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Business News/ Politics / Policy/  G20 meet: Arvind Mayaram stresses on forward guidance on Fed tapering
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G20 meet: Arvind Mayaram stresses on forward guidance on Fed tapering

Advance information on US tapering will help minimize its impact on emerging economies, says Mayaram

There has to be a much greater clarity and cooperation between the Fed and other emerging markets to ensure that tapering is done in a systematic manner so as not to destabilize whatever little stability has been achieved in the global economy, says Arvind Mayaram. Photo: Ramesh PathaniaPremium
There has to be a much greater clarity and cooperation between the Fed and other emerging markets to ensure that tapering is done in a systematic manner so as not to destabilize whatever little stability has been achieved in the global economy, says Arvind Mayaram. Photo: Ramesh Pathania

Sydney: India on Friday stressed the need for the US Federal Reserve to provide advance information about the gradual tapering of economic stimulus to minimize its impact on emerging market economies.

Since the start of the year, the US central bank has trimmed its $85 billion a month bond purchasing programme twice by $10 billion each, citing improvements in the labour market and a pick-up in economic growth in the world’s biggest economy.

“There should be some kind of a forward guidance that makes it (tapering) more predictable," economic affairs secretary Arvind Mayaram said at a meeting of finance ministry and central bank deputies in Sydney.

“There has to be a much greater clarity and much greater cooperation between the Fed and other emerging markets to ensure that tapering is done in a systematic manner so as not to destabilize whatever little stability has been achieved in the global economy," he said.

After talk first surfaced in May last year about the prospects of a gradual tapering of stimulus spending by the Fed, emerging market currencies, including the rupee, and stock markets fell sharply as foreign investors fled risky assets.

The local currency fell to a record low of 68.85 per dollar on 28 August. It has since recovered to the 62 per dollar levels after giving up 11% in all of 2013.

Many emerging economies like India, Brazil, Argentina, South Africa and Turkey also renewed pressure on their currencies after the US in December cut stimulus spending with effect from January.

Mayaram was speaking at a meeting that precedes talks among finance ministers and central bank governors from the Group of 20 (G20) biggest economies starting on Saturday in the Australian city.

“Within the central bankers, they must have a consensus on what is the optimum level of withdrawal of stimulus that the world economy can manage and the manner in which it is done," Mayaram said.

India also asked for definite timelines for implementation of quota reforms at the International Monetary Fund (IMF) that were approved in 2010, but stalled by the US senate, adding that the delayed implementation was the first visible failure of the G20.

IMF quota reforms will give countries like India and China a higher voting share and larger access to funds.

“We strongly stated that it is unfortunate that despite an agreement in G20, implementation of 2010 reforms has not been completed and we have missed the deadline of January 2014. This is perhaps the first visible failure of G20. This has reduced the credibility of G20 as a premium forum for international economic cooperation," Mayaram said.

Battling with tax evasion and innovative tax avoidance measures employed by multinational companies, India also pushed for automatic exchange of important financial information like salaries, royalties and dividends between nations.

To address loopholes in the current taxation system, India stressed that automatic exchange of information should also address tax avoidance and not only tax evasion.

It also urged reciprocity by the US under automatic exchange of information under the Foreign Account Tax Compliance Act, a US law that requires foreign banks to disclose account details of American citizens. But it does not require the US to reciprocate and provide information to other countries.

Remya Nair is in Sydney on the invitation of the department of foreign affairs and trade, Australia.

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Published: 21 Feb 2014, 06:50 PM IST
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