Prime Minister Manmohan Singh, warning that a slowdown of growth in the developing countries will push millions of people back into poverty and have an adverse effect on nutrition, health and education levels, on Saturday said it was imperative that growth in these countries was not affected.
The meeting appeared split between the US and Europe, with the former warning against protectionist policies and the latter urging stricter market regulation.
“These are not transient impacts but will impact an entire generation,” he said, adding that, “If we are to prevent a slide back and ensure that millennium development goals are achieved, we need to ensure that growth in the developing economies is not affected.”
Manmohan Singh was speaking at a G-20 meeting of world leaders convened in Washington to find a way out of the financial crisis that has gripped much of the globe and dragged industrialised economies, including the US, into a recession.
The Prime Minister, a renowned economist, said India was experiencing a “negative impact” from the economic crisis and warned that after growing at close to 9 per cent per year for four years, India’s growth rate was expected to slow down to between 7 per cent and 7.5 per cent in the current financial year. “The pace of growth next year will depend, in part, upon how long the global recession lasts and how quickly global capital flows return to normal. Much of India’s growth is internally driven and I expect we can maintain
a strong pace of growth in the coming years, but many developing countries will be hit harder,” he said.
“One of the dangers during a crisis such as this is that the people will start implementing protectionist policies,” US President George W. Bush cautioned. But he said he was pleased that the leaders had reaffirmed the “principles of open markets and free trade.”
Bush found an ally in Manmohan Singh who told the leaders: “We need to take urgent steps to strengthen the global trading system and forestall any protectionist tendencies which always surface in times of recession.”
Bush said the summit would identify regulatory reforms and launch a “specific action plan” to implement them. “Billions of hardworking people are counting on us to strengthen our financial systems for a long term,” he added. The President was expected to make a statement at 3 pm on Saturday on the findings of the summit.
British Prime Minister Gordon Brown said the leaders faced a “difficult” set of negotiations. “I think it is obviously important to make decisions today about what can be done,” he said. “There are a lot of countries with their own interests and their own policy directions at the moment that will have to change.”
Manmohan Singh acknowledged that the meeting was taking place at a time of “exceptional difficulty for the world economy.”
“The financial crisis, which a year ago seemed to be localised in one part of the financial system in the US, has exploded into a systemic crisis, spreading through the highly interconnected financial markets of industrialised countries, and has had its effects on other markets also,” he said.
The recession, Manmohan Singh predicted, would hit the export performance of developing countries and the choking of credit, combined with elevated risk perception, would lead to lower capital flows and reduced levels of foreign direct investment.
President-elect Barack Obama was conspicuous by his absence from the meeting. Obama, who has maintained that the US only has one President at a time, deployed former Secretary of State Madeleine Albright and former Republican Congressman Jim Leach to represent him on the sidelines of the meeting.
