Meeting of BRICS Finance Ministers and Central Bank Governors on 16th April, 2015

Intervention of FM

Meeting of BRICS Finance Ministers and Central Bank Governors on 16th April, 2015

·        Economic recovery from the financial crisis has been relatively weak, and characterized by imbalances and build-up of financial market risks. Even more worrisome is the decline in potential growth in both advanced and emerging economies.

·        Countries are continuing to rely on unconventional monetary policies (UMP) to do the heavy lifting. More importantly, it is imperative to complement them with fiscal policy support in economies that are large and not constrained by debt burdens, as well as structural reforms, both of which would impart durability to the recovery.
·        UMPs need to be monitored by the IMF to minimize their impact on other economies.
·        There is also need for creating additional mechanisms to finance infrastructure in our economies as well as the developing world.

·        In India, we have of late seen a huge sprout of changes. Our growth has risen to a stable 7.5percent and our deficits have declined significantly. Our current account deficit is one of the lowest in several years. The impact of our reforms appears to be very positive. We are opening markets, easing business activities and placing an emphasis on infrastructure spending as well as radical tax reforms. These reforms have been helped by the reduction in oil prices. A lot will depend on how the world economy will move ahead in the next year.
·        On IMF reforms, we are deeply disappointed at the delays in implementation of the 2010 IMF Quota and Governance Reforms, notwithstanding commitments by the members for their early ratification at diverse global fora. These delays can potentially erode IMF’s credibility and effectiveness.  IMF is a quota based institution and its continued dependence on borrowed resources is neither desirable nor sustainable.

·        As regards interim options to take forward the reform process, pending the ratification of IMF reforms by USA, we believe that the proposal of delinking the Quota increase from governance reforms merits support. This option will to the maximum extent possible enable resourcing of IMF and deliver substantive shift of voting power to EMDS in line with 2010 IMF reforms.

·        On the New Development Bank and Contingent Reserve arrangement, India has ratified the agreements. We look forward to the ratification by all other countries. As regards the President of the Bank, we are in the final stages of nominating the candidate.

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Intervention of Finance Minister on Global Economy and Framework for Strong, Sustainable and Balanced Growth at G-20

Following is the text of the Intervention made by the Union Finance Minister Shri Arun Jaitley during his visit to Washington D.C.:

“Once again the global economic situation requires ambitious policy reforms and international coordination. The growth in some advanced countries has not improved as much as we had anticipated. Emerging market economies face a high risk of negative spill-overs from un-conventional monetary policy actions of advanced economies. The uncertainties about their extent and eventual normalisation have induced greater volatility and intensified pressures on both emerging market currencies and capital markets.

Some EMEs have had to dip into their foreign exchange reserves in order to manage the effects of volatile currency markets and others had to shore them up in the absence of other adequate safety nets.

Given these challenges, there is need for clarity in communications and forward guidance to minimise surprises. But we need cooperative tools which will create confidence in EME investors and prevent currency crises. As we have seen from the crises of the 90s in East Asia and Latin America, policies which place the burden of tackling the impact of capital flight solely on affected countries, are ineffective. We need to co-operate to cushion the impact of unconventional policies and their normalisation on affected economies which may face a flight of capital shortly similar to that of the “taper tantrum” of 2013.

The lack of infrastructure is a structural bottleneck to growth. The increasing monetary base in advanced economies combined with extremely low yields can be leveraged to fulfill the need for channelizing long term finance in the infrastructure sector.

The Turkish Presidency’s efforts for continuing to focus on investment in infrastructure and SMEs are welcome. Creative ways must be found to channel funds into productive investments.

The Indian economy is picking up after a few years of slowdown. We had double digit inflation which has been brought down to five percent. Many legislative changes have been made to boost investment, many sectors have been opened up for investment and steps have been taken for easing business and industrial activities. Ambitious taxation reforms are on the anvil. We are committed to build 100 new smart cities and there is special focus on building rail, road and rural infrastructure. We believe that improvement in investment avenues and infrastructure will provide the necessary momentum for sustained high growth.

The Framework Working Group has decided to crystallize the commitments laid down in the Brisbane growth strategies into few key ones based on their impact on growth and the national priorities of the concerned member. In addition we hope that the adjusted growth strategies would be finalized by the time of the Antalya Summit.

International Organizations deserve praise for their efforts and inputs into the growth strategy exercise. At the same time, there should be a continuous refining of the models so as to incorporate country specific heterogeneities.

The current scenario analysis is welcome as a risk gauging exercise, but there is also a need to look at an alternative scenario which more correctly reflects challenges facing the global economy, specifically the EMEs, in the light of policy normalization by the US and unconventional monetary easing by some other advanced economies.

We must work together to achieve our common goal to make this world a more happy, livable and secured place where all human beings live in peace and grow with dignity and respect for all”.


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Intervention of Finance Minister on International Tax Issues at G20

Following is the text of the Intervention made by the Union Finance Minister Shri Arun Jaitley:

“Base Erosion and Profit Shifting (BEPS) has been a cause of concern for developing and emerging economies for long as it erodes their tax base depriving them of much needed resources for developmental activities. It is also unfair to the general taxpaying public. It also provides an unfair competitive advantage to Multinational Enterprises (MNEs) vis-à-vis domestic companies which have no opportunities for BEPS strategies. We welcome the progress made in BEPS project incorporating the participation of eight (8) non-OECD G20 countries.

Although exchange of information on “request basis” has resulted in improving transparency, its scope is limited; as offshore financial centers and tax havens are obliged to provide information only when investigation in a particular case has already commenced. The problem of offshore tax evasion and flow of illicit money can be addressed only by the free flow of financial account information, exchanged amongst countries on an automatic basis.

We strongly feel that there is a need to ensure that the Common Reporting Standards on Automatic exchange of Information should be implemented on a fully reciprocal global basis and those countries which have not yet committed to the timeline of 2017 or 2018 should do it without any further delay. The problem of black money and illicit flow to offshore jurisdictions and tax havens can be addressed only if this is implemented at a global level.

The Global Forum should monitor the implementation of common reporting standards on exchange of information and ensure that every country/jurisdiction is effectively implementing them, have necessary legal and regulatory frameworks and are also exchanging information in practice.