The prime minister’s concerns about the reigning protectionist sentiments arose as the country’s exports have been worst hit over the last 12 months due to the global economic and financial crisis and it could continue to suffer unless the western countries shed the protectionist sentiment, apart from strong global economic recovery.
India has been particularly concerned over US President Barack Obama’s recent “Say no to Bangalore and yes to Buffalo” remark to American entrepreneurs who outsource from India to cut cost and remain competitive. More than any other sector, the global recession has hit the Indian exports hard.
However, the prime minister left for Pittsburgh amid expectations of an early recovery from the worst global economic and financial crisis since the 1930s. On the eve of his departure for the two-day meet on September 24-25, the prime minister said the global economy and financial markets had shown a distinct improvement since the last G20 summit held in London in April. He, however, sounded a word of caution:
“… we are still not out of the woods.”
At the London summit, which had taken place in an atmosphere of economic and financial gloom, the summit leaders had announced an unprecedented liquidity stimulus and growth package of US$ 1.1 trillion towards restoring global financial and economic stability, order and growth.
The steps taken since the London meet of the elite grouping have augmented availability of international lending to India, the prime minister who had attended the previous two summits, including the first one in Washington last November, said.
The prime minister’s confidence about early recovery stemmed not only from recent reports of positive growth rates in such industrialised nations such as Japan, France and Germany, but also from the recent positive trends in the Indian economy.
“Even though our economic growth rate has slowed to 6.7 per cent in 2008-09, India approaches the summit with a sense of confidence. Our growth is primarily driven by domestic demand, our savings rate is robust and the external sector has exhibited resilience. Capital flows, especially portfolio flows, have started picking up, and we remain an attractive investment destination,” said the prime minister.
The same view was echoed during the day by Finance Minister Pranab Mukherjee while addressing a meeting of the West Bengal industry body in Kolkata. “…The monetary policies adopted by the government and the Reserve Bank of India to defuse the adverse effects of the slowdown have been paying dividends and recovery signs are visible,” Mukherjee said.
While the finance minister said the DGP growth rate for the first quarter of the present fiscal was pegged at 6.1 per cent, “we expect it to grow a little better in the second quarter. Growth will be higher in the third and fourth quarters”. The prime minister said it was necessary for India to engage in the management of the world economy because we have a lot at stake, and a lot to contribute.
“I will convey India’s interest in seeing the earliest possible return to trend growth and stabilisation of the banking and financial sectors in the advanced economies, because this directly affects our exports, capital inflows and investment. We would like to see a continuous increase in the capital base of multilateral development banks to finance the massive infrastructure needs of emerging markets.”