'Developed world must shield countries like India'

ON BOARD AIR INDIA ONE: Countries like India that drive global economic growth today shouldn't be made to suffer the impact of the current financial crisis and must get more funds to ease their burden, Finance Minister P Chidambaram has said, ahead of the G20 Summit in Washington.

"We must not forget that there are only a handful of economies that are driving the world economic growth and among them are China and India and a few other countries,” said Chidambaram, a key member of Prime Minister Manmohan Singh's delegation to the Nov 15 Summit.

"So it is very important that these few countries shouldn't suffer in the period during which we grapple with the economic crisis,” he said inside the prime minister's special aircraft while on his way to the Summit.

“More resources must be made available to these countries, including India, so that they can continue to grow."

Planning Commission Deputy Chairman Montek Singh Ahuwalia, who will be Manmohan Singh's “sherpa” at the Summit, and Economic Affairs Finance Secretary Ashok Chawla, are also part of the delegation and have already reached the US capital for official-level talks.

The finance minister said the International Monetary Fund (IMF) had failed in the role of pre-empting the financial crisis and that the group of seven rich nations (G7) was too small and narrow a formation to address the issues.

"The key point is, we must agree to a new order of global oversight,” he said, adding: “A more inclusive system can provide better surveillance and serve as an early warning mechanism.”

Chidambaram also maintained that if there was effective surveillance, it could have identified and prevented the risks which some large international financial entities were taking, exacerbating the financial tsunami.

“In the absence of such a surveillance mechanism, these financial entities, some of which have collapsed, took unacceptable risk,” he said, adding: "That's what led to the crisis in the US.”

He said an effective surveillance mechanism was high on the agenda for the G20 Summit - called by US President George W. Bush - but said it was still unclear as to what shape it would eventually take.

"That's what we talked about in Sao Paulo and this is what we'll talk about in the Summit,” he said, referring to the meeting in the Brazilian city last week among finance ministers and central bank governors of G20 countries in the run-up to the Washington Summit.

He, however, dismissed the suggestion that new Bretton Woods institutions could emerge from the Summit.

It was the post-World War-II United Nations Monetary and Financial Conference at Bretton Woods, New Hampshire, in July 1944 that eventually led to the formation of the International Bank for Reconstruction and Development (IBRD), better known as the World Bank, and the IMF.

"I don't think regulation can be raised to (the level of) a global regulator. That's just too ambitious and perhaps not possible in today's circumstances. Regulation must be national."