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FM slams West for global economic woes
Raj Kumar Ray in Davos | January 28, 2006 19:43 IST
Blaming the industrialised nations for global economic imbalances, Finance Minister P Chidambaram on Saturday asked them to step up investment in developing nations like India and address the burning issues of high interest rates and fuel prices.
"Global imbalance issues are not addressed by countries responsible for that. It is deepening and has serious consequences to developing nations like India," he said, addressing the World Economic Forum in Davos.
A high trade and budget deficits in US and other matured economies are leading to a reverse flow of capital from developing nations to developed nations, which goes against the economic rationale as poorer nations require more capital to grow faster and reduce poverty.
Referring to the reverse flow of capital from developing nations to developed economies like the US and EU, he said: "Capital must flow from developed to developing countries, which are scarce in capital."
Unless this happens, he said the Millennium Development Goals of reducing poverty will not be achieved.
Higher capital flow to developing nations would step up growth, which will in turn lead to higher imports from developed nation.
Chidambaram said a weak dollar, rising interest rates in US and fuel prices are affecting developing nations. "High energy prices leads to inflationary pressures and forces developing nations to adopt contradictory policies."
The minister also asked developed nations to knock down trade barriers and implement the recommendations of WTO Doha Round.
European Central Bank president Jean Claude Trichet admitted that it was "profoundly abnormal" that huge resources flow from developing nations to advanced nations. He recommended flexibility in exchange rate and higher growth in EU to reduce the global economic imbalances.
Japanese Minister for External Affairs Heizo Takenaka also agreed that higher growth in US, EU and Japan would reduce the global imbalances.
Lawrence Summers, the president of Harvard University, said that global imbalances arose due to low savings and investments by US. However, he said developing nations have to improve the investment climate in order to attract investments.