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Business – India may agree with US model on growth strategy

A K Bhattacharya

Prime Minister Manmohan Singh arrived here on Thursday to attend the G-20 Summit amidst reports that the United States has succeeded in hammering out a consensus on the need for policies that are “collectively consistent” with more sustainable and balanced trajectories for the global economy.

Indian government officials declined to comment on whether India had fallen in line with the US prescription, which was likely to be made part of the G-20 declaration at the end of the Summit that began here today.

But with China reportedly agreeing to the US view and many other developed countries including the United Kingdom endorsing it, India will have little option other than agreeing to the consensus already reached. Germany, according to these reports, is one of the members of the Group of 20 countries which has expressed reservations about making binding commitments to alter its economic policy. Germany’s ambivalence on this issue is being attributed to the fact that the country is going in for elections this weekend.

The US prescription provides for a framework for sustainable and balanced growth, without creating asset bubbles and unsustainable financial flows, which among other things contributed to the current global economic crisis. Officials involved with negotiations pointed out that such a framework for sustainable and balanced growth did not necessarily mean any commitment to be made by developing countries like India to cut their greenhouse gas emissions beyond levels already promised. India, they maintained, would continue to oppose any framework for balanced and sustainable growth that might place curbs on its economic growth plans on the ground that higher growth might lead to higher greenhouse gas emission.

Other issues on which a consensus appears to have been reached include increased quotas in the International Monetary Fund and other multilateral development banks for the emerging-market economies. Higher quotas will give the developing countries including India greater voice and representation in the decision-making bodies of such institutions, in keeping with their increased share in the global economy.

The US prescription has also got explicit endorsement from World Bank President Robert Zoellick, who has underlined the need for a five-pronged approach for an agenda to be signed and sealed at Pittsburgh. Zoellick has argued that G-20 leaders at Pittsburgh should recognise that developing countries are part of the solution to the current economic crisis, emphasise that a balanced and inclusive global economy needs multiple poles of growth, growth must be inclusive and the most vulnerable sections of society must be protected first during an economic crisis.

However, Zoellick’s suggestion on an “exit strategy” from government-sponsored stimulus measures will be opposed by developing countries, particularly India, which has stated categorically that the plan to phase out fiscal stimulus measures should be delayed till the global economy shows signs of stability and growth.

The G-20 Summit began with a reception followed by a working dinner hosted by US President Barack Obama for all heads of delegations at the Phipps Conservatory and Botanical Gardens, a steel and glass greenhouse. The opening plenary session will be held on Friday at the David L Lawrence Convention Center, which is one of the most energy-efficient and green buildings in this part of the world.

Ahead of the opening plenary session, Prime Minister Manmohan Singh will have a bilateral meeting with the newly elected Japanese prime minister, Yukio Hatoyama. Singh may also have informal meetings (referred to as pull-aside meetings in G-20 parlance) with UK Prime Minister Gordon Brown and Australian Prime Minister Kevin Rudd.

The city administration in Pittsburgh has already deployed about 3,000 security officials ahead of the G-20 Summit, fearing thousands of protesters congregating here to demand a more concrete action plan to tackle the global economic crisis. The authorities are not taking any chances with the protesters, in view of their past experience of rioting that happened at Seattle in 1999 during the trade ministers’ meeting for the Doha round of multilateral trade negotiations. The cost for providing additional security at Pittsburgh is estimated at $19 million.

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September 25, 2009 - Posted by | Uncategorized |

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