"We urge the advanced economies to take appropriate measures to restore full normalcy in financial markets," finance minister P Chidambaram said at the joint meeting of the World Bank and the International Monetary Fund.

Chidambaram last week said that while the developed countries had injected considerable amount of liquidity into their markets, part of the liquidity had spilled over into India and some other countries.

He said the injection of funds have increased downside risks and the turbulance is spreading across financial markets. The prospects for 2008 are somewhat uncertain as risks continue to unfold, he added.

He said global imbalances, supply-side inflationary pressures like oil prices and protectionism continue to pose risks to growth.

While China and India continue to remain the engines of global growth and the world GDP growth is projected to cross 5 per cent this year, he said, supply-side inflationary pressures and protectionism continue to pose risks to growth.

IMF managing director Rodrigo Rato also warned that an ''earthquake'' in credit markets sparked by rising defaults in the US mortgage market could tip the global economy into recession.

Rato, who steps down at the end of October, said the full scale of the financial turmoil, which was sparked by rising defaults in the US mortgage market, could not yet be gauged, but that it was large enough to raise a troubling question.
"The central question now is whether the global economy is at an inflection point," he said. "So far, it seems that growth will continue, although at a slower pace than in the past two years."

The IMF chief, speaking toward the close of a three-day annual meeting of the IMF and World Bank, said the credit market strains that burst into view in August had exposed weaknesses in the world''s financial infrastructure that needed to be addressed.

Still, he said corporate balance sheets in developed countries were strong and labour markets generally healthy.

"For these reasons, we expect a slowdown in growth but not a recession in the United States, and a smaller slowdown in other advanced countries," Rato said. He added that emerging economies, led by fast-growing countries such as India and China, had become a source of stability.