Jaitley: Steps taken by US Fed pose challenge

Asks international community to make unbiased assessment

New Delhi: Union finance minister Arun Jaitley told IMF’s steering committee on Sunday that the US Federal Reserve’s steps towards restoring normal monetary conditions and the global slowdown in investments and employment posed policy challenges. Mr Jaitley said that the Federal Reserve’s steps aimed at increasing interest rates posed risks to emerging markets and developing economies.

Union finance minister Arun Jaitley on Sunday told IMF’s steering committee that US Federal Reserve’s steps towards restoring normal monetary conditions, global slowdown in investments and employment, posed policy challenges.

Mr Jaitley said that US Federal Reserve’s steps towards increasing interest rates posed risks to emerging markets (EMs) and developing economies.

He urged the international community to make a fair and unbiased assessment of the macro-prudential and capital flow management measures available to and used by countries to manage short-term capital volatility, according to a statement issued by the finance ministry here.

“Besides, finding ways to revive investment is critical to sustaining global growth and collective and co-ordinated action needed to be explored in this regard,” said Mr Jaitley at the International Monetary and Finance Committee (IMFC) Restricted Breakfast session in Washington D.C.

Mr Jaitley said that the most important priority of the government was to find ways to provide employment to the 12 million young people entering the workforce annually.

The minister said that the short-term adverse impact of both GST and demonetisation measures are mostly overcome and the recent data in manufacturing sector indicate that India’s growth story is soon getting back to its normal course.

He claimed that there was a substantial reduction in both high value cash notes as well as cash as such in the economy thanks to demonetisation.

India also called for urgent revision of the quota of International Monetary Fund in favour of dynamic emerging market so as to reflect the ground realties of the world.

Mr Jaitley expressed his feelings at the apparent lack of progress in converging to a consensus on the review of quotas. To achieve such an outcome, he urged the Fund — the board, the management and the staff — to diligently explore the space offered by the three objectives laid out in the IMFC Communiqué in October 2016: reduce misalignments, shift quota shares in favour of dynamic emerging economies and protect the shares of low income countries and small states.

Mr Jaitley also said that he never talked about any stimulus package for boosting economy.

The media has spoken about it and “you should ask” them on it, he said when asked whether the government was considering a massive fiscal stimulus package. The remarks came amidst an increased speculation over a possible fiscal stimulus.