India wants consensus and not confrontation to resolve the standoff over under-valuation of Chinese Yuan against the U.S. Dollar - a matter likely to come up for discussion at the meeting of finance ministers and central bank governors of the G-20, opening here today.
“I do not believe in confrontation. I believe in dialogue. If the issues are to be resolved, it should be through the dialogue amongst the parties concerned,” Indian Finance Minister Pranab Mukherjee said ahead of the two-day meeting of a club of developed and emerging nations.
“India’s stand”, he added, “will depend on how the issue is raised at the meeting. It will be left for the leaders to decide (at the G-20 summit later in November). We will get our views reflected in the communique to be issued at the end of the two-day conference.”
While the U.S. wants China to appreciate its currency yuan in line with market forces, Chinese government is resisting the move as it would hurt the country’s exports.
The resultant currency war has prompted some other countries, especially Japan, to weaken their currencies by pumping in more funds into the market.
The issue is likely to be deliberated upon by finance ministers of G-20 countries, which besides India include US, China, Brazil, Japan, United Kingdom and the European nation.
Deliberations will be followed up by the G-20 summit to be held in Seoul.
Besides the currency war, Mr. Mukherjee said, the issue of slow economic recovery will also come up for discussion “as the world economy is still not out of the woods.”
Although the three trillion dollar in stimulus has helped the countries and the fear of double dip recession is not there, “but at the same time, crisis is not yet over,” he added.
As the process of recovery has been slow in countries in north America and there are uncertainties in Europe, the world leaders will have to consider ways and means to overcome this present situation and find the path forward, the Minister said.
“The forecast of IMF has been revised now. That means that except France, Germany and couple of other countries the process of recovery is slow,” he said, adding that the efforts would have to be made to ensure that the global economic recovery was sustained.
He further said that it might not be possible to sustain growth through substantial fiscal expansion as it would become difficult to sustain large the sovereign debts.
“The sovereign debt burden, which caused the crisis in Euro zone, Greece, Spain and Portugal, if repeated in the larger context then it (growth) would (become) extremely difficult”, he said, adding the issues like withdrawal of stimulus were needed to be carefully deliberated.
Replying to questions on the International Monetary Fund (IMF) quota reforms, Mukherjee said that although the reforms were agreed in 2008, several countries were yet to ratify increased voting power for the emerging nations.
As many as 112 countries have to ratify the quota reforms, though only 81-82 countries have done it so far.
The reforms that seek to give additional 5 per cent voting power to emerging nations will not come into effect unless the requisite number of countries ratify them.