Montek Singh Ahluwalia at the media briefing on G20 Summit 2013 in New Delhi on Saturday. (PTI)
New Delhi, Aug. 31: India will coordinate with other emerging economies to discuss their common currency woes at the G20 summit in St Petersburg next week, Planning Commission deputy chairman Montek Singh Ahluwalia said today.
Prime Minister Manmohan Singh will attend the summit, which comes at a time fluctuations in the rupee’s value have triggered concerns about the stability of the Indian economy.
The Centre has blamed the US Federal Reserve’s decision to taper its quantitative easing programme as a key contributor to the rupee’s fluctuating fortunes that have seen it sink to its lowest ever value against the dollar this past week. The quantitative easing programme led to a flow of money from America to emerging markets like India, Brazil and South Africa.
The Brazilian real, Indonesian rupiah and the South African rand too have suffered a battering in currency markets over the past few weeks.
The BRIC nations — Brazil, Russia, India and China — have been worried about massive capital outflows from their economies after the sharp appreciation in the value of the dollar since the US Federal Reserve’s May 22 announcement that it would consider tapering its quantitative easing sometime later this year.
Most expect the “tapering” to be announced sometime in September. The Federal Open Market Committee — the policymaking body of the Fed — is due to meet on September 17 and 18.
India and Brazil have already tightened liquidity in response to the sharp fall in the value of the rupee and the Brazilian real. The rupee has fallen 20 per cent since May 22 against the US dollar.
The BRICS nations, who include South Africa, have started working on the creation of a $100 billion reserve fund and a joint development bank. But both will take some time to set up and there is a great deal of scepticism about whether the reserve fund will provide an adequate cushion against the anticipated tsunami of dollar outflows. The reserve pool is expected to be launched at a BRICS summit in Brazil next year.
On Friday, Prime Minister Singh had told the Rajya Sabha he would urge the G20 to formulate a coordinated plan to ensure that the winding down of the cheap money policy in the US, under which the Fed buys bonds worth $85 billion every month, doesn’t cause massive disruption in the economies of the developing nations.
“I command certain respect in the councils of the G20,” Singh had asserted.
It is not known whether the G20 will agree to such coordinated action. But when the global financial crisis rocked the rich nations including the US in 2008, the G20 had decided, at the London summit in 2009, on coordinated monetary policy action.