PM tells G-20 to cure imbalances in economy

Rebalancing the global economy cannot happen unless industrialised nations cure the imbalances created in their economies artificially. India sent this message across at the Seoul G-20 nations summit on Friday.

“Major industrialised countries are running unsustainable current account deficits which have to be reduced to manageable levels,” said prime minister Manmohan Singh, speaking at the plenary session.

A current account deficit occurs when a country’s imports of goods, services and transfers are greater than the country’s total export of the same. This makes a nation a net debtor to the rest of the world.

“It is not easy to reach an agreement on what are sustainable current account balances for individual countries, given the structural differences across countries. But we must avoid competitive devaluation and resist any resurgence of protectionism,” Singh said.

Singh said fears that high unemployment in developed nations threatens the revival of protectionist tendencies. “This affects the investment climate and dampens the medium-term growth prospects of emerging market countries,” he said.

The prime minister hailed the Mutual Assessment Process (MAP) adopted at the G-20’s Pittsburgh session in 2009 as the first major step towards attaining such coordination.

Later deputy chairman of the planning commission Montek Singh Ahluwalia said the next session of G-20 in 2011 will see a further consolidation of MAP.

In a point-by-point prescription for the global economy, Singh said advanced deficit nations must follow fiscal consolidation, so as to ensure debt sustainability over the medium term.

“This means that fiscal correction need not be frontloaded everywhere,” he added.