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Asian meltdown won't affect liberalisation, India's growth rate will be 8 pc in future, PM assures G-15

Prime Minister Atal Bihari Vajpayee has cautioned developing countries against dramatic inflow and exit of the foreign capital that could plunge their economies into deep crisis, and asked for a rule-based system to bring greater discipline in the global financial markets.

Making an intervention during the ongoing ninth G-15 summit in Montego Bay in Jamaica, Vajpayee admitted that India was affected during economic crises in east and southeast Asia and more recently in Brazil, but it managed to escape the onslaught due to various factors.

He said the economic problems in some countries affected India's external trade, foreign direct investment inflows and portfolio management.

''We, however, remain committed to continuing the economic liberalisation programmes at a pace and manner that we consider is best suited to our needs,'' the prime minister said while asserting that India's economy is expected to grow by five to six per cent this financial year.

''We would attain a sustainable growth rate of seven to eight per during the coming years,'' he added.

The prime minister said the recent events in developing countries had shown that the boon of large-scale capital flow can turn into a bane when it makes a dramatic exit.

According to him, when a crisis erupts, the country will need to be quickly assisted while at the same time prompt preventive steps are to be taken against its contagious impact.

''Any assistance should also pay special attention to the social consequences arising from such crises,'' he pointed out.

Vajpayee advocated transparency among all players -- both public and private, and developed and developing. Apparently upset over trade barriers against the developing countries under the World Trade Organisation, Vajpayee said some unilateral trade measures were hurting the developing nations.

He regretted that the expectations raised by the Uruguay round have unfortunately not been realised, and meaningful market access was still to accrue in areas such as textiles and architecture. ''We, however, see a resurgence in protectionism in the form of anti-dumping, safeguards and other actions.''

For service negotiations, the objective of developing countries should be to achieve substantial liberalisation in sectors of interest to them. Regarding movement of ''natural persons'', all these issues can be looked into at the preparatory meeting India is holding this year before the third WTO ministerial meeting, he said.

Earlier, referring to the economic crisis in developing countries, the prime minister said it was not abnormal for markets to react to a perceived aberration in a country's economic fundamentals or in its economic and monetary policies, but wide fluctuations in currency values had led to loss of confidence in foreign investors.

''Once an economy is engulfed, it takes a significant length of time to recover,'' he noted. "Also the adverse effects are felt only by the affected economies. The global interdependence has ensured that the shock impulses are transmitted worldwide and no country is immune, in particular.''

This is posing a grave threat to emerging economies whose markets institutions and regulatory mechanisms are still at an evolutionary stage, he said.

Stating that India, too, cannot remain complacent in spite of having weathered the economic odds, Vajpayee said there was a great need for revamping the global financial architecture.

Similarly, on issues such as capital account convertibility there was a greater appreciation even within the International Monetary Fund about the need for caution, he pointed out.

However, in the absence of a comprehensive institutional framework within which proposals for reform can be examined, it becomes necessary that G-15 look at the various options, he said.

He noted that an unfortunate effect of the globalisation trend was that the priorities of development co-operation have virtually receded into the background and structural weaknesses of the developing countries were starkly evident.

Vajpayee said the G-15 could play a critical role in bringing the importance of the development co-operation back to the global agenda.

He welcomed the initiative of the International Labour Organisation to develop a global employment strategy to address the problem of growing unemployment.

Vajpayee said India had proposed the new initiatives aimed at strengthening linkages between member-countries in various areas such as communications, biotechnology, information and infrastruture.

He said developing countries should fully gear themselves to benefit from revolutionary technologies in the 21st century.

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