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India urges emerging economies to rally together
August 31, 2013, 4:56 am

The Indian Finance minister(left) seen here with his South African counterpart Pravin Gordhan, finalising details of the BRICS Bank in Durban in March 2013 [AP]

The Indian Finance minister(left) seen here with his South African counterpart Pravin Gordhan, finalising details of the BRICS Bank in Durban in March 2013 [AP]

A top Indian Finance Ministry official told Reuters that India is asking for support from BRICS and other emerging markets like Turkey, Malaysia, Mexico for a joint intervention to halt capital flight from domestic markets and stem the tide of depreciating currencies.

The recent speculations about the US Federal Reserve’s plans to end a $85 billion a month stimulus programme has prompted a massive capital flight in emerging economies.

The Indian rupee has depreciated about 18 per cent against the dollar in the past six months.

Dipak Dasgupta, Principal Economic Adviser in the Indian Ministry of Finance told Reuters “It is now time to stop”.

“It is going to happen in a matter of days rather than weeks,” he said. “Brazil and India can start the move.”

The Indian official said that even four or five out of the stronger emerging markets together would have estimated international reserves of $1.2 trillion.

This would exceed $6 trillion if China joined in efforts, he said.

“Once they decide they will move to intervene to mutually support each other to put a floor, there is no force that can stop the impact,” he said.

Amid rising concerns over the falling rupee, the Indian Prime Minister Manmohan Singh made a statement in the lower house of the Indian Parliament on Friday.

India’s forex reserves stand at $278 billion and the fundamentals of the Indian economy are strong, assured the prime minister.

Earlier on Thursday, India’s Commerce and Industry Ministry constituted a task force to work out currency swap arrangements with key trading partners.

Brazilian President Dilma Rousseff had also last week criticised the US monetary policy of injecting dollars into the economy as a stimulus measure, which led to significant exchange rate shifts.

Rousseff echoed Singh in saying her country can deal with the surging dollar due to its high forex reserves, currently amounting to $372 billion.

“We are certainly among the five or six countries in the world with the biggest foreign currency reserves,” Rousseff said during a radio interview.

“We have what is called ‘ammunition’ to deal with those global situations,” she added.

Meanwhile, BRICS are close to reaching a consensus on creating a $100 billion foreign currency reserve fund, asserted a top Chinese central bank official last week.

Yi Gang, Deputy Governor of the People’s Bank of China, held a press briefing in Beijing on Tuesday ahead of the G20 Summit that opens next week in Russia.

Yi said BRICS have agreed on the ratio of contributions, operation mechanisms, governance structure and loan-to-value ratio of a Contingent Reserve Arrangement (CRA).

“We will see the launch of the fund in the foreseeable future,” said Yi.

The BRICS hold total foreign-currency reserves of $4.4 trillion, $3 trillion of which are held by China alone.


With inputs from Reuters