Capital flows should promote growth not speculation: PM

Ajay Kaul
Brasilia, Apr 16 (PTI) Cautioning the world that global
economic recovery is still fragile, India on Friday said the
cross-border capital flows should contribute to growth and not
speculation.
"The financial sector and international capital flows
should contribute to economic growth rather than encourage
speculation and volatility in the international system," Prime
Minister of India Manmohan Singh said at the plenary session
of the IBSA (India-Brazil-South Africa) Summit here.
Singh said the focus should be on greater investments in
infrastructure, human capital and education.
"The critical phase of the global economic crisis is
behind us, but the process of recovery is still fragile and
uneven. We have to ensure that we do not repeat the mistakes
of the past," he said.
The Prime Minister presented a similar view at the BRIC
(Brazil-India-Russia-China) Summit, held here on the same day.
While the immediate crisis is behind the global economy,
it is still early to say whether "we are on the path of long
term recovery," he said.
A lot would depend on investment in infrastructure, stable
capital flows to the developing markets, macroeconomic
adjustments and financial sector reforms, he said.
Even though the world economic recovery is considered
fragile, the global funds have been investing heavily in the
stock markets from the end of the 2009, both in the US and
emerging economies. Foreign institutional investors(FII)have
pumped into India about USD 5.5 billion since January, 2010
taking the benchmark Sensex to 18,000 mark, the highest in
more than two years.
Prices of commodities, including metals, have also been
on upswing, leading to apprehensions whether bubbles are
building again in some of the economies.
China yesterday reported an economic growth of 11.9 per
cent in the first quarter of 2010, the highest quarterly
expansion in nearly three-years.
Reflecting these concerns, the BRIC Summit joint
statement said, "the world needs today a reformed and more
stable financial architecture that will make the global
economy less prone and more resilient to future crises, and
that there is a greater need for a more stable, predictable
and diversified international monetary system".
It said the international community must delivery a result
meeting expectations from them. Or else, the institutions like
the IMF and the World Bank "run the risk of seeing them fade
into obsolescence".
In a plain-speak about reforms of these institutions,it
said ,"The IMF and the World Bank urgently need to address
their legitimacy deficits". PTI AKK
AHM


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