The reality is that India is now at the receiving end of a pullback of the loose monetary policy pursued by advanced economies like the United States.
St. Petersburg: It all boils down to the interpretation, and if you are in Russia, then on the interpreters, most of whom are winsome beyond compare. That, in some ways, sums up the final outcome of the G-20 Summit held, in what was, without doubt, the most lavish circumstances possible in a world struggling with a slowdown.
However, this is Putin’s Russia and no effort could have been spared. So, Russian hospitality meant that every country had an individual, but lookalike Dacha, to itself on the grounds of the Strelna Palace, the summit location. Strelna Palace is a twenty minute ride by ferries, all of them painted in the G20 colours.
Wikipedia informs us that Strelna Palace is a municipal settlement in Petrodvortsovy District of the city of St. Petersburg, Russia, located about halfway between St. Petersburg proper and Petergof and overlooking the shore of the Gulf of Finland. Formerly a Swedish chancellor’s estate, Strelna was chosen by Peter the Great as a place for his future summer residence in 1714. Jean Baptiste Le Blond, famous for his work with André Le Nôtre at Versailles, prepared the designs for the would-be palace and park. In 1718, a temporary wooden palace was constructed in Strelna. It had been used by the Russian royalty as a sort of hunting lodge, and has been faithfully preserved to this day. In preparation for the celebration of the 300th anniversary of the founding St. Petersburg, the Russian government decided to restore the palace and its grounds as a state conference center and presidential residence.
India got one Dacha too in this fabulous locale and the tricolour fluttered proudly in the wind. It is hard not to feel a lump in the throat and a spring in your step when you see the colours, but national pride, can be occasionally tempered by the hard reality of the world and its politics. The reality is that India is now at the receiving end of a pullback of the loose monetary policy pursued by advanced economies like the United States. The pullback is now a hard reality and no amount of hand-wringing will deter the powerful nations from correcting course. The G20 Summit declaration makes that amply clear, stating:
“Monetary policy will continue to be directed towards domestic price stability and supporting the economic recovery according to the respective mandates of central banks. We recognise the support that has been provided to the global economy in recent years from accommodative monetary policies, including unconventional monetary policies”. It goes on, unmindful of how twitchy market players would react to the news. “We remain mindful of the risks and unintended negative side effects of extended periods of monetary easing. We recognize that strengthened and sustained growth will be accompanied by an eventual transition toward the normalization of monetary policies. Our central banks have committed that future changes to monetary policy settings will continue to be carefully calibrated and clearly communicated.”
So, how should you interpret these remarks? Economic Affairs secretary Arvind Mayaram thinks they reflect India’s position and asked everyone to read more meaning into the last two lines, the bit about “careful calibration and clear communication”. Considering the importance that Prime Minister Manmohan Singh gave to “unconventional monetary policy” and its “spillover effects” in the run up to the Summit declaration, it is open season on whether he managed to convince his counterparts here. For the record, the Summit declaration did seem to borrow the PM’s line, when it said, “we commit to cooperate to ensure that policies implemented to support domestic growth also support global growth and financial stability and to manage their spillovers on other countries”. Mayaram interprets this as good news for India. But, given the harsh realities, the last word has to be had by the interpreters and they, pretty as punch, will smile on as we, the residents of one the poorest nations in the world, struggle to make sense of which way the world will turn later this month.