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October - November 2008
The Chancellor of the Exchequer, Rt Hon Alistair Darling MP and Indian Finance Minister, Palaniappan Chidambaram after the second ministerial talk issued a joint statement:
“We are of the opinion that the problems currently facing the global economy can only be overcome through a constructive dialogue between countries to help find a global solution. Today’s meeting demonstrates the importance our countries place on our bilateral relationship and the ties that bind our economies.
While we remain positive about the longer-term prospects for the UK and Indian economies, we are also aware of the increased uncertainty and downside risks currently facing us with the worsening of the outlook for the world economy since the first EFD. A confluence of shocks: high food prices, high oil prices, and volatile financial markets, have adversely affected the global economy. In the year to July, world agricultural prices increased by 32 percent, oil prices by 62 percent and coal prices by 112 percent. On 17 January 2007, on the day of the first Ministerial EFD, a barrel of oil cost $53, last week it cost $120. We have seen oil prices increase by $10 in a single day this year. Together, these shocks have dampened growth prospects in in all economies, including advanced economies, and pushed up inflation.
The sharp increase in commodity prices has heightened inflationary pressures world wide. In April 2008 the IMF forecasted 2.6% inflation in advanced economies this year. In July the IMF further raised projected inflation in advanced economies to 3.4%. For emerging markets the figure has gone up from 7.4% to 9.1%. This global shock requires a global solution. Today’s meeting provided us with an excellent opportunity to explore such a solution. We discussed the policy options open to countries to help combat these pressures in the short run and to help reduce prices in the future.
We believe that open markets, operating through a free and fair trading regime, will be crucial for overcoming the challenges facing the global economy. Both India and the UK share a strong commitment to a multilateral, rules-based trading system and an open and transparent investment regime. We are deeply disappointed by the recent pause in the Doha Development Round talks. Today we discussed the way forward. We urge all parties to show greater flexibility to agree on free and fair trade rules that deliver a balanced result for the world’s poor and the global economy. Bilateral initiatives will also be important, and we are pleased to announce that the UK and India will undertake a joint-study into non-tariff barriers, including domestic regulations in services, to trade between India and the UK and how they could be removed. We also acknowledge the promising beginning to our work on intellectual property as joint co-chairs of the Intellectual Property Rights and Innovation work stream within the G8 Heiligendamm Process.
The recent volatility of international capital markets has once again underscored the importance of open, efficient, and transparent financial markets for sustained high economic growth and development. Both countries agree on the need to reform the International Financial Institutions, and support an effective multilateral response to the global challenges and opportunities facing us. As part of this, we highlight the need for the IMF to work closely with the Financial Stability Forum to develop an early warning system of the threats from the international financial system to financial and economic stability We welcome the establishment of the industry-led International Centre for Financial Regulation, to be launched in London at the end of 2008, to carry out cutting-edge regulatory training and research. We look forward to the development of voluntary guidelines by private equity and hedge funds. We also discussed how our countries can benefit from investment by sovereign wealth funds, and reaffirmed our support for the IMF and OECD’s work to develop best practice guidelines for these funds and recipient countries.
In recent years financial ties between India and the UK have been further strengthened, with a number of Indian banks operating in the UK, a number of British banks operating in India, and many Indian companies listed on the London Stock Exchange. We reaffirmed our support for liberalised financial markets that permit financial services and related businesses to operate in the UK and India on a level playing field. We agreed that the UK would collaborate closely to support India’s efforts to maintain momentum on key areas of financial sector reform in the coming months.
Making the financial sector more inclusive, such that everyone, in particular the poor, has better access to financial services, is a key tool to reducing poverty, achieving sustainable growth and improving livelihoods in both countries. This is why we are pleased to announce that India and the UK will work together through exchanges between institutions concerned with financial inclusion, including through mutual study visits. The initial findings of the work will be unveiled at the UK Financial Inclusion Taskforce Conference at HM Treasury in October 2008.
India has embarked upon a very ambitious PPP programme for infrastructure development. In the next five years, it is expected that 500 billion US dollars will be invested in infrastructure development and augmentation, of which 150 billion US dollars will be private sector investment. We agreed that Public Private Partnerships could provide a value for money means of delivering this investment. Today, we signed a Memorandum of Understanding between HM Treasury and the Indian Ministry of Finance to encourage sharing of best practice in the development of Public Private Partnerships.
Climate Change is a global challenge facing the world economy and it is important that Finance Ministries work together to reduce GHG emissions without compromising growth and development. We agreed to work towards the creation of a larger and deeper carbon market, to facilitate emissions reductions as required under the UNFCCC through public and private finance, and to explore how to overcome the barriers to progress, including how best to provide the necessary financial flows and technology transfers to developing countries. We will host a workshop looking at how the Kyoto Mechanisms can be enhanced to meet these objectives. We welcome the launch of the new Climate Investment Funds (CIFs), and will work together to develop a plan to support India’s pursuit of a climate-resilient economy.
Addressing climate change also requires enhanced cooperation in technologies, including for improving energy efficiency. Today, Professor Julia King set out her findings from her recent review of Low Carbon Cars and ways in which the industry in the UK and India can collaborate to take forward this agenda. The UK and India will jointly host a workshop that will bring together business and academia from our two countries to consider how best we can collaborate to address this issue.
Today, we reaffirm the commitment made by both Prime Ministers Singh and Brown to the MDG Call to Action. We agreed that an urgent global effort is required to meet the MDGs and reduce global poverty. We reconfirmed our commitment to working together to reduce poverty in India. The UK plans to provide £825 million in grant assistance to India between 2008-11 in line with the new DFID Country Plan for India 2008-15. We have agreed to promote exchange of information and approaches to the provision of aid. We welcome the new multi-donor strategic partnership for Bihar, an important innovation which may have valuable lessons for the administration of development programmes around the world.
Today’s dialogue reaffirmed the continued strength of the modern UK-India economic and financial relationship, and the value placed on these by both governments. We agreed to meet again for the next round of the dialogue in India in 2009, and emphasised that our ongoing cooperation in the economic and financial spheres is, and will be, a truly collaborative relationship.”