G20 nations should help bridge infrastructure gap: Manmohan Singh

SEOUL - Indian Prime Minister Manmohan Singh Friday said the global economy now required a new rebalance in which funds from surplus countries must be pumped into the infrastructure development of poor and emerging economies to avoid destabilisation.

“Problems facing us in rebalancing the global economy is well known,” the prime minister told a plenary session of the G20 Summit here, while making a point that deficits of some countries need to be offset by investment elsewhere by surplus countries so as not to cause a contraction of the global economy.

“Even as we try to avoid destabilizing surge of volatile capital flows to developing countries, there is a strong case for supporting long term flows to these countries to stimulus investment, especially in infrastructure,” he said.

His reference was to the huge deficits that countries like the United States are accumulating, which needs to be reduced, and the large surpluses in some others like China that has to be contracted so as not to impact on the global financial system.

The prime minister said economic performance of emerging markets including several in sub-Saharan Africa had improved vastly in recent years, as was the case with emerging market countries like India that can attract more investment.

“These countries are now in a position to absorb capital flows aimed at an expansion in investment, which would inject mush needed demand into the global economy,” he said.

Manmohan Singh, whose views on global economic and other international issues have been appreciated at the previous four G20 Summits in Washington, London, Pittsburgh and Toronto, said even as there were differences among the leaders, there was agreement on four areas:

- Competitive devaluation must be avoided at all cost resurgence of protectionism must be resisted;

- Advanced deficit countries must follow fiscal consolidation policies;

- Structural reforms must increase efficiency and competitiveness in deficit countries and expand internal demand in surplus nations;

- Countries must be flexible with exchange rates without destabilizing capital flows.

The prime minister congratulated his host, South Korean President Lee Myung-bak, for his initiative in seeking to bring about a consensus among the leaders, as also for putting the development agenda on the G20 table for the first time.

The G20, originally formed at the level of finance ministers and central bank governors in 1999 after the East Asian economic crisis, has assumed significance after it was elevated to a summit-level forum in 2008 after the ongoing global financial crisis.

Besides India, South Korea, the G20 comprises Brazil, US and Canada, Argentina, Australia, China, France, Germany, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, Turkey, Britain, and the European Union.

(Arvind Padmanabhan can be contacted at arvind.p@ians.in)