Washington: Seeking a global response to the financial crisis, Prime Minister Manmohan Singh on Saturday called for a multi-pronged response to arrest the deepening recession and avoid another one in future.
"Since the crisis is global, it calls for a coordinated global response and this summit is, therefore, timely," he said as world leaders from the Group of 20 (G20) leading economies met for the second day in a summit.
The historic summit convened by US President George Bush brings together Group of Seven industrial nations, a dozen emerging markets like India, China, Brazil, and South Africa and the European Union which together account for 90 percent of the global economy.
Among the measures suggested by Manmohan Singh were a coordinated fiscal stimulus to mitigate the severity and duration of the recession, special initiatives to counter the shrinkage of capital flows to developing countries and a reform of the global financial architecture to prevent similar crises in future.
"An obvious issue is to consider whether the emergence of recessionary trends calls for some fiscal stimulus," said Manmohan Singh, suggesting "a coordinated fiscal stimulus by countries that are in a position to do so would help to mitigate the severity and duration of the recession.
"It would also send a strong signal to investors around the world. Resort to fiscal stimulus may be viewed as risky in some situations, but if we are indeed on the brink of the worst downturn since the Great Depression, the risk may be worth taking," he said.
Manmohan Singh stressed the "need to distinguish between the immediate priority, which must be to bring the crisis under control as quickly as possible with as little adverse effect on developing countries, and the medium term objective of reforming the global financial architecture to prevent similar crises in future.
"The international community needs to consider special initiatives to counter the shrinkage of capital flows to developing countries that is almost certain to occur over the next two years," Manmohan Singh said.
Seeking a new global financial architecture reflecting changes in economic realities, he said: "The new architecture we design must include a credible system of multilateral surveillance, which can signal the emergence of imbalances that are likely to have systemic effects."
It "should also put in motion a process of consultation that can yield results in terms of policy coordination," he added.
The summit had raised expectations of a Bretton Woods-II, Manmohan Singh said. "The world has certainly changed sufficiently to need a new architecture, but this can only be done on the basis of much greater preparation and consultation.
"We can, however, signal that we are serious about starting a process that will, in time, produce an architecture suited to the new challenges and vulnerabilities facing the world economy and reflective of the changes that have taken place in the economic structure.
"We need to ensure that the processes we set in motion today safeguard and promote the welfare of our future generations," the Prime Minister said.
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