G20 ministers to address capital volatility concerns

Paris: Ahead of G20 Cannes Summit, finance ministers of world`s most powerful economies have reached a consensus on ways to handle volatile capital flows a bane of emerging economies like India.

There has also been an agreement on enhancing the capacity of the developing countries to absorb capital inflows, India`s Finance Minister Pranab Mukherjee said Saturday. He is here to participate in the meeting of G20 finance ministers and central bank governors, which is taking place in the backdrop of worsening Eurozone debt crisis and fears of double-dip recession in several economies of the world.

The ministers met for two-days, ahead of the Summit next month at Cannes. India, along with several other emerging economies, had to cope with volatility in international flows in its capital market, affecting the currency movement. In the recent weeks, India`s currency weakened against US dollar on outflows. A weak Rupee had its impact on domestic inflation as imports become expensive.

On the contrary, in the not-too-distant past, the country had to manage with excessive foreign inflows which strengthened Rupee to make its exports uncompetitive. "I am happy to note that a consensus has been reached on …how to handle large volatile capital flows, enhancing capacity of developing countries to absorb capital flows and how to cope with sudden stops on capital in developing countries," Mukherjee said.

Later an Indian official accompanying the delegation said the issue of rebalancing growth and stability of the banking system was also to be addressed by deepening of local currency bond market.