The International Monetary Fund has done little to persuade developing countries to end self-serving monetary policies that only hurt the economies of the developing and poor countries, India's finance minister Arun Jaitley said while addressing the IMF-World Bank meeting in Washington today.
''Emerging market economies face a high risk of negative spill-overs from un-conventional monetary policy actions of advanced economies, Jaitley said.
He said the uncertainties about their extent and eventual normalisation have induced greater volatility and intensified pressures on both emerging market currencies and capital markets.
Some EMEs have had to dip into their foreign exchange reserves in order to manage the effects of volatile currency markets and others had to shore them up in the absence of other adequate safety nets, he pointed out.
At the same time, he pointed out that the global economic situation requires ambitious policy reforms at the global institutions and international coordination.
"The growth in some advanced countries has not improved as much as we had anticipated" Jaitley said.
He said there is need for clarity in communications and forward guidance to minimise surprises and for that there is a need for developing tools which will create confidence in EME investors and prevent currency crises.
He said the current policies place the burden of tackling the impact of capital flight solely on affected countries, which are ineffective. ''We need to co-operate to cushion the impact of unconventional policies and their normalisation on affected economies which may face a flight of capital shortly similar to that of the ''taper tantrum'' of 2013.''
He called for leveraging the increasing monetary base in advanced economies and their extremely low yields to fulfill the need for channelising long-term finance in the infrastructure sector.
Jaitley said the Indian economy is picking up after a few years of slowdown and inflation has been brought down to five per cent.
The government has undertaken several legislative changes to boost investment while many sectors have been opened up for investment and steps have been taken for easing business and industrial activities.
He said while the Framework Working Group has decided to crystallise the commitments laid down in the Brisbane growth strategies into few key ones based on their impact on growth and the national priorities of the concerned member, the adjusted growth strategies have to be finalized on an emergency basis.
There should be a continuous refining of the models so as to incorporate country specific heterogeneities, he said.