India asks IMF to take lead role in tackling financial crisis


Washington : India asked the International Monetary Fund to be prepared to meet the borrowing needs of countries engulfed by the global financial crisis, warning that failure to address liquidity concerns may further risk the financial system’s stability.

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“The financial institution (IMF) should have the mending instruments and the financing capacity to address potential borrowing needs,” according to Finance Minister P Chidambaram, whose speech was read out in absentia by Reserve Bank of India Governor D Subbarao at the International Monetary and Finance Committee’s meeting here on Saturday.

Subbarao was representing Chidambaram, who cancelled his visit to assuage fears at home about the global financial storm hitting the Indian shores.

Noting that there were a number of concerns over the attempts to resolve the current crisis spawned by defunct mortgages in the US, India suggested that IMF take up the role of an orchestra conductor so that fragmented efforts at different levels be organised for more effective results.

Besides, India wanted the stigma attached to Fund lending to be tackled to reduce recourse to alternatives. “Countries have to be encouraged to approach the Fund in the incipient stages of a crisis,” India maintained.

Although according to Chidambaram emerging market economies were relatively safer, he felt their growth would nevertheless be affected and would slow to 6.9 per cent in 2008 and further to 6.1 per cent in 2009.

“The risks for these base line scenarios are clearly tilted downwards,” he said, pointing that inflation could, however, moderate mildly due to the recessionary conditions in some parts of the world and some moderation in commodity prices.