India on Friday got support from global leaders on two key issues -- a calibrated tapering of the US Federal Reserve's quantitative easing programme to avoid any spillover effects on emerging markets and tacking of tax evasion by multinational companies.
Emerging market economies grappling with currency fall due to "unconventional" monetary policies adopted by the developed world managed to get their voice heard at the gathering of G20 Leaders today. The group agreed to be mindful of the impact of monetary stimulus withdrawal by developed nations on emerging markets.
"We commit to cooperate to ensure that policies implemented to support domestic growth also support global growth and financial stability and to manage their spillovers on other countries," the G20 said in a declaration at the end of the two-day summit.
Although the language was not as strong as the views expressed by India before the meet began, a mention of it in the declaration is soothing for it and other emerging markets such as Brazil and Indonesia.
The G20 considered the issues of slower growth in emerging market economies and volatility of capital flows as growth strengthened in advanced economies. "Our central banks have committed that future changes to monetary policy settings will continue to be carefully calibrated and clearly communicated…We reiterate that excess volatility of financial flows and disorderly movements in exchange rates can have adverse implications for economic and financial stability, as observed recently in some emerging markets," the G20 said.
It, however, also noted that sound macroeconomic policies, structural reforms and strong prudential frameworks will help address an increase in volatility in these countries.
Among the currencies of emerging market economies, the rupee has depreciated by a little over 20 per cent this financial year to touch 65.25 against a dollar. Its value is down 17 per cent since May 22, when the Federal Reserve chairman hinted at a tapering of quantitative easing.
On the issues of tax erosion and profit shifting, the G20 declaration said it was a priority more than ever that all taxpayers pay their fair share of taxes, in the context of severe fiscal consolidation in many countries. It said profits should be taxed where economic activities deriving the profits are performed and where value is created.
"The principle that you must tax has been recognised globally. It is a matter of satisfaction for India. It fully justifies our stand on taxes which are due to the country," Economic Affairs Secretary Arvind Mayaram told reporters here.
The G20 declaration comes as the Indian government is embroiled over tax disputes with many multinational corporations. It has offered a conciliation procedure to Vodafone over a Rs 11,000 crore tax dispute; Vodafone is yet to respond. Mayaram said there was a general consensus on achieving of recovery though fiscal sustainability, generating job opportunities and long-term financing for infrastructure, financial reforms, financial inclusion and food security.
As allegations about corruption fly thick and fast in many regions of the world, the countries committed themselves to address this by enhancing transparency and closing the gaps in implementation and enforcement.