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April 1st, 2009

A global crisis needs global solutions: PM

Prime Minister Dr. Manmohan Singh at G-20 Summit

Satisfied with the outcome of the G-20 summit, held in London, and content that the final declaration reflected the issues raised by India, Prime Minister Manmohan Singh on April 2 said the forum could become a major global voice.

Excerpts of Dr. Singh's remarks at the official dinner hosted by British Prime Minister Gordon Brown on April 1:

"The problems facing the world economy are well known and need no elaboration. The only point to note is that the downturn is much deeper than we though when we met in Washington D.C. in November last year, and the prospects of a recovery have receded to 2010 at best. This is the worst recession in sixty years and is generating negative expectations which threaten a downward spiral if not corrected. The pain is being felt both in industrialised countries and in developing countries.

A global crisis requires global solutions. In Washington D.C. we pledged to take action to revive the world economy and also to bring about basic reform of the financial sector to reduce the likelihood of similar severe crises in future and to build institutions that can intervene more effectively if we do. We have made considerable progress in several areas, but I believe much more needs to be done.

There can be no doubt that restoration of the banking system in the industrialised countries to full functionality is precondition for successful revival of the global economy. This is primarily a task for the Governments of the individual countries concerned. It is a task that will require commitment of resources on an unprecedented scale. The IMF has estimated that the write down of toxic assets needed may be as high as $2.8 trillion in the U.S. and $1.4 trillion in Europe and Japan. A rescue effort on this scale will place a huge burden on tax payers and this has given rise to considerable public anger, which is entirely understandable. However, it has to be explained to tax payers, and also their elected representatives, that anger at the irresponsible, and even morally reprehensible behaviour on the part of managements of financial institutions, should not come in the way of efforts to resurrect the system.

Active contra-cyclical policy must be a priority item on our agenda and global markets are looking to see if we are united on this issue. We have seen a massive contraction in consumer demand in industrialised countries arising from the wealth effect of the decline in house prices and in stock market values. This is compounded by uncertainty about future employment prospects.

Most industrialised countries, and also developing countries, have responded by using monetary policy fairly aggressively to counter the downturn. They have also resorted to a fiscal stimulus to varying degress. I recognise that it is not easy to determine the level of fiscal stimulus that is appropriate for different countries in different circumstances. But we do know that expansionary policies are most effective when they are coordinated. I hope the Summit will give a clear signal that we are willing to act in a coordinated, or at least in a credible concerted manner, to ensure that the downslide is minimised.

Let me now turn to the steps needed to ensure the revival of growth in the developing countries. These countries have suffered a double shock. They have seen a collapse in world trade, with an unprecedented decline of almost 9 percent in trade volume in 2009.

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India to vote April 16 to May 13 for a new govt

India, the world's largest democracy with 714 million voters, will pick a new government over five phases between April 16 and May 13, and the result will be declared on May 16. In what is often billed as a grand festival of democracy, six million civil officials as well as police and paramilitary personnel will oversee the conduct of the election, the 15th to the 545-seat Lok Sabha since India became independent in 1947. Making the much awaited announcement, Chief Election Commissioner N. Gopalaswami said that 124 Lok Sabha constituencies would go to the polls April 16, followed by 141 on April 23, 107 on April 30, 85 on May 7 and 86 constituencies on the final day on May 13. Gopalaswami said elections to the Andhra Pradesh, Orissa and Sikkim assemblies would also take place simultaneously. State by-elections would also be held in Mizoram, Jharkhand and Karnataka (one seat each) and Nagaland (four seats).

The strength of the Indian electorate, more than the combined population of Russia and the US, has gone up by 43 million in 2004 to 714 million now, Gopalaswami said.

Meanwhile, on March 4, President Pratibha Patil approved the appointment of Navin Chawla as the next Chief Election Commissioner.

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G20 pledges $1.1 tn to usher in 'new world order'

Leaders of G-20 and Outreach Countries at the G-20 Summit

Leaders of the world's largest economies, including India, on April 2 pledged a $1.1 trillion package alongside measures for a tighter regulation of the international financial system to help bring the world out of recession. The measures were also designed to prevent future shocks.

The leaders at the G-20 summit agreed to negotiate a speedy conclusion of the Doha trade round and put some $250 billion more into trade finance which were also key demands from India.

"We have reached some big, important conclusions," British Prime Minister and the chair of the summit Mr. Gordon Brown said after the leaders concluded their talks behind closed doors at the ExCel Centre on the bank of the Thames in East London.

Out of $1.1 trillion pledged for various institutions, $250 billion will be given to the International Monetary Fund (IMF) to lend at cheaper rates to needy countriescountries in the form of special drawing rights (SDRs). The leaders agreed to another major Indian demand by deciding to sell IMF gold reserves to raise $6 billion that would go towards helping out the world's poorest countries with cheap loans over the next two to three years.

"I think a new world order is emerging and with it the foundations of a new and progressive era of international cooperation," Prime Minister Gordon declared. Mr. Brown said another $5 trillion would be spent toward a "concerted fiscal expansion" by member-countries of the G-20 that together account for nearly 85 percent of the global output and two-thirds of the population. The stimulus package will go hand-in-hand with strict regulation of the global financial system, the world leaders agreed after a protracted disagreement between the U.S. and Britain on the one side and France and Germany.

"Major failures in the financial sector and in financial regulation and supervision were fundamental causes of the crisis," said the leaders in a communique.

The leaders agreed on a new Financial Stability Board comprising all members of the G-20 that would provide an early warning system of macro-economic and financial risks. The G-20 leaders also agreed to bring an end to tax havens - jurisdictions that allow people to park their funds - as also those that have extremely loose regulation for the financial sector.


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G-20 Highlights

The following are excerpts from the declaration issued by G20 leaders on April 2 : "We have pledged to do whatever is necessary to: restore confidence, growth, and jobs; repair the financial system to restore lending; strengthen financial regulation to rebuild trust;fund and reform our international financial institutions to overcome this crisis and prevent future ones; promote global trade and investment and reject protectionism; and build an inclusive, green, and sustainable recovery. By acting together to fulfil these pledges we will bring the world economy out of recession and prevent a crisis like this from recurring in the future."

Salient Milestones

  • A new Financial Stability Board with India among the members to provide early warning of financial risks
  • Extend regulation and oversight to all financial institutions, markets and instruments, including hedge funds
  • Action against non-cooperative tax havens
  • Bring an end to banking secrecy.
  • Improve and set high-quality global accounting standards for companies
  • Extend $1.1 trillion to multilateral lending institutions to restore credit flow
  • Refrain from raising new barriers to investment or trade in goods/services
  • Ensure availability of at least $250 billion for export credit

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High Commissioner visits Glasgow

High Commissioner Mr. Shiv Shankar Mukherjee cutting ribbion

India's High Commissio ner Mr. Shiv Shankar Mukherjee visited Glasgow from March 23 to 24 to inaugurate the India Visa Application Centre (IVAC). He was accompanied by Mr. Tilak Devasher, Minister (Consular), High Commission of India, London. The High Commissioner unveiled a plaque and cut the ribbon to mark the inauguration of the Visa Centre.

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