Jaitley calls for global measures to stem short-term capital volatility

16 Oct 2017


Finance minister Arun Jaitley has urged the international community to make a fair and unbiased assessment of the macro-prudential and capital flow management measures available to and used by countries to manage short-term capital volatility.

Speaking at the IMFC Plenary Session, he said, this is necessary for reviving investment, which is critical to sustaining global growth, adding that collective and co-ordinated action is needed to be explored in this regard.

While observing that the World Economic Outlook for this year and the next was reassuring, Jaitley took note of the caution advised for the medium term. He appreciated the focus on cyber security in the Early Warning Exercise and emphasised that the entire global financial system is vulnerable to this threat, more so because it is so interconnected.

In this regard, he highlighted three policy challenges. The first was the risks posed to emerging markets and developing economies (EMDEs) by the US Federal Reserve's bold steps towards restoring normal monetary conditions. The second was the global slowdown in Investments and the third was employment.

Jaitley pointed to the lack of progress in converging to a consensus on the review of IMF quotas. To achieve such an outcome, he urged the Fund – the board, the management and the staff – to diligently explore the space offered by the three objectives laid out in the IMFC Communiqué in October 2016: Reduce misalignments, shift quota shares in favour of dynamic emerging economies and protect the shares of low income countries and small states.

The finance minister also attended the 96th meeting of the Development Committee Plenary of the World Bank, which among others discussed the World Development Report 2018, ways of maximising finance for development, progress report to governors on shareholding and implementation of forward looking policies.

Jaitley stated that during this financial year, India consolidated its steady growth through systemic reforms that enabled significant progress in formalizing the economy, building macroeconomic fundamentals, creation of digital economy and financial inclusion. The newly rolled out Goods and Services Tax was a transformative reform that has unified 1.3 billion people into one single market.

He called upon the IMF to bring finality to the shareholding review by the Spring meeting 2018 in a spirit of consultation and co-operation.

Drawing attention to the downward trend in lending to middle income countries, he urged the shareholders of World Bank Group not to forget the pockets of poverty in low and middle income countries, where concessional finance continues to be indispensable. Jaitley said that resources required for achieving the twin goals - Climate targets and SDGs - by 2030 were substantial and that the World Bank must, act with ''Speed, Skill and Scale''.

The finance minister called for quick consensus for capitalising the Bank and IFC to meet legitimate expectations of development financing for these institutions.

He also observed that India is currently one of the few large economies in the world in the virtuous phase of its demographic transition and the most important priority of the government was to find ways to provide employment to the 12 million young people entering the workforce annually.

Jaitley highlighted the big structural reform initiatives taken by India – Goods and Services Tax (GST), demonetisation and Insolvency and Bankruptcy Code. He also underlined that short term adverse impact of both GST and demonetisation measures are mostly overcome and the recent data in manufacturing sector indicate that India's growth story is soon getting back to its normal course.

He also mentioned about substantial reduction in both high value cash notes as well as cash as such in the economy thanks to demonetisation.

During his other engagements in the day, Jaitley also held bilateral meetings with the finance ministers of the UK and Sri Lanka. The discussions covered a wide spectrum of bilateral collaboration to strengthen the cross-country relationships.

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