India to take up currency devaluation at G20 meet

Sanjeev Sharma

Tribune News Service

New Delhi, September 3

Concerned over the recent devaluation of currencies in Asia, including China, India today said it will take up the issue of currency devaluations and its impact on global economic stability at the meeting of G20 Finance Ministers in Turkey beginning from tomorrow.

A Finance Ministry statement released along with the departure of Finance Minister Arun Jaitley to Turkey for the meeting of G20 Finance Ministers voiced India’s concern over recent currency depreciation.

Although the statement did not name any particular currency, it is obvious that the recent turmoil in global and emerging currency and stock markets over the past one month has ensued after China decided to devalue its currency, yuan, to battle an economic slowdown.

“The recent devaluation of major currencies followed by currency depreciations in a large number of Asian emerging markets raises the risk of competitive devaluations,” the Finance Ministry said.

The risk of competitive devaluations is what is known as currency wars when countries race against each other to keep their currencies competitive. For instance, the Indian rupee has been falling in the last month to keep pace with other currencies in the region.

The government said competitive currency devaluations, at a time when global demand is sluggish, are a major threat to stability in the global economy. India has borne the brunt of the recent global turmoil which seeks to threaten the recovery in the economy when many international agencies have called India “bright spot” in a gloomy global economy.

“The attempt in Ankara would be to analyse the situation and consider collaborative measures like developing the global safety nets to protect countries from negative spillovers arising from domestic actions”, the Finance Ministry statement added.

The meeting of G20 Finance Ministers would be the first major multilateral economic forum meeting after the very recent and fresh volatility in the global economic system.

The Finance Ministry said the main purpose of these meetings is to review ongoing global economic developments, growth prospects, investment and infrastructure, international financial architecture and international tax issues among others.

The main worries over currency depreciation especially from China is stemming from exports becoming uncompetitive, domestic markets being dumped with low cost Chinese goods. The silver lining is weak demand has resulted in multi-year lows for commodities like coal, metals and crude of which India is a net importer.