India: World's Finances Need More Oversight
STEVE INSKEEP, Host:
Who knows, maybe world leaders will be getting cheaper hotel rooms this weekend. They're going to spend the weekend looking for a way out of the global financial crisis. They are from the so-called Group of 20, the world's top developed and emerging nations and they've come to Washington for a two-day economic summit headed by President Bush. Unlike some of history's past financial emergencies, the key players this time include India. And as NPR's Philip Reeves reports, India has a few suggestions.
PHILIP REEVES: The morning begins in one of New Delhi's luxury malls. The trendy boutiques and coffee shops are preparing to do business. The city's shoppers are not. There's hardly anyone here. A while back, shopping malls like this were testimony to India's rapidly growing and vibrant economy. Now the party's over, thanks to the global financial crisis. Like many countries, India's taking a hit. Economist Ram Gopal Agarwal, a former advisor to the World Bank, says stocks have fallen more steeply in India than in the US.
M: And the house prices are coming down. The builders are having great difficulty in getting finance so unemployment is increasing, exports are declining.
REEVES: The global economic crisis is slowing down India's growth rate, which was running above nine percent. Economists generally agree that several percentage points will now be shaved off that figure. Mythili Bhusnumath, a senior editor with India's Economic Times newspaper, thinks growth will dip to just over six percent.
M: I think it will be too harsh this medicine because it's going to slow down and very dramatically. So I think the pain is very dramatic and because it's been driven by external forces. The export sector, which is where a large number of our small and medium enterprises are engaged, they're going to feel the hit.
REEVES: There's a strong feeling in India, where hundreds of millions still live in profound poverty, that India's paying the price for a crisis that's not its fault. It blames the US and Europe and also the International Monetary Fund for failing as an early warning system. As the G-20 summit approaches, the Indian government is staking out its case. Worried about further falls in foreign investment, it's appealed to western economies not to draw into what it calls a protectionist cocoon. It also wants there to be more oversight over the global financial system and, says the Prime Minister Man Hansing, improvements to key international financial institutions including the IMF and the World Bank.
INSKEEP: They should be strengthened to ensure that the fallout on developing countries of the global crisis is minimal.
M: Concrete decisions, they are not going to be taken. Only a general agreement on what needs to be done.
REEVES: That's Kabal Sibel(ph), a former foreign secretary of India. Sibel is not expecting anything decisive from the summit but thinks there may be some important broad themes. One will be whether to give emerging economic powers, including India, considerably more say in the IMF and the World Bank. That's one of the things India wants. Although the US, which dominates these institutions, may prove reluctant to share. Sibel says the US has generally avoided interfering in the financial system, trusting in market economics to resolve its glitches. He thinks there'll now be pressure for more regulation.
M: Now what kind of regulation, how strong this would be and what oversight can IMF have on the internal regulatory policies of individual sovereign countries, especially that of the United States, is going to be a big question.
REEVES: The summit is coming in for criticism even before it's started. Ram Gopal Agarwal, the former World Bank adviser, thinks the focus is wrong. He says the summit should concentrate more on what to do next.
M: Unfortunately, the US is still in a state of denial. You know, they're talking of regulating the financial institutions. That is done. Now, you'll think of the problem ahead of us.
REEVES: Agarwal knows what he would like to happen.
M: I would say that we need a trillion dollar of global fiscal stimulus over perhaps the next two years.
REEVES: Philip Reeves, NPR News, New Delhi.