India asks rich nations to give heads up on monetary policy exit

A day after the Group of 20 pressed the US to avoid a potentially devastating default, India Saturday asked advanced economies to give a heads up when the time comes for an exit from unconventional monetary policies.

Noting that "global recovery is as yet fragile," Finance Minister P. Chidambaram said, "It needs to be ensured that it is nurtured and put on a sustainable path through appropriate policy actions, both in advanced and emerging market economies."

"Dialogue, cooperation and effective communication, on a multilateral basis, would be important in ensuring this," he told world's financial leaders gathered here for the International Monetary Fund World Bank annual meetings.

"Although the improving economic activity in the US is a good sign," Chidambaram said, "a smooth exit from the unconventional monetary policies poses a major challenge for the policymakers in advanced and emerging economies".

"Given the risks involved in the exit from the unconventional monetary policies, there is a need to communicate clearly to market participants the parameters that will guide the exit," he said.

"Emerging market economies also need to strengthen their domestic fundamentals and be prepared with appropriate policy responses in different scenarios, to meet the challenge arising out of exit from the unconventional monetary policies in advanced economies," he said.

India's warning came amid report that the negotiations between President Barack Obama and Republicans to raise the US debt limit had broke down - just days before the nation reaches its borrowing limit Oct 17 - with the White House rejecting Republican's latest offer.

(Arun Kumar can be contacted at arun.kumar@ians.in)