Investment, particularly in infrastructure, can play critical role in sustaining the global recovery and rebalancing, Finance Minister P. Chidambaram said at a meeting of G20 Finance Ministers and Central Bank Governors here Friday
"Larger investments in infrastructure in emerging markets will increase the potential of these countries to grow more rapidly in the medium run and will also contribute to a much needed global demand in the short run," he said.
Chidambaram recalled Indian Prime Minister Manmohan Singh had suggested at the St Petersburg Summit that if industrialised countries can put to use unconventional monetary policies, "we need to show the same innovativeness in devising unconventional development financing".
Special windows need to be created in the World Bank and other Multilateral Development Banks' (MDBs) for ensuring finance in support of infrastructure development, he said.
These should include provision of finance for ongoing projects which face a sudden scarcity of funds owing to volatile capital flows, he said, and access to this window should be beyond the normal country limits, which otherwise introduce inflexibility.
The aim should be to create mechanisms which can increase the flow of infrastructure financing at times when other investments are slowing down, Chidambaram said.
He also suggested having a greater involvement of the IFC in infrastructure financing to help catalyse private sector flows into the sector.
Chidambaram welcomed the proposal to set up a new and dedicated financing facility called the Global Infrastructure Facility at the World Bank to serve the financing needs for infrastructure, particularly in emerging and developing economies.
India, he said would like to see the detailed proposal for its establishment with specific timelines by the December Deputies meeting.
G20 is well placed to coordinate various stakeholders including governments, especially the ones that have large surpluses, the private sector, and multilateral development banks, for investment in developing countries, Chidambaram said.
The minister suggested doing so "through innovative ways to recycle global savings and development of viable strategies that overcome the presumed hurdle of 'lack of enabling environment' for infrastructure investment."