Market-linked financing for G20 infra plans likely

Outcome to help India and countries with large current account deficits to cushion such shortages.

The G-20 nations are expected to create a market-linked mechanism to finance infrastructure projects in developing countries as a means to push global growth and find a way to provide stable capital flows across the globe. The outcome will help India and other emerging economies with large current account deficits to cushion such deficits.

Indian official sources said the details would have to be hammered out,but the final communiqué would mean the developing world would be weaned away from aid into a market-linked capital transfer mechanism. They said this could also include private equity means which were mostly out of bounds in development plans.

Just a mile away,the B-20 the business summit of global CEOs running concurrent to the G-20 will also heave a sigh of relief. Attendees include Kris Gopalakrishnan,CEO,Infosys and Vikram Pandit of Citibank,both of which have presence across countries. For them,the prospect of unfolding restrictions on capital flows to correct global imbalances is plainly uncomfortable.

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Angel Gurria,secretary-general of the Organization for Economic Co-operation and Development,told reporters that G-20 will endorse what he called Seoul Development Consensus for Shared Growth, which is built on an emphasis on infrastructure investment to achieve sustainable growth in developing countries. This is really going to change the way in which we address development, he added.

Sources said following the final G20 communiqué,a high-level body could be set up to work out the mechanisms. In a way,the proposal is a strong endorsement of the development agenda that,among others,Prime Minister Manmohan Singh has called the group that accounts for over 80 per cent of the world GDP to focus on.

This will also mean the end of plans to stem the flow of capital into emerging economies by either capping current account deficits or pushing then to exercise capital controls. This is a position India is uncomfortable with as it wants the inflows to finance its massive infrastructure needs,which is projected at $1 trillion by 2017. Planning Commission deputy chairman Montek Singh Ahluwalia,the Prime Ministers key negotiator at the two-day meet said India already has quantitative limits on debt inflows,which enable the economy to tolerate fluctuations.

The meeting was formally inaugurated Thursday with a working dinner among the heads of state,which was attended by Singh. At the dinner,Singh and Obama were seated almost adjacent to each other,with Argentine President Cristina Fernandez,between the two.

Avoid devaluation,protectionism

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Prime Minister Manmohan Singh is expected to ask nations to avoid competitive devaluations and fresh spurt in protectionism at the G-20 heads of state meeting on Friday.

The comments,say agency reports is contained in Singhs speech at one of the sessions. However at the time of going to press,government sources said the final text of the speech could be modified,as several meetings including that of the sherpas was still on.

Exchanged rate flexibility is an important instrument for advancing a sustainable current account position and our policies must reflect this consideration, the speech draft,seen by Reuters,says. Advanced deficit countries must follow policies of fiscal consolidation consistent with their individual circumstances so as to ensure debt sustainability over the medium term, the report said.

Singh will also call for such fiscal correction to be accompanied by credible reforms in products and the labour market which would increase efficiency and competitiveness.ENS