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Money missiles in time of war drums

Manmohan Singh arrives at Pulkovo airport in St Petersburg. (PTI)

St Petersburg, Sept. 4: Here we are for a high-table summit on the chilly sidelines of Syria, nosed into a toxic cumulus of war dragged to economic summitry. Up by the Baltic to mend global purse holes, but riveted on the pirouette of hostilities 3000 miles south in West Asia that could blow those holes bigger.

Chance would be a fine thing if the G20 stage, set up at the offshore palace isle of Strelna, isn’t bleached by the eyeball-to-eyeball between host Vladimir Putin of Russia and the most powerful of his arriving guests, US President Barack Obama. A dare flames away between the two; Obama bent on a disciplinary strike on Damascus, Putin girded to prevent that happening.

There’s more that strains the two men than just the causes and consequences of the deathly spew of sarin gas in Syria. There is also the ice over a certain Mr Edward Snowden, spy turned whistleblower, who the US wants for national security offences and who Russia has provided shelter and protection. Obama scrapped a scheduled state visit to Moscow last month, enraged over Putin’s hospitality to the American absconder; he’s come to St Petersburg only because it’s a multilateral. Never mind that poor bilateral atmospherics between the Cold War Big Two could sour it for the rest of the conference table.

Not for any lack of trying by the subalterns of the G20, though. For all the war drum decibels booming in the summit halls, there is a cacophony for corrections seeking to be heard. Prime Minister Manmohan Singh might well be lead tenor of that set. “Though there are encouraging signs of growth in industralised countries, there is also a slowdown in emerging economies which are facing the adverse impact of significant capital outflows,” Singh said setting out for the G20 this morning, “I will emphasise in St Petersburg the need for an orderly exit from the unconventional monetary policies being pursued by the developed world so as to avoid damaging the growth prospects of the developing world.”

Decoded, “unconventional monetary policies pursued by the developed world” essentially means huge capital withdrawals by the United States into its own economy and markets. So, though the Prime Minister and his government chose not to collar Washington by name, plaint and plea both addressed to the Obama administration: follow your recovery path, but don’t push us back in the process.

Prime Minister Singh referred to “several reform measures to stabilise the rupee and create an investor-friendly environment” but sought a “stable and supportive external environment” to sustain the Indian effort.

Economic affairs secretary Arvind Mayaram, who spoke to journalists en route to St Petersburg, also flagged Indian concerns over the “spillover impact” of substantive capital withdrawals by the US. “We hope to raise the issue with other nations at the summit and arrive at a consensus on matters such as enhancing the resource base for emerging economies and underlining the need for infrastructure investment to impact growth impulses,” Mayaram said.

Two areas seemed to trouble him: the likelihood of a spurt in international oil prices, and the liquidity pullout by developed nations. “We have to raise this concern strongly and I do not believe that if our voices are strong we will not be heard,” Mayaram said.

Asked whether India hadn’t itself partly to blame because of its laggardly progress on structural reforms, Mayaram countered: “I don’t believe it is correct to say structural reforms have not taken place in the recent past. I can list them, it is a long list, it is a path-breaking list of reforms.”

For a senior official headed to conference sessions where the discourse is likely to be dominated by concern, if not pessimism, Mayaram was oddly bullish of posture. “We do not require any drastic measures,” he said to a suggestion that the government might have to resort to dire-strait steps. “We can bring the situation under control.”

He flew in the face of a threatened downgrade by Standard & Poor’s, saying he had “credible numbers” to contest the ratings agency’s grim forecast: a nine per cent expansion in the sowing area has raised the prospect of a bumper crop and a one percentage point spike to GDP growth; the impact of project approvals worth $30 billion will soon begin to kick in; first quarter FDI inflows stand at $9 billion compared to $5 billion over the same period next year; the rein on fiscal deficit (4.8 per cent) and current account deficit (3.7 per cent) will be held tight. “I don’t understand what the case for downgrading us is? And where do they get this 33 per cent downgrade prospect figure?” Mayaram wondered. Then, as if to put down S&P’s own standings, he acidly added, “Unless, of course, they want to downgrade the whole world because the slowdown is global.”

Brave words from a finance man speaking on the back of a shaky rupee, plunging markets and spiralling prices. But we were 40,000 feet up in rarefied air aboard AI-1 when Mayaram proclaimed the prospects on Indian economy robust and raring for leap. Loftiness probably comes easy at such heights.