reform institutions of global political and economic governance,” Singh said in a statement. India seeks quota reforms in the International Monetary Fund and the World Bank. The statement also assumes importance as tension over Syria accelerated on Tuesday following fears of a missile attack on the country.
The US, France, and Germany are backing action against Syria for its alleged use of chemical weapons on civilians. Russia and China, which have veto power in the UN Security Council, are not in favour of it. The fluid situation has also led to a rise in crude oil prices.
In a bid to sell the India growth story abroad, the Prime Minister said, “The Summit comes at a time when we in India have introduced several reform measures and taken steps to strengthen macro-economic stability, stabilise the rupee and create a more investor-friendly environment.”
At the Summit, the discussions will take place on four major areas—growth and the global economy, growth and inclusive development, investing in growth in job creation, and growth in trade.
The Prime Minister said a stable and supportive external economic environment is also required to revive economic growth. “The G 20 Summit, therefore, is an important forum to seek an international climate that is beneficial for all countries,” said Singh.
External economic woes, particularly in advanced nations, have contributed to India’s economic growth falling below the 2008-09 level of 6.7 per cent in 2011-12 and 2012-13. The prospect of the growth rising to 2008-09 level looks dim after India’s GDP grew by over four-year low of 4.4 per cent in the first quarter of FY14.
On infrastructure development and investment, India is emphasising on development of capital markets, especially domestic markets, and enhancing resource base of multilateral agencies to provide capital to developing countries.
Mayaram said,"There is a concern with regard to lack of consensus on areas on which we have been laying emphasis such as infrastructure investment for providing impulses for growth in the global economy.”
On trade, a major concern of India is the effort by some of the emerging countries to roll-back the trade related agreements that have been breached, especially with regard to movement of labour for providing services.
The Prime Minister will also hold meetings with his BRICS (Brazil, Russia, India, China, and South Africa) peers on the sidelines of the St Petersburg summit. The BRICS meeting will be held on September 5. BRICS may reach consensus on creating a $100-billion currency reserve fund to meet the short-term financing needs of these nations.
G-20 is a representative body of the rich nations and emerging market economies.
