India wants US to foot emerging market bill

India is expected to ask the United States to come up with a $200 billion fund for emerging economies to counteract the reversal of private capital flows, at a meeting of heads of state and governments of the Group of 20 Nations (G-20) at Washington this Saturday.

The country may also propose the creation of an Asian Investment Bank to act as a new multilateral agency to lend money to developing countries for their investment needs.

In response to the global concerns arising out of the continuing financial crisis, President George Bush has invited world leaders including Prime Minister Manmohan Singh to the meeting.

Regulatory reforms, capital flows and the international financial architecture are expected to top the agenda. Much of the ground work for this summit was done at a meeting of G-20 finance ministers and central bank governors at Sao Paulo last week.

Prime Minister Singh left for Washington on Thursday evening. The Indian delegation includes Finance Minister P Chidambaram and Planning Commission Deputy Chairman Montek Singh Ahluwalia.

In a statement prior to taking off for Washington, Prime Minister Singh said he would campaign for a greater say for developing countries in the global financial system: “I will put forward our views on the need for greater inclusivity in the international financial system, the need to ensure that the growth prospects of the developing countries do not suffer and the need to avoid protectionist tendencies.”

India as a major developing economy which is integrating into the world has a vital stake in the stability of the international economic and financial system, Singh said and added that the “fundamentals of the Indian economy are strong.”

It is likely that the summit, which includes countries like the United Kingdom, China, Japan and Australia among others, will see a general declaration at the end. A group within the G-20 may also be set up to prepare a specific set of recommendations, which will be subsequently taken up at another summit. Japan, China, Australia and the UK have already sounded out India for participating in a smaller group of “like-minded” countries to deal with the issues arising out of the summit.

While the deliberations may see the US being held responsible for the crisis, India is expected to impress upon participants the huge investment requirement of around $ 500 billion over the next five years that it has for augmenting its over-burdened physical infrastructure. Much of this money was expected to come from private capital flows, but with the international credit market nearly freezing in the recent past, there is a complete loss of appetite for emerging market paper. This threatens development plans of countries like India.