G-20 draft backs economic stimulus; India to fight protectionism

Leaders of the Group of Twenty (G-20) leading and emerging nations are expected to agree to refrain from currency moves that would hurt each other's economies, according to a draft statement even as India sought concrete action against protectionist moves by the developed countries.

The G-20 summit in London beginning 2 April should vow concrete action against the protectionism in various forms, foreign secretary Shiv Shankar Menon said even as a World Bank report said India is most active in initiating anti-dumping action.

The summit should concentrate on putting an effective regulatory mechanism to deal with the global financial crisis, he said, adding, that the international financial institutions like the World Bank and International Monetary Fund should be reformed to enable them to deal with any future crisis.

He also said India would like an expansion of the Financial Security Forum which would supervise global financial structure.

The Indian prime minister Manmohan Singh, accompanied by a senior level delegation which includes deputy chairman of the planning commission Montek Singh Ahluwalia will represent India at the summit.

While the G-20 draft praises the achievements of the system with strong growth for over half a century, it said the world now faces the greatest economic challenge in modern times - a crisis affecting the lives of ordinary men, women, and children around the world. A global crisis requires a global solution, it noted.

The draft also calls for concerted fiscal actions to support growth and jobs and to strengthen the impact of the planned fiscal expansion for over two years.

''We believe that an open world economy based on market principles, effective regulation, and strong global institutions will ensure a sustainable globalization with rising prosperity for all. We are determined to restore growth now, resist protectionism, and reform our markets and our institutions for the future. We have agreed actions to meet these challenges as part of an integrated strategy that will restore confidence and ensure a lasting global recovery. We are determined to ensure that this crisis is not repeated.'' it said.

The draft takes special note of the backing given by central banks to drive home the point that expansionary policies are needed and countries should make full use of monetary policy instruments, including unconventional policy instruments, consistent with price stability.

The draft also calls for comprehensive action to strengthen financial institutions of individual countries in order to restore domestic lending and international capital flows.

''Emerging and developing countries, which have been the engine of recent world growth, are now facing shocks which threaten stability and jeopardize the global economy. It is imperative that capital continues to flow to them. We have therefore agreed to make of resources available through the international financial institutions. This will finance counter-cyclical spending, bank recapitalisation, infrastructure, trade finance, debt rollover, and social support,'it said

To this end, the draft suggests: Increase in the resources available to the IMF through bilateral borrowing from members, which would subsequently replaced by an expanded New Arrangements; Implement a new Flexible Credit Line for countries with strong policies and its reformed lending and conditionality framework and a general increase in SDR allocation to strengthen global liquidity.

The draft while pledging by the UN's Millineum goals, also called for an effective mechanism to monitor the impact of the crisis on the poorest and most vulnerable. ''We have also asked the IMF to bring forward, by the Spring Meetings, proposals to use the proceeds of agreed gold sales to support low income countries''.

These actions together constitute the largest fiscal and monetary stimulus, the most comprehensive support programme for the financial sector, and the greatest mobilisation of resources to support global financial flows in modern times, it added.