Washington: ‘Calibrated and clearly communicated monetary policies will build trust and improve business sentiments across the world by leaving little room for speculation,’ said Arvind Mayaram, Economic Affairs Secretary.
Recent risks of very low inflation in euro areas might demand use of appropriate tools in the coming time to thwart deflation tendencies. “We believe monetary policy co-operation is extremely crucial in the current juncture. This calls for calibrated monetary policies by advanced economies which are communicated clearly among our central bankers and between central bankers and the market plus a willingness to listen to others,” added Mayaram.
Mayaram will also be representing India during the ongoing spring meet of the International Monetary Fund and the World Bank. In terms of exchange rate policy, while flexible exchange rates are desirable, a cautious approach should be followed before going for currency revaluations that can result in trust deficit and currency wars.
Structural policy gaps regarding investment, product and labour markets further need to be filled to put the global economy on sustainable higher growth trajectory in the medium to long run. ‘The upcoming elections in several countries may affect the full impact of structural reforms,’stated Mayaram.
‘Investment in infrastructure should be a priority area for filling output and growth gaps’ highlighted Mayaram. He also said, “Financial innovation and investment by institutional investors of surplus countries is an area where cooperation can produce tangible results. My leader, in particular, hopes to see actions by Brisbane, that enhance the catalytic role of MDBs (multi-development banks) for infrastructure investment financing by exploring new options to optimise balance sheets.”
Central banks such as the US Federal Reserve have resorted to near-zero interest rates in order to boost growth in the wake of the global financial crisis in 2008.
The Fed had also started a massive bond purchase programme to push down borrowing costs and inject liquidity, leading to capital inflows to emerging economies such as India.
