India seeks consensus over currency imbalances

WASHINGTON - Indian Finance Minister Pranab Mukherjee has called upon world leaders to resolve global tensions over imbalances in the global currency markets through consensus-building negotiations rather than confrontation.

“We must try to engage the countries into negotiations and try to build consensus so the matter could be resolved,” he said in response to questions after a speech at the Woodrow Wilson Centre here Thursday.

“It cannot be resolved through confrontation, but through consensus it could be possible,” he said ahead of the Annual International Monetary Fund (IMF)-World Bank meetings, where imbalances in the global foreign-exchange market are likely to be a hot topic.

“For sustained growth and stability, global structural imbalances have to be addressed sooner rather than later,” he said. “The huge build-up of reserves in some countries and deficits elsewhere, massive trade surpluses in some and deep trade deficits in others, are not sustainable.”

Earlier, IMF Managing Director Dominique Strauss-Kahn also said the global financial institution needs to launch a “systemic stability initiative” to build international consensus on global currency policies.

Mukherjee also hoped for more cooperation between global leaders in reforming financial regulation, noting excessive risk-taking, as well as institutions that are “too big to fail,” are harmful for the system. He also called for an early conclusion to the stalled Doha Round of world trade talks.

Downplaying the effects that sharp foreign institutional investment and foreign direct investment into India have had on the rupee and the economy, Mukherjee said. “The inflow of FII and FDI has not distorted market sentiments” and so therefore there is no need for intervention,.

It is the Reserve Bank of India’s duty to monitor the situation and “when it is necessary to intervene appropriately,” “But … I do not consider that situation has arisen in the Indian economy today.”

Mukherjee said high inflation continues to be of concern but that he is “more concerned with inflationary pressures on food items.”

However, the finance minister was hopeful that steps taken to open up import of food items in short supply, as well as, recent interest rate increases by the Reserve Bank of India would bring inflation down to 6 percent by the end of the fiscal year.

Mukherjee also expressed the hope India will become a permanent member of the United Nation’s Security Council “when the expansion of the Security Council along with the general reforms of the UN take place.”

(Arun Kumar can be contacted at arun.kumar@ians.in)