Onboard Air India One, Nov 14: To help tide over the fallout of the global financial crisis, Finance Minister P Chidambaram on Friday, Nov 14 sought greater developmental assistance from the World Bank for India and transfer of larger resources to developing countries from the Multilateral Institutions or working out a new global ad-hoc mechanism for the purpose.
''The World Bank can step up lending to India from the present level of three billion dollars a year for Central and State projects and programmes,'' Mr Chidambaram told a news conference. The Finance Minister is part of the team led by Prime Minister Manmohan Singh en route to Washington to participate in the G-20 Summit there.
The theme of the Summit is ''Financial Markets and World Economy'', where the discussions are expected to centre on the deepening global financial crisis which has shattered economies every where.
Mr Chidambaram's remarks relating to India seeking larger World Bank assistance assumes significance as the country no longer is dependent in any great measure on external assistance.
It is after several years now that India again is seeking larger International Bank for Reconstruction and Development (IBRD) and International Development Agency (IDA) -- the soft lending window of the Bank -- assistance.
Assistance from the World Bank, including for infrastructure development could spur growth, employment, incomes and consequentially demand. Part of the problem has arisen from global financial crisis and some from the long spell of inflation.
Mr Chidambaram said a new order on ''global oversight'' needs to emerge and this can happen through greater inclusivity of the international financial system. ''A more inclusive system can provide better surveillance and serve as an early warning system.'' ''In many ways the G-7 is too narrow and too small,'' he said.
He said only a handful of economies are driving global growth, India and China being two such countries, and added that there were other economies which have the potential to drive world growth and they need to be enabled to do so.
''It is very important that the few countries that are able to drive economic growth and other countries which are put on the bandwagon of development, should not suffer in the period during which we grapple with the world crisis. Resources must be made available to developing countries, including India, so that they can continue to grow,'' he said.
The Finance Minister said India does not need an IMF programme now. Money from the IMF can only be if you accept an IMG programme. (The IMF gives money only for adjustment of Balance of Payments problems). However, Mr Chidambaram said what was needed was more resources for development, for which the best bet would be the World Bank.
Mr Chidambaram was answering a question as to whether India could get resources from the IMF and World Bank.
The Finance Minister said larger resources need to be transferred to poorer countries, where developmental prospects have been hit by the global turmoil. This could be done through the existing multilateral institutions, Or else, an ad hoc arrangement can be worked out for passing on the resources to the developing countries.
The answer will depend upon where the resources are to be found.
Mr Chidambaram said the focus of the Indian delegation at the Summit would be on three issues. These have been spelt out by the Prime Minister, he said.
They are (a) greater inclusivity in the international financial system; (b) ensuring that growth prospects of developing countries are not affected and (c) the need to avoid protectionist tendencies which are rearing their ugly head.
''This is not a time to adopt protectionist policies,'' he quipped.
On the other hand, Mr Chidambaram said the need is for greater flow of goods and services and larger capital flows among countries.
Mr Chidambaram admitted that growth and development of the Indian economy has been hit, though indirectly, as a result of the global financial crisis. The impact has largely been by way of lower growth, exports and currency flows.
''But we are confident that given the underlying strengths of Indian economy, we can weather the crisis and still return a decent growth rate in 2008-09. Even the IMF in its last week assessment places India's growth rate in the current fiscal at 7.8 per cent.'' He said the growth projections for the economy vary between 7 to 7.8 per cent. In this context, he said, the Prime Minister's Economic Advisory Council has projected a growth rate of 7.7 per cent for this fiscal and the RBI at 7.5 per cent.
The Finance Minister said, in Washington the issue of effective surveillance mechanism would be talked out. If such a system had been in place, it would have identified the huge risks that were being taken by some international financial entities.
In the absence of this surveillance mechanism or the oversight mechanism, these financial entities, some of which have collapsed, took unacceptable risks. This is what led to the crisis in the United States, which is the centre of the world crisis now.
There was thus need for adopting global prudential norms and convergence of accounting standards. He said this is what was highlighted at the G-20 Finance Ministers met at Sao Paulo in Brazil, from where he has just returned.
The global prudential norms financial institutions, especially those with global footprints, would relate to issues like risk assessment and risk weight age.
Mr Chidambaram, however, did not think that a global regulator was the answer to these problems nor a feasible option. ''While there need to have global standards, regulation would have to be national. That is what I think is going to happen,'' he said. In reply to a question, Mr Chidambaram said he did not think that inventing another Breton Woods type institution would be a practical answer. What was need was improving global governance and global oversight of these institutions.
In reply to another question, Mr Chidambaram said if the world community were to agree to enhance the capital of Breton Woods Institutions, India would not be found wanting.
Mr Chidambaram said the IMF has done one set of reforms, under which India got a higher voting right. ''Whether IMF is ready for another set of reform of voting rights, I don't know. I doubt it. But surely the IMF must begin to discuss within itself governance reforms.'' Asked whether electoral politics would determine the response of the government to the global crisis and its impact on India, Mr Chidambaram said the resolution of the crisis will take one to a point well beyond the elections. Thus it would not adopt an ''election constructive'' point of view, but medium to a long-term point of view.
''I believe the US also will take that view. After all, President Bush and President-elect Obama are reported to have talked about these issues at great length just two days ago.
Obama inputs will be there in whatever President Bush presents.
So we will have to take a view that takes us well beyond these election dates. That is the stance I think India will adopt,'' he said.