Need new investment bank for high-growth countries: India

With the fiscal position back home allowing little room for any substantial hike in government spending...

With the fiscal position back home allowing little room for any substantial hike in government spending, Prime Minister Manmohan Singh will make a strong pitch for a “new channel” to expedite fund flows into developing economies such as India. He will exchange views with Group of 20 leaders today at a working dinner meeting hosted by United States President George W Bush and will formally speak at the plenary session of the Summit on Financial Markets and the World Economy tomorrow.

In an exclusive conversation with The Indian Express on board the Prime Minister’s special aircraft, Finance Minister P Chidambaram said India has already written to the World Bank to increase its development funding significantly from the $3 billion committed for the current year. “India is ready to absorb more funds,” he said.

According to him, if capital-surplus countries are willing to pool together resources outside the International Monetary Fund-World Bank framework, India along with some other countries such as Brazil, South Africa and Indonesia are keen to tap the window. “We talked about this in Sao Paulo. We can channelise this, but in what form, is not clear now.”

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A government official said the so-called “new channel” could take the form of an “Investment Bank” that focuses on high-growth or emerging economies. Funding for such a bank could come from resourceful and capital-surplus economies such as Saudi Arabia and Qatar in the Middle East, Singapore and Japan.

Earlier, briefing reporters on board, Chidambaram, who has just returned from a meeting of finance ministers of the Group of 20 countries in Sao Paulo and is now accompanying the PM to the summit, said only a handful of countries including India and China were registering high growth rates today.

Though multilateral institutions such as the World Bank do lend to emerging economies, they come with a lot of strings attached, thereby curtailing their flexibility. India is keen that developed countries agree on a new framework or a mechanism for quicker disbursement of funds without conditionalities to emerging economies.

P Vaidyanathan Iyer

P. Vaidyanathan Iyer is The Indian Express’s Managing Editor, and leads the newspaper’s reporting across the country. He writes on India’s political economy, and works closely with reporters exploring investigation in subjects where business and politics intersect. He was earlier the Resident Editor in Mumbai driving Maharashtra’s political and government coverage. He joined the newspaper in April 2008 as its National Business Editor in Delhi, reporting and leading the economy and policy coverage. He has won several accolades including the Ramnath Goenka Excellence in Journalism Award twice, the KC Kulish Award of Merit, and the Prem Bhatia Award for Political Reporting and Analysis. A member of the Pulitzer-winning International Consortium of Investigative Journalists (ICIJ), Vaidyanathan worked on several projects investigating offshore tax havens. He co-authored Panama Papers: The Untold India Story of the Trailblazing Offshore Investigation, published by Penguin. ... Read More

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