Washington: Finance Minister Arun Jaitley has said that it was time to sharpen the focus on public investment and work towards reviving global trade.
"We feel that the efficacy of monetary policy instruments has reached its limits and that its pass-through has not been seamless. The time is ripe for a re-evaluation of the fiscal policy space, with a greater focus placed on public investment," the minister said.
He was speaking at the G20 Finance Ministers and Central Bank GovernorsÂ’ meeting on "Global Economy and Framework for Strong, Sustainable and Balanced Growth".
“Our individual and collective efforts to restore growth back to pre-crisis levels have met with limited success. The distribution of risks to the global economic outlook continues to remain tilted to the downside and global growth continues to disappoint,” the minister said.
According to the minister, the key downside risks which could derail the fragile global recovery were -- weak demand, tighter financial markets, softening trade and volatile capital flows.
He, however, said: “India has consistently recorded the highest growth figures in the world for the last three quarters. We expect this momentum to continue, assuming a normal monsoon.”
The minister also said that in the current year, the G-20 growth strategy would focus on identifying reforms which had the potential to act both as a short-term stimulus and have a positive impact on growth in the long run. The point of difference, however, is regarding the approach to be adopted for formulating the Structural Reform Indicators.
"While some of the members are of the view that a top down approach has to be formulated, India, along with other members, believes that we need a country-led process," the minister said.
A challenge to keep in mind, Jaitley said, was the importance of ensuring that a balance was maintained between addressing domestic priorities of member countries with the international role that each G20 member had to play.
"Therefore, we should also consider undertaking an analysis of the possible negative spillovers of policy actions. At the moment, the recent use of negative interest rate policies has been identified as an area of concern by members," the minister said.
Saying that India had always emphasised the need for globally co-ordinated policy decisions as remedy to the global economic turbulence, Jaitley said: “We also appreciate the efforts being undertaken by the Chinese government in rebalancing their economy and in particular in reducing excess capacity in several sectors. This would create necessary space for manufacturing activity in other countries.”
Declines in both imports and exports were recorded in all G20 economies in 2015. “We, therefore, need to articulate an effective and tangible policy response to revive the trade engine of the global economy. Countries must avoid trade protectionist measures, and refrain from competitive devaluations.”
The minister said, “We should also take note of the asymmetry in the global financial safety net. While advanced economies have access to swap lines in order to smooth currency shocks, emerging market economies, which are highly dependent on reserve currencies both for borrowing and for international transactions, do not have recourse to these.”
Global and regional financial safety net and oversight needed to be augmented, including through new financing mechanisms, the minister said.
