The G20 countries on Tuesday pitched for growth and job creation and signalled that fiscal discipline can wait in almost all countries,including the US and euro zone economies running a surplus such as Germany.
In a joint declaration released after a two-day summit here, leaders of countries that account for 84 per cent of the world output said their finance ministers and central bank governors would find out ways in which the G20 can foster investment in infrastructure and conceded that the global economy remained vulnerable and vowed to strengthen recovery and address financial market tensions. India has been at the forefront of a campaign that the G20 should pay heed to infrastructure financing problems of developing countries saying that resolving these would be crucial to robust demand creation or the world economy.
They reiterated that excess volatility of capital flows and disorderly movements in exchange rates needed to be avoided,but were seemingly unclear about how to address these issues at this junctre. India currently needs copious capital inflows as its current account deficit has enlarged in recent years. While capital flows are a way of financing the deficit,given the global economic turmoil,likely flight of capital to the dollar and the federal bunds (German government bonds) despite the abysmally low returns is a fear of policymakers in New Delhi.
The G20 gave an unequivocal message that its top priority at the moment is to reduce the uncertainty about the future of the euro zone. Euro area members will take all necessary policy measures to safeguard the integrity and stability of the area,improve the functioning of financial markets and break the feedback loop between sovereigns and banks, the leaders said. A Los Cabos Growth and Jobs Action Plan was also unveiled.
Prime Minister Manmohan Singh said after the release of the declaration: There was general agreement that policy in all countries must shift to strengthening growth. Singh added: Euro zone leaders have assured us that they are firmly committed to protecting the integrity of the euro area. They recognise the need to move beyond the present monetary union towards unified banking supervision and adoption of common and enforceable fiscal rules.