G20 Finance Ministers and Central Bank Governors have discussed the need for G20 countries to come together on policies to overcome inflation in a way that does not have a negative impact on other member nations, Prime Minister Narendra Modi said in an exclusive interaction with Moneycontrol on September 5.
“During our G20 Presidency, there was a meeting of G20 Finance Ministers and Central Bank Governors. This forum has recognised that there is a need to ensure that policies taken by each country to combat inflation do not lead to negative repercussions in other countries,” the Prime Minister said, adding that there is an understanding that timely and clear communication of policy stances by Central Banks is crucial.
His remarks come at a time when the US Federal Reserve has hiked rates by more than 525 basis points but inflation refuses to cool off. Interest rates are at their highest in 22 years. However, Chairman Jerome Powell may be forced to raise the rates even further to tame a stubborn inflation at home. And, that could make the dollar more expensive and hurt emerging markets like India.
Back home, Reserve Bank of India’s (RBI) Governor Shaktikanta Das is of the view that inflation in India may start cooling from September but not without a warning.
In the conversation with MC, Prime Minister Modi also highlighted the steps that his government has taken to curtail price rise. These include a cut in LPG prices, export curbs, sale of foodgrains and vegetables in the open market etc.
“As far as India is concerned, we have taken a number of steps to control inflation. Even in the face of adversities and global dynamics, India’s inflation was two percentage points lower than the global average inflation rate in 2022. Yet, we are not resting at that and are continuing to make pro-people decisions to boost ease of living. For example, recently on Raksha Bandhan, you saw how we reduced the prices of LPG for all consumers,” he said.
This is not the first time that India has pushed for better coordination between global central banks. Back in 2013, the fear that the US Federal Reserve may start to pull back the stimulus money from its economy led to a significant rise in dollar value that broke the back of many emerging economies including India.
Then Prime Minister Manmohan Singh had said, he would at St. Petersburg, emphasise the need for an orderly exit from the unconventional monetary policies being pursued by the developed world for the past few years to avoid damaging the growth prospects of the developing world.
"It is also important that G20 encourages and promotes policy coordination among major economies in a manner that provides for a broad-based and sustained global economic recovery and growth," Singh had said in 2013.
The G20 itself was born out of the need for a similar need for improved coordination between countries post the Asian financial crisis in the 1990s. It was supposed to be a forum for the Finance Ministers and Central Bank Governors to discuss global economic and financial issues.
“Soon, the G20 will be nearing 25 years of establishment. Such a milestone is an opportunity to evaluate the objectives that the G20 set out with and how far it has been able to achieve them. Such introspection is a necessity for every institution. It would have been wonderful if the UN had undertaken such an exercise when it turned 75 years old," PM Modi told MC.
First Published: Sept 6, 2023 8:32 AM IST
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