India on Friday led calls by world’s major emerging economies against attempts by the developed countries to push through indirect forms of “protectionism” in the name of fighting recession.
Finance Minister Pranab Mukherjee warned that “creeping protectionism” on the pretext of fiscal reforms threatened economy recovery just as the world was starting to emerge from the world’s worst depression since the 1930s.
“In the name of reforms, protectionism should not be allowed to creep in,” he said speaking here after talks with his counterparts from China, Russia and Brazil ahead of a crucial meeting of G20 Finance Ministers on Saturday.
A joint communiqué issued after the talks said that protectionism remained a “real threat to the global economy” and should be avoided “both in direct and indirect forms.”
“Ongoing regulatory reforms in the financial sector should not impede cross-border capital flow and investments. Failure to do so would risk compromising the expected recovery of the world economy,” it said.
The four “BRIC” countries also called for urgent action to reform international financial institutions, especially the World Bank and the International Monetary Fund, to reflect what Mr. Mukherjee described as “ground realities” of the new emerging world order. They said the current “quotas” and voting powers were not only “unfair” but also undermined the “legitimacy” of these institutions.
“We propose the setting of a target of the order of 7 per cent in the IMF and 6 per cent in the World Bank Group so as to reach an equitable distribution of voting power between advanced and developing countries,” they said.
Reviewing the general world economic situation, the “Bric” Finance Ministers said that while the crisis had started to ease it was “too early” to declare that it was over.
“The global economy still faces great uncertainty and significant risks remain to economic and financial stability. A sustainable recovery required a more solid basis,” they said.
Mr. Mukherjee said there was broad consensus among “Bric” countries on key issues that would be discussed at the G20 summit in Pittsburgh, USA, later this month.
At their meeting on Saturday, the G20 Finance Ministers are expected to outline a commitment to boosting the global economy amid differences over the pace of spending.
