India has made a strong case for "globally coordinated policy decisions" to remedy the global economic turbulence against the backdrop of key downside risks like weak demand, tighter financial markets and volatile capital flows that could derail the fragile recovery process.
Intervening at a G-20 meeting ahead of the Spring Meetings of the IMF and World Bank, Finance Minister Arun Jaitley also called for a re-evaluation of the fiscal policy space amid doubts about the efficacy of monetary policy instruments.
"We feel that the efficacy of monetary policy instruments has reached its limits and that its pass through has not been seamless," he said, adding: "The time is ripe for a re-evaluation of the fiscal policy space, with a greater focus placed on public investment."
"Our individual and collective efforts to restore growth back to pre-crisis levels have met with limited success," Jaitley said, noting global growth continues to disappoint with even projections of future growth subject to recurring downward revisions.
Commenting on India's growth prospects, he said the Government expects the momentum for high growth to continue with the assumption of a normal Monsoon this year.
"That being said, the fading impact of lower input costs on value addition in manufacturing, persisting corporate sector stress and risk aversion in the banking system, and the weaker global growth and trade outlook pose as downside risks to India's growth outlook," he said, adding these challenges are being dealt with through a series of policy measures.
The Finance Minister appreciated China's ongoing efforts to rebalance its economy and reduce excess capacity in several sectors, noting that this move would create necessary space for manufacturing activity in other countries.
Referring to the declines in both imports and exports in all G-20 economies in 2015, he said the situation calls for an effective and tangible policy response to revive the trade engine of the global economy.
"Countries must avoid trade protectionist measures, and refrain from competitive devaluations," he stressed, adding: "We should also take note of the asymmetry in the global financial safety net."
While advanced economies have access to swap lines to smooth currency shocks, emerging market economies, dependent as they are on reserve currencies for borrowing and international transactions, do not have a similar recourse, Jaitley said as he made the case for augmenting global and regional safety net and oversight.
Dwelling on the G-20 Structural Reform Indicators, he said while some members favour a top-down approach, India, along with other members, believes in a country-led process.
"A challenge to keep in mind is the importance of ensuring that a balance is maintained between addressing domestic priorities of member countries with the international role that each G20 member has to play. Therefore, we should also consider undertaking an analysis of the possible negative spillovers of policy actions," he said.
The Finance Minister also participated in a meeting of BRICS Ministers and Central Bank Governors and a Board of Governors meeting of BRICS New Development Bank (NDB). He complimented NDB president K.V. Kamath and his team for the quick pace with which the Bank has commenced its activity.