India on Friday expressed satisfaction that the final G-20 declaration took care of its key concern, stating that the central banks of the developed world have agreed to calibrate and communicate their monetary policies to the developing economies to minimise volatility in capital flows and currencies.
Briefing the Indian media after the G-20 meeting, Arvind Mayaram, Secretary, Department of Economic Affairs, said, “Now there will be some comfort that we will have an idea of the road map adopted by the central banks of the developed economies” as they withdraw the massive liquidity pumped by them globally after the 2008 financial crisis. The G-20 declaration has also accepted that there has been a spillover effect of massive monetary easing by the central banks of the developed world.
The other big comfort for India’s volatile currency market comes from Japan’s decision to enhance its forex swap arrangement with India from $15 billion to $50 billion. This will go a long way in boosting and stabilising the currency market sentiment in India. This was worked out at a meeting that Prime Minister Manmohan Singh had with Japanese Finance Minister and Deputy Prime Minister Taro Aso.
The arrangement means India can access up to $50 billion from Japan to meet any Balance of Payment (BoP) contingency whenever it needs the dollars. Effectively, with this swap and the progress made in the $100-billion BRICS currency reserve fund, India has sought to diversify its sources of contingency fund arrangement with nations other than those of the West. To that extent, India’s dependence on the IMF for the funding of BoP requirements is reduced.
The DEA Secretary, however, said India would not need the enhanced Japanese swap funds anytime in the future because “we are totally confident of funding our current account deficit this year which will be strictly kept under 3.7 per cent of GDP.”
He said the other important achievement from India’s standpoint was that it got the G-20 declaration to state that all nations would work together to ensure that multinational corporations pay taxes in the countries where their profits arise.