The global war over the devaluation of currency by China and some other countries may come to an end soon, with G20 nations trying to work out a solution.
Pranab Mukherjee " height="120" alt="Pranab Mukherjee " hspace="5" width="100" align="left" src="/newsimgfiles/2010/october/23102010/102310_16.jpg" />India has also urged the G20 members to adopt a balanced approach on the issue and cooperate among themselves to find an early solution.
“Some formulations are being worked out to limit the current account deficit at a particular level that is feasible… countries have to make adjustments to their policies,” Finance Minister Pranab Mukherjee told reporters here today.
He refrained from taking sides with any country on the issue.
The US has been insisting China allow its currency to appreciate in accordance with valuations. China, however, is resisting any move to revalue the yuan, as this could hit its exports.
Earlier during the day, at the G20 ministerial meeting, Mukherjee said external balancing required shunning of competitive devaluations.
“This would be greatly helped if countries cooperate more on their exchange rates to reflect economic fundamentals, with some degree of policy space retained for smoothening disruptive movements. We cannot, however, have sudden spurts. Neither can we have virtual standstills, as both will be disruptive. Some balance needs to be found,” he said.
‘All should cooperate’
The minister said the world expected cooperation from a multilateral forum like G20 on issues of immediate importance and all should cooperate to avert “what many are now terming a currency war. We must find a solution to this by the Seoul Summit, if not by the end of our meeting”.
In today’s meeting, G20 members gave their observations but no conclusion was reached. Conclusions will get reflected in the communiqué, to be released tomorrow.
India also raised concerns on rising unilateralism and protectionism. The US had recently increased visa fees and clamped on outsourcing, while India has argued for a free flow of trade and money.
“Opaque protectionism is on the rise. And, this is more onerous as it is insidious and takes myriad forms. We must all resist this, heeding the lessons from the great depression,” Mukherjee said.
He added a lot was needed to be done by systemically important economies, which had large external account imbalances, coupled with distortions in consumption, savings and investments.
Asked about US Treasury Secretary Timothy Geithner’s letter on the policies of G20 countries, Mukherjee said it was just a suggestion and there was nothing wrong in that. Geithner had said countries with significantly undervalued currencies and adequate precautionary reserves should allow their exchange rates to adjust fully over time to levels consistent with economic fundamentals.
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It also recommended that the state should focus on raising revenue without widening the tax net and simplifying the tax procedures