Leaders Grapple with Ways to Boost Growth at G20 Meet
BIGGER PICTURE FM Jaitley says time is ripe for a re-evaluation of fiscal policy space
Washington: Financial leaders from the Group of 20 major economies scrambled on Friday for a way to keep global growth from stalling amid concerns about a drop-offin international trade and the waning effectiveness of loose monetary policy.
The G20 gathering, the highlight of the InternationalMonetary Fund and World Bank spring meetings in Washington, came amid growing pressure on richer nations to boost infrastructure spending, deregulate industries and spur employment.
Earlier this week the IMF cut its 2016 growth forecast forthe world economy, the fourth such move in less than a year. In a statement to the G20 on Thursday night, Finance Minister Arun Jaitley said governments could not continuerelying on central banks to take the lead in spurring growth andshould consider boosting spending.
“We feel that the efficacy of monetary policy instrumentshas reached its limits and that its pass-through has not beenseamless,” Jaitley said. “The time is ripe for a re-evaluationof the fiscal policy space, with a greater focus placed on public investment.” Although India is one of the brightest stars of the worldeconomy, with the IMF predicting 7.5% growth this year,Jaitley warned that the global recovery was fragile and couldeasily be derailed by weak demand, tighter financial markets,softening trade and volatile capital flows. “We, therefore, need to articulate an effective and tangiblepolicy response to revive the trade engine of the glob- aleconomy. Countries must avoid trade protectionist measures, andrefrain from competitive devaluations,” he said.
But Jaitley's currency views appeared at odds with those ofJapanese officials, who expressed concerns about increases inthe value of the yen, which recently hit a 17-month high againstthe dollar.
Japanese Finance Minister Taro Aso told reporters late onThursday that he stressed those concerns in a meeting with U.S.Treasury Secretary Jack Lew, a sign that currency issues wouldbe high on the list of the G20's priorities. “I told (Lew) that excessive volatility and disorderlycur- rency moves would have a negative impact on the economy. Ialso expressed deep concern over recent one-sided moves in thecurrency market,” Aso said. Bank of Japan Governor Haruhiko Kuroda also described theyen's ascent so far this year as “excessive,” the first time hehad referred to the currency move in such a way. A U. Treasury spokeswoman said that Lew, in a meeting onThursday with Chinese Finance Minister Lou Jiwei, emphasized theneed for China to transition to a market-determined exchangerate and “to refrain from competitive currency devaluations.” China's economic slowdown has slashed demand for commodities worldwide.
Union Finance Minister Arun Jaitley and RBI Governor Raghuram Rajan with US Federal Reserve Chair Janet Yellen and US Secretary of Treasury Jacob J Lew during a bilateral meet in Washington DC on Thursday. -PTI