‘Currency war’ – Pranab for talks, not confrontation

Finance Minister Pranab Mukherjee said on Thursday that global tensions over currencies should be resolved through consensus-building negotiations. International leaders must try to work together in resolving imbalances in the global currency markets and shouldn't resort to confrontation, he said.

"We must try to engage the countries in negotiations and try to build consensus so the matter could be resolved," he said in response to questions after a speech at an event organised by the Woodrow Wilson Center and the Federation of Indian Chambers of Commerce and Industry (FICCI) in Washington. The seminar took place amid meetings of the International Monetary Fund and the World Bank.

While emerging market economies have voiced concerns over the surge in capital flows that is driving up their currencies, India has said there is no need to intervene in the foreign exchange market or cap foreign portfolio inflows.

Mukherjee said huge surpluses in some countries and large deficits in others are "unsustainable" and should be addressed in multilateral discussions.

He also called for an early conclusion to the stalled Doha Round of world trade talks.

Mukherjee reiterated what he had said in New York on Wednesday – India doesn't need to restrict foreign institutional investment and foreign direct investment at this time. Foreign funds have pumped $20 billion into Indian equities so far in 2010, compared with $17.5 billion in full-year 2009, on optimism about India's growth prospects. Countries from Brazil to South Korea have taken steps to cool currency appreciation amid rising capital flows into emerging and Asian economies.