India at ease as G20 leaders spar

SEOUL - India Thursday sat comfortably at the high table of the G20 Summit here Thursday as leaders scrambled to bridge differences over the next steps to end the global financial crisis and move forward toward sustained economic growth.

With a robust growth and a manageable current account deficit, Prime Minister Manmohan Singh was at ease when two the sides economies with deficits or surpluses sparred over measures to be adopted ahead.

Some countries are livid over the recent US decision to pump $600 billion into the economy to prop the economy, while others are angry over China’s currency devaluation policy.

One of the solutions suggested was a cap on a country’s current account deficit - the difference between total imports of goods, services and transfers and outflows on similar accounts - at 4 percent.

India’s position, where the key official-level discussions were led by Planning Commission Deputy Chairman Montek Singh Ahluwalia, was that it had nothing to fear over its current account deficit, at 2.9 percent now.

“We have no issues,” Ahluwalia, who has burnt midnight oil here looking at the successive drafts of the final communiqu from the leaders that have been passed around for arriving at a consensus.

“I personally do not think there is any need to alter our present policy for foreign investment inflows because I think that’s not a very volatile thing. If we get more within the realm of possibility it’s excellent,” he said.

In a little difference to India, over a meal that included king crabs and brownies, the leaders dropped the idea after German Chancellor Angela Merkel opposed it, while Chinese President Hu Jintao took exception to Beijing being blamed for the yuan’s valuation.

“Fixing limits for current account surpluses or on current account deficits is neither economically justified nor it is politically appropriate. This would also be in contrast to the principles of free trade in the world which we all want,” Merkel said.

Manmohan Singh is expected to speak Friday. Indian officials said his basic points are expected to be a caution against protectionism and a proposal that can help surplus economies divert funds to poor and emerging economies towards infrastructure development.

“India has always expressed reservations against competitive currency devaluation. Our stand has always been: Don’t induce protectionism and look at the broader picture over the medium term rather than a knee-jerk reaction,” said an official.

Yes, the development agenda, which is new to G20, is also a high priority.

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