The Hindu Business Line : Stimulus Version 2.0

The Hindu Business Line : Stimulus Version 2.0

Q and A with Chidambaram.

Text of Finance Minister P Chidambaram's replies to questions from journalists on the G 20 Financial Summit in Washington, on board Air India One, on November 14, 2008.

Q: Are we talking of a new mechanism for fund flows?

FM: That depends upon where the resources would be found. If the resourcescan be found and channelised through the existing multilateral institutions,that would be good. But if you find resources that cannot be channelisedthrough existing financial institutions, then we have to find anothermechanism through which these resources can be channelised to developingcountries. We have to talk to others about this.

Q: Can you tell us about the outcome of the G20 Finance Ministers' meeting?

FM: I've hinted at a number of ideas that came up in Sao Paulo to which wewere a contributor. We hear others' suggestions also. We have many ideas andsuggestions but we don't yet have a plan. A plan is what has to be devisedin Washington and subsequently.

Q: Are we talking about a global regulator?

FM: Regulation, in the present context, is a function which nationalregulators will be loath to give up. That is why regulation must benational. If we can agree on common prudential and regulatory standards, andthen ask national regulators to apply those standards, there can be somekind of global oversight [over] whether the national regulators are doingtheir job. I don't think regulation can be raised to [the level of] a globalregulator. That's too ambitious, perhaps not possible in today'scircumstances.

Q: Are we talking about a global oversight body?

FM: I didn't use the words, 'global oversight body.' I said there must besome way in which we can have global oversight over whether the commonlyaccepted regulatory and prudential standards are being applied by nationalregulators. These are things that have to be talked over. These are ideas,formative ideas.

Q: Basically standards will be global but their regulation will be national.That's what you are talking about?

FM: That's what I think will happen.

Q: Can we get countries like China and some of the Arab countries totransfer their reserves out of the U.S. and into developing countries likeIndia?

FM: I don't know where China keeps its reserves. I don't even know whereIndia keeps its reserves. It's a closely guarded secret. Each country willdecide where its reserves should be kept. We can't tell another country howto handle its reserves.

Q: Is an increased voting share for India in the IMF being considered?

FM: If it's contribution to additional capital for these [multilateral]institutions, surely we'll accept our share of responsibilities. But is thatthe way being suggested? I don't know. I don't know if they're talking ofinfusing additional capital into multilateral institutions. But ifadditional capital is infused, consistent with our share, voting share, wewill accept our share of responsibilities.

Q: Will the government undertake increased public expenditure?

FM: That's a question you should ask on the way back. On the flight back.We've just passed a supplementary demand, which is about Rs. 105,000 croreadditional cash expenditure. Where do you think all that is going? The bulkof it is going into NREGA, rural development. Just look at the heads underwhich we have provided additional cash amounting to Rs. 105,000 crore.

Q: Is reform of the IMF on the agenda?

FM: The IMF has just done one set of reforms, under which we got a highervoting right. Whether the IMF is ready for another major reform of votingrights, I don't know. I doubt it. But surely the IMF must begin to discusswithin itself further governance reforms.

Q: What kind of prudential norms are you looking at?

FM: These are the well-known norms to regulate financial institutions,capital adequacy, risk-assessment.what all bankers do, what the BIS issupposed to be doing.

Q: What might have happened if we had surveillance and early warningmechanisms?

FM: In retrospect, it is clear that if there had been an effectivesurveillance mechanism, that mechanism would have identified the huge risksthat were being taken by some international financial entities. In theabsence of such a surveillance mechanism or an oversight mechanism, thesefinancial entities, some of which have collapsed, took unacceptable risks.They caused a crisis in the United States, which is the epicentre of thecrisis. So what we are talking about, what we talked about in Sao Paulo andwe will talk about in Washington is: can we agree upon such a globaloversight entity? I don't know what shape it will take. But we need to talkabout it.

Q: What will be the impact of the financial crisis on India?

FM: We can't measure the impact. We have said we would be indirectlyimpacted. It will impact, to some extent, on our growth, our exports, and itwill also impact the currency flows, as it has already. But we are confidentthat given the underlying strengths of the Indian economy, we can weatherthe crisis and still return a decent growth rate for 2008-2009. Even theIMF's last week assessment places India's growth rate for the currentfiscal, 2008-2009, at 7.8 per cent. We'll still return a decent growth ratebut we will suffer an indirect impact.

Q: Is there not a contradiction between the need for regulation and freemarket reforms?

FM: There is no contradiction. That is why the Prime Minister has emphasisedthat the answer to the crisis is not to adopt protectionist policies.

Q: Won't President-elect Barack Obama's decision not to attend the Summit ormeet leaders visiting Washington during the Summit be a dampener?

FM: That's for Mr. Obama to decide. He made a very politically correctstatement when he said the U.S. has only one President at any given time.

Q: There seems to be a divide between Europe and the United States on how totackle the financial crisis. Which side will be on?

FM: I don't think this is a question of taking sides. In São Paulo, theFrench, the Americans and the British were all there and we did agree upon acommuniqué. If agreement could be reached in São Paulo, why doubt that anagreement can be reached at Washington?

Q: Is the creation of another Bretton Woods institution on the agenda?

FM: Very difficult to say we can invent another Bretton Woods institution.What we're trying to do is improve global governance and global oversightover these financial institutions. I don't expect that we will have anotherBretton Woods type of institution. That's my view.

Q: Given global trends, aren't Indian interest rates too high?

A: That's a question that the Governor of the RBI has to answer. And I thinkhe has given his answers on October 6, October 10, October 24, and October31. He will respond as the situation develops. I can't give an answer tothat.

Q: In the US you have a lame-duck administration, as lame-duck as any lameduck can be. What impact will this factor have on the Summit? Secondly, inIndia elections are approaching. What will be the input made byelection-oriented imperatives to our response to the financial crisis?

A: The resolution of this crisis will take us to a point of time well beyondJanuary 20, 2009. Likewise, it will take us to a point of time well beyondMay 22, 2009. So I don't think we are going to take an election-constrictedpoint of view. We're going to take a medium- to long-term point of view. AndI believe the U.S. will also take that view. After all, President Bush andPresident-elect Obama are reported to have talked about these issues atgreat length only two days ago. So I think the Obama input will be there inwhatever Mr. Bush presents. So we'll have to take a view that takes us wellbeyond these election deadlines. That's the stance, I think, that India willadopt.

Q: Can we get Saudi Arabia and other oil-rich states to invest in India?

FM: If someone wants to invest in India, we welcome that. PM has made thatstatement in Qatar.

Q: Can we get resources from the IMF and the World Bank?

FM: I think you are mixing up two things. Money through the IMF can comeonly if you accept an IMF programme. Money through the World Bank is fordevelopment. It depends upon what you need. We don't need an IMF programmenow. What we need is more resources for development. And if you ask me topick an institution, then I would say that if World Bank can give us more,we will happily accept that.

Q: Can the World Bank give more money to India?

FM: Our requirement is for project-oriented and programme-oriented funds.We're now taking World Bank funds of the order of $ 3 billion. If that canbe raised, it will finance many more projects that have been pushed to thenext year or the year after that. States' projects, Central projects. We'llbe happy if the World Bank can raise its development assistance.

Q: Are there plans to reduce the CRR?

FM: Once again, surely, a question the Governor of the RBI can answer.

Q: And about India's credit growth rate?

FM: I'm not targeting any growth of credit. It is growing at 29 per centtoday. If it is non-inflationary growth, we don't have to worry about thecredit growth rate. That is what Dr Bimal Jalan said in a recent interview.We have to juxtapose the rate of credit growth with inflation. If the growthis non-inflationary, then we can accept the current credit growth, but itdepends upon its impact on inflation. The [RBI] Governor will have to take acall on that.

Q: The British press is saying India's GDP growth rate will be less thanwhat is being projected.

FM: I said the estimates vary between 7 and 7.8 per cent. IMF 7.8, RBI 7.5to 8, Prime Minister's Economic Advisory Council 7 to 7.5. We still have avery decent growth rate. What do I have to tell the British? All I can sayis it's still higher than their growth rate!

Q: Can you tell us more about the agreement being sought on internationalaccounting standards?

FM: That was one of the points agreed in São Paulo. We have agreed to go tointernational accounting standards, IASB or something. Now there is anotherstandard, which the U.S. and some other countries are inclined to adopt.What we agreed in São Paulo was to have common accounting standards, so wehave to work a bit for that. Even if there are two accounting standards, wecan still arrive at a common standard. 

http://www.hindu.com/2008/12/31/stories/2008123188881400.htm

  Global crisis: Indian stock prices more than halve

  Oil demand slows down

  Five companies bid for Tilaiya UMPP

  Fresh hope for Bangladesh

  Getting banks to lend

  Historic triumph for Hasina

  Decks cleared for ONGC takeover of Imperial

  Bindra’s gold lights up an engrossing 2008

  Jazz legend Freddie Hubbard dead

  NABARD boost for school infrastructure

  Committee to probe terror strikes

  Looking Back India 2008

  Vote reflects an urge for change

  New spring soon: Rajapaksa

  Israelis begin attacks from sea too

  Europe mulls over common response

  Thailand PM outwits protesters

  Consensus eludes panel on women’s reservation

  Subaltern studies a challenge to historians: Irfan Habib

  Amartya Sen: RBI has taken right measures

  Commission recommends changes in Tribunals Act (Discussed in the class on 27th, Dec)

  “Good news for south Asia”

  Army may induct Nag missile soon

  Malay ethnic Indians for talks with opposition

  Manmohan for close ties with Bangladesh

  “Amend Constitution to set up regional apex court benches”

  Statesmanship, the need of the hour (Krishna Iyer, Beware!!!!!!!!!!!)

  Israel’s onslaught on Gaza will fail

  Spiritual wealth

 

30th December

  Israeli aggression against Gaza

  Cautious approach warranted

  Hasina alliance set for landslide

  Kashmir results cut across communal fault lines

  Second stimulus package in the next few days: Ahluwalia

  Onges rejoice as a new member is born

  A fulfilling year for ISRO

  Dinosaur fossil field in China may be the largest

  Somalia’s President resigns

  Gaza toll reaches 310 in relentless attacks

  Victory for democracy: Bangladesh General

  Paranthan in striking distance: Colombo

  China aims at faster farm growth

  Ministry assures coastal States of all assistance

  Manjit Bawa dead

  The Lord’s compassion

interview with C Rangarajan

 

  The flip side to lower crude oil prices

  IT industry: waiting to exhale in 2009

  Valiant bid to stem slowdown in economic growth

  Austerity in government, yet another routine exercise

  13th finance panel must chart a new course: study

  Hamas calls for third Intifada

  Jyoti Randhawa triumphs

  Bangladesh all set for polls

  Samuel Huntington is dead -Clash of Civilizations

  Copyright challenges in the digital era

  Reduced militancy led to higher voter turnout: Chief Election Commissioner

  Culture emerges as site of struggle: K.N. Panikkar

  “Amend Constitution to set up regional apex court benches”

  Asteroid named after girl of Assamese origin

  Amartya Sen to speak on West Bengal development

  Two flight tests of Nag missile successful

  DGMOs speak on hotline

  Non-state actors and the rule of law

  Printing money and its price

  Good riddance to bad year

  God’s accessibility

 

·  Fiscal stimulus will see investment picking up in second half of 2009

·  PFRDA invites EoI for New Pension Scheme

·  Photographer who caught the terrorists on camera

·  Finally, in 2009, IT’s your Internet

·  Electioneering ends in Bangladesh

·  Coral reefs recover from tsunami damage

  PSUs allowed to invest surplus funds in MFs

  Making energy market more competitive

  RBI to release Q3 review on January 27

  Include Central cess in divisible pool: study

  Keeping up the pressure

  Onus on Pakistan as we can’t chase non-state actors: India

  Inflation falls to 6.61%

  Diaspora to help India turn the heat on Pakistan

  “Common friends” trying to defuse India-Pakistan tensions, says Gilani

  Commission preparing for elections, says Chawla

  Cabinet nod for upgrading 30 CSIR posts

  National highway projects cleared

  China joins anti-piracy mission

  Prisoners in South Africa embrace yoga

  Indian-American doctor honoured

  Bird flu spreads to more areas in Assam

  NHRC serves notice on CBI

  Narendra Modi warns diamond barons

  Kurangani set to become a major tourist attraction in Western Ghats

  Cabinet nod for energy policy

  Cabinet clears pay hike for Lt. Governors

  Greener energy sources turn susceptible

  Thai leader proposes stimulus package

  U.S. economy — it’s business as unusual

  Lok Sabha prorogued

  Meat and Poultry Processing Board approved

  Concentration of mind

  More sops for exports, realty sector on anvil

  RPL’s world’s biggest refinery on stream

  Eventful year for pharmaceutical sector

  ‘Single window can hasten projects’

  Democracy triumphs

  Mainstreaming CSR

  Moon Mapper throws new light

  British playwright Harold Pinter dead

  Pakistan offers to buy Indian share of Iranian gas

  Anti-tank Nag missile test-fired successfully

  Americans curb spending as income declines

  Maldives offers help to ‘observe’ Indian Ocean

  Nasheed seeks diverse help from India

  IAF not keen on French offer for Kaveri engine

  Russia plans to step up ties with India, China

  ‘Prerna’ scheme inspiring many

  A vital gateway where Taliban is in control

  Supreme devotion

 

  Lifetime achievement award for RP Goenka

  Global meltdown: moderate impact on manufacturing seen

  Tilaiya UMPP getting delayed

  Finance panels’ role undermined: study

  The oral polio vaccine is safe

  Switzerland in Schengen

  Voters defy secessionists

  We will send a spacecraft to Mars in 2013: Madhavan Nair

  Parliament to be prorogued

  Rockets from Gaza smash into Israel

  Near-extinct frog found

  China to boost consumption

  U.S. draws India into the Afghan war

  Sahitya Akademi awards for seven novelists

  India to engage Gulf nations actively

  South Asia editors call for restraint by media

  U.S. firms queue up for bailouts

  Towards a new ‘balance of economic power’

  Harbinger of peace

 

  Centre’s optimism in tackling impact of meltdown

  Centre issues oil bonds to 3 OMCs

  OIL defers IPO to next fiscal

  Teaching evolution

  Focus on rural infrastructure

  Nobody wants war: Manmohan

  Left parties protest passage of Bills without discussion

  Insurance staff strike work against tabling of Bills

  Parliament approves cyber crime Bill

  Breeder to clone bull-fighting stud

  Awaiting the avian guests

  NASA yet to spot toys used in test

  ‘Save energy’ drive to avert tariff hike

  A portion of Sathyamangalam forests declared sanctuary

  Second stimulus package within three days

  Cross-border trade resumes

  Speaker clears air on verdict

  Sahitya Akademi awards for 7 novelists 

  Era of cheap gas over: Putin

  Iraqi MPs back foreign troop deal

  Advance amid heavy resistance: Colombo

  Two 4,300-year-old tombs unveiled near Cairo

  Parliament adjourned sine die

  Buddhadeb for joint effort to tackle economic slowdown

  Maldives invites India to pick up stakes in PSUs

  Nod for SC/ST Bill

  Insurance Bills against India’s interests, says AIIEA

  Lok Sabha passes Bill to protect agricultural products

  Panel raps government for price rise

  Pakistan: the impasse over evidence

  God’s auspicious traits

 

  China cuts rates for fifth time .

  100 oil blocks to be offered in February ..

  Cairn announces new oil find in Rajasthan .

  Gloomier by the day

  Land for public purpose

  India adopts nuanced approach

  Insurance Bill seeks to hike FDI cap to 49 per cent from 26 per cent

  CPI(M) leads protest against Insurance Bill

  Repairs under way, Internet still hit

  1,300-year-old coins unearthed

  Budget to look into social security

  Ramadoss presses for prohibition

  Rajapaksa serves ultimatum on LTTE

  No extra troops for Afghanistan, says Australia

  Iran missile deal: officials non-committal

  NSG hubs in four cities

  Sonia did not hold office of profit: panel

  ‘Get ready to tackle avian flu’

  Skin cells to tackle spinal muscular atrophy

  India Rising and the hunger index

  Equanimity of mind

 

  Severe pressure on balance of payments

  BSA launches eScooters in Kerala

  Height of irresponsibility (Antu lay off)

  A silver lining

  FBI grills Ajmal Amir

  Mumbai’s sang-froid impresses French envoy  

  IITs should address illiteracy and poverty: Amartya Sen

  IT, BPOs may be hit

  Attenborough in hospital after fall

  Iran, China will begin counter-piracy patrols

  Setbacks to Sri Lankan Army: LTTE

  U.S. troop surge aims for Afghan “tipping point”

  Crises today and the future of capitalism (Stiglitz)

  Strategic ties not with U.S. alone, says Pranab

  Boost to India’s space commerce

  Country needs more courts to render speedy justice: CJI

  “Free Trade Agreement will solve India-Pakistan problems”

  Portents of insurance amendments

  The latest crisis of trust

  S-300s for Iran: an argument for peace

  Force of destiny

  Demand recession: textile units fear worse days

  Plain-speak by Hamid Ansari on governance

  Radar cover for entire coastline

  Shanti Swaroop awards presented

  4.25 lakh birds culled in Assam

  Indigenous cryogenic engine passes crucial test

  More evening courts to be opened

  Illinois Governor vows to clear his name

  World’s first ‘green ship’ unveiled

  Noam Chomsky bereaved

  U.N. plea to Nepal

  PM to address diplomats

  Jairam Ramesh calls off visit to Pakistan

  Cohen: India must liberate itself from Pakistan, Kashmir

  Crisis does not mark the end of free-market capitalism: economist

  LNG cost likely to go up in January

  Amnesty criticises anti-terror Bill

  “India should follow its own model”

  Use Wakf boards for educational uplift: Ansari

 

 

  Infosys CEO upbeat on IT industry

  Stress on package for next fiscal also

  Bank of Japan cuts key rate to 0.1%

  More at stake than cricket

  Looking beyond Kyoto

  Bird flu under control: Centre

  U.S. gives lifeline to auto industry

  Swraj Paul presides over House of Lords

  UPA allies seek further cut in fuel prices

  We must find our own ways to deal with crises: Manmohan

  Terror attacks: Panel for citizens’ initiative set up

  2010 World Cup will be held in India, says Leandro Negre

  SEBI studying corporate governance issue in Satyam

  Nod for science research board Bill

  Parque Via wins best film award

  World Bank to lend more to India

  Hamas ends ceasefire with Israel

  Sea Tiger leaders killed: Colombo 

  Defensive measures alone won’t suffice

  Manmohan: we are destined to become knowledge superpower

  Iran hopes India will persist with gas pipeline talks

  Amartya owes it to his bright students

  ‘Sonia can hold constitutional posts’

  Cabinet clears amendment Bill to define minorities

  Brits now poorer than Italians

  Spirit of renunciation

 

  “Banks will have to cut floating rates”

  POSCO plans first-ever output cut

  Two steps backward (The Two Bills)

  Breaking with the past

  Pakistan cricket tour off

  Towards a renaissance of the IITs

  Parliament approves anti-terror Bills

  In cancelling cricket tour, a mix of objectives

  Chidambaram covers two flanks (!!!!!!!!!)

  Kakodkar presses Karunanidhi for neutrino observatory approval

  Falling inflation points to lower interest rates

  Smallest humanoid robot wins award

  Prices slump despite oil production cut

  BrahMos test-fired

  Hu lauds three-decades of reform

  Bid to revive Ba’ath party

  Implement promises, Prachanda told

  Cholera overshadowing AIDS crisis

  Not bringing back POTA, says Sibal

  AERB for analysis to attain the highest safety benchmarks

  Regulation needed to avert crisis: economist

  Elevation, transfer of seven High Court judges cleared

  Re-nourishing the Indian polity

  When convention went out of the window

  Glory of Lord’s names

Thursday, December 18, 2008

 

 

  Need for calibrated fiscal policy

  Emphasis on financial stability: RBI

  India-U.S. agree on developing gas hydrate resources

  Fed cuts rate to near-zero level

  Aurobindo Pharma gets USFDA nod

  Investigating terror crimes

  Improving museums

  Lok Sabha passes anti-terror Bills

  OPEC to slash oil output

  Aim is to strike a balance between rights and tough laws: Chidambaram

  Coastline security to be strengthened

  Najam Sethi awarded Golden Pen of Freedom

  14 names cleared for judges appointment

  Stamp on Manekshaw released

  Course on “ethical hacking”

  Obama is Time ‘Person of the Year’

  U.K. troops to leave Iraq in May: Brown

  Scientists find hole in Earth’s magnetic field

  Courts to decide on bail

  Bill on social security for unorganised workers passed

  Speaker warns of action against members criticising Deo report

  Rajya Sabha passes Gram Nyayalaya Bill

  Avian flu: culling continues in Malda district amid further poultry deaths

  Year of interlinked food shortages, climate change and recession

  Hymn for liberation

World Development Report 2009: Reshaping Economic Geography

  

Overview

“…..Economic growth will be unbalanced, but development still can be inclusive. That is the main message of this year's World Development Report. The report proposes that spatial transformations along the following three dimensions will be necessary:

Higher density as seen in the growth of cities. Tokyo, the world's largest city is home to 35 million--a quarter of Japan's population--but stands on just four percent of its land.

Shorter distances as firms and workers migrate closer to economic opportunities. Eight million Americans change states every year, migrating to reduce distance to economic opportunity.

Fewer divisions as countries thin their economic borders to enter world markets to take advantage of specialization and scale. Border restrictions to flows of goods, capital, ideas, and people continue to prevent progress in Africa, in contrast with Western Europe….”

“….The new World Development Report challenges the assumption that economic activities must be spread geographically to benefit the world’s most poor and vulnerable. Trying to spread out economic activity can hinder growth and does little to fight poverty. For rapid, shared growth, governments must promote economic integration which, at its core, is about the mobility of people, products, and ideas…”