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

The Economic Times - - Economy -

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.

CUR­RENCY DE­BATE

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

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