Taking on board India’s concerns, the G-20 Summit on Friday acknowledged that excess volatility of financial flows and disorderly movements in exchange rates can affect economic and financial stability of emerging markets and called for sound policies to address it.
Coming against the backdrop of the battering that rupee suffered in recent weeks, the 27-page G-20 leaders’ Declaration committed itself to cooperate to ensure that policies implemented to support domestic growth also support global growth and financial stability and to manage their spillovers other countries. The Summit also shared Prime Minister Manmohan Singh’sviews on the need for orderly exit from the monetary stimulus undertaken in the context of 2008 economic crisis.
“In the five years since we first met, coordinated action by the G-20 has been critical to tackling the financial crisis and putting the world economy on a path to recovery. “But our work is not yet complete and we agreed that it remains critical for G-20 countries to focus all our joint efforts on engineering a durable exit from the longest and most protracted crisis in modern history,” the declaration said.
It noted that the most urgent need is to increase the momentum of the global recovery, generate higher growth and better jobs while strengthening the foundations for long term growth and avoiding policies that could cause the recovery to falter or promote growth at other countries’ expense.
Talking about the problems arising out of the exit from stimulus package, the G-20 leaders said monetary policy will continue to be directed towards domestic price stability and supporting the economic recovery according to the respective mandates of central banks.
“We recognise the support that has been provided to the global economy in recent years from accommodative monetary policies, including unconventional monetary policies. We remain mindful of the risks and unintended negative side-effects of extended periods of monetary easing,” it said.
The Summit recognised that strengthened and sustained growth will be accompanied by an eventual transition toward the normalisation of monetary policies. The Central banks are committed that future changes to monetary policy settings will continue to be carefully calibrated and clearly communicated.