India has urged countries to oppose protectionist tendencies and work towards developing a better system of surveillance and regulation in order to face the current global economic crisis.
Addressing the UN Conference on World Financial and Economic Crisis, Minister of State for External Affairs Preneet Kaur said: "...It is particularly necessary that we should not permit protectionist tendencies, not just protectionism of trade in goods, but also protectionism in free flow of persons, protectionism in financial services as well as imposition of non-tariff barriers, to succeed in our response measures."
She also cautioned the world body that the measures to address the global crisis should not create other problems in the future.
"We need to address regulatory and systemic flaws. There should be better and transparent regulatory mechanism for capital markets, including the non-banking sector, redefine capital requirements to avoid pro-cyclicality, and avoid build-up of excessive leverage," Kaur said in her address at the UN General Assembly.
Arguing that there should be a better system of surveillance and regulation, she said surveillance should be even-handed with greater focus on the systemically important institutions.
Developing countries have limited policy space. They must continue to have this space to determine measures that best fit their specific requirements, she articulated.
Referring to the current global economic crisis, Kaur said of immediate importance is the revival of the world economy. Counter-cyclical stimulus measures are, therefore, critical, she said.
"There must be a substantial increase in lending by international financial institutions (IFIs) and the Multilateral Development Banks (MDBs) with increased limits for developing countries and emerging economies. The capacities of the MDBs to do so, including adequacy of their capital, requires to be urgently addressed," Kaur said.
The Minister said there is a particular imperative to make good the decline that has taken place in capital flows to developing countries by increased multilateral and bilateral flows.
Increased resources for international financial institutions are very relevant but conditionality associated with the use of these resources need to be softened, otherwise their deployment will be counter-productive in the countries affected, she said.
