Statement by India at the 59th Session of UNCTAD Trade and Development Board, Agenda Item 4: Interdependence: Coordinating stimulus for global growth, delivered by Shri Dilip Sinha, Permanent Representative, on September 18, 2012, Geneva

Mr. President,

          On behalf of the delegation of India, I wish to join other members in congratulating you, Mr. President ( ) on your election to the Presidency of the Board.  My delegation associates itself with the statements made by the G-77 Chair, Indonesia, and the Asian Group Coordinator, Iran.

          This session assumes importance as it is the first annual session after the successful conclusion of UNCTAD XIII. I would like to congratulate the Secretary General for a comprehensive and analytical ‘Trade and Development Report 1981-2011’ covering a period of past three decades, and the latest ‘Trade and Development Report 2012’, which are based on in-depth research that is the hallmark of UNCTAD. 

Mr. President,

          The topic of discussion today, ‘Interdependence: Coordinating stimulus for global growth’, is very timely and relevant for all of us. Interdependence-christened globalization – represents the salient feature of today’s world that has profoundly impacted the economic and social aspects of our life.

          Till a few years ago the world had taken for granted the benefits of globalization and global interdependence. Today, as we enjoy its fruits, we have also to cope with the full gamut of its impact, some of which has been negative, especially for the vulnerable economies and the weaker sections of society.

The global financial crisis has shown that economic liberalization and globalization have increased the vulnerability of developing countries, in particular the least developed countries, which have to bear the additional burden of inflationary pressures. Developing countries were not the cause of this crisis, but they are amongst its worst affected victims. Global economic recovery is faltering and even the fast growing emerging markets are feeling the impact.

The TDR 2012 examines the current trends and challenges in the world economy and attempts to provide policy responses for balanced growth.  The report emphasizes that owing to the adoption of expansionary demand side policies the developing and transition economies managed relatively healthy GDP growth of  5% in 2011 and 4% in first half of 2012, while the developed countries grew 2.7% in 2011 and 1% in first half of 2012. The slowdown in international trade is largely due to the developed economies, which remain the major participants in world trade, even though their aggregate share in total trade declined from 69% in 1995 to 55% in 2010.

          The TDR notes the positive impact of the stimulus measures provided by the governments of all the major economies in response to the economic crisis until the first half of 2009. But lately, the asymmetry in the policy approaches of the developed and developing countries in providing general stimulus measures to sustain a global recovery may delay the rapid recovery of the global growth.

          This brings us to the contentious issue of the relationship between austerity and growth. It has been argued that austerity now will lay the basis for sustained growth later. But there is also an alternative view that with growth impulses seriously weakened as they are today, synchronized austerity across many countries may actually accentuate the current crisis.

          These divergent views underscore the complexity of the challenges we face today and the need for sound policy responses. We should not allow the global economic slowdown to become an excuse for promoting protectionism or erecting barriers to movement of people, services and capital. We need greater coordination of macroeconomic policies of major economies. The benefits of globalisation have to be preserved and the weaknesses that have led to the current crisis need to be addressed. Developing countries need a rule-based, stable and predictable global order which gives them the policy space and time to develop.

          The gaps in the international financial architecture that allow the recurrence of crises stare us in the face today. These crises have global ramifications and underscore the need for collective action. The reform of governance systems of international financial institutions ought to be pursued with speed and efficiency.

At the recent G-20 Summit, governments and economists weighed two different paths to ease the financial crisis: spending more to try to stimulate growth or slashing budgets by austerity measures. The crucial challenge for policymakers is reconciling fiscal consolidation with growth. We hope that the deliberations in this TDB will provide suggestions on policy options and guidance to UNCTAD for further policy analysis.
My delegation reiterates its full support to UNCTAD and readiness to work with other member states to ensure the implementation of the decision of UNCTAD XIII Conference that addresses the development aspirations of the developing countries.

Thank you, Mr. Chairman.

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