While global leaders,be it Frances Nicolas Sarkozy,Chinas Hu Jintao or even Germanys Angela Merkel have strong views on the two most critical issues fiscal stimulus and financial markets regulation Indias position so far suggests that it will be happy with just about a nicely worded G20 communiqué tomorrow. The Group of 20 Summit in London is perhaps the last high-decibel overseas engagement of Prime Minister Manmohan Singh,whose government now has less than two months to go,before general elections throw up new possibilities at the Centre. In an interview with the Financial Times,Singh said a fiscal stimulus of 2 per cent of GDP is good enough for developing economies to overcome the crisis. India seems to be enamoured of the middle path by taking generic positions on protectionism,global regulation,fiscal stimulus and reform of international financial institutions. This when China put the United States and its strongest ally in Europe,the United Kingdom,on the defensive by letting the governor of the Peoples Bank of China float a paper suggesting it was time a new global reserve currency replaced the US dollar. Jintao,buoyed by some positive signs in the Chinese economy,told Xinhua yesterday that the stimulus package ($585 billion) had begun to take effect. Confident that Chinas economy can maintain a steady and rapid growth,he sought positive results from the G20 meeting. Jintao met US President Barack Obama today and had an extensive exchange of views,with the latter accepting the Chinese Presidents invitation to visit his country in the second half this year. The two also agreed to establish a US-China Strategic and Economic dialogue. China,in fact,expressed its readiness to help top up IMFs resources,but only if its quota is hiked. India too wants reform of the IMF and the World Bank to reflect todays economic realities. It wants the quota reviews of the IMF advanced to 2011 from 2013 and seeks a 200 per cent increase. But despite being one of the very few economies that has grown 9 per cent on an average in the last four years and not being as badly affected as many others,it is not quite asserting itself. On the Chinese proposal though not put formally on the G20 agenda,but widely discussed of a new global reserve currency,India is more cautious than forthcoming. This means countries must be willing to yield their powers to expand and contract money supply to another international organisation, said the PMs sherpa Montek Singh Ahluwalia. But with quotas of 2 per cent or so in such an organisation,does it make sense? he asked. Sarkozy has threatened to pull out of the G20 if there are no strict regulations to put curbs on tax havens,hedge funds and the banking system. His demand for a single global regulator has not found many takers,except for Germany and to a limited extent,the United Kingdom. But global leaders will not risk the prospects of France pulling out and the communiqués tone on more effective supervision of the financial markets will reflect Sarkozys demands. India does not say no,but thinks it is not practical since such a move will limit the efficiency of capital flows into emerging economies. Obama,who had a one-on-one meeting with UK Prime Minister Gordon Brown today,has preferred team talks with India,scheduled for tomorrow. He has the support of China,UK and India,except of course Germany,on the need to continue with their fiscal stimulus programmes in 2009 and well into 2010. Germanys Merkel is of the strong opinion that it is such excess money that led to the financial crisis in the first place. Briefing reporters today after Singhs bilateral meeting with Brown,Foreign Secretary S S Menon said UK was sensitive to Indias call against financial protectionism that held back private capital flows from foreign banks that were recipients of multi-billion dollar bailouts into countries such as India. Tonight,the G20 leaders have an invitation from Queen Elizabeth,after which they will be together during dinner. Tomorrow,Singh meets Obama over 45 minutes,which will tell a story,if not less important than what the outcome of the G20 meeting will be.
