New Delhi: As the world economy continues to face challenges on several fronts, the slowdown in emerging economies does not augur well for the global economy, said Mr Pranab Mukherjee, Finance Minister, Government of India. He was speaking at the inaugural session of the 1st Delhi Economics Conclave organized by the Ministry of Finance, Government of India, in partnership with the Confederation of Indian Industry (CII).

The challenges are enormous, he elaborated, speaking of the persisting Euro Zone crisis that has further fuelled uncertainty in the global markets. Though economies have been working to address the challenge through fiscal and monetary policy tools, the slowdown poses fresh challenges for policy makers going forward. As the world economies grapple with re-alignments and rebalancing, emerging economies like India have a greater and more prominent role to play. In a complex and interconnected world, he said, a concerted approach is the need of the hour, adding that the global economy is better placed today than it was in the 1930s.

Talking of the challenges that India faces, he said the primary challenge is of human development – infant and maternal mortality rates are worrisomely high; employment poses a huge challenge as around 250-300 million new entrants are expected in the work force over the next decade. This coupled with high inflation, issues regarding land availability and environmental sustainability make the challenges daunting. The government has been addressing these challenges through various policy measures, the Minister said, citing the recent National Manufacturing Policy and the decision to allow greater FDI in the Retail sector, “but greater consensus will help speed up implementation,” he stressed. “No action can afford to be insular in a decision-making process,” he said.

Earlier, in his welcome address to the delegates, Mr Adi Godrej, President Designate CII, said that the world economy is fragile today, and as we witness major structural transformations, there are multiple challenges to be met. To tackle those, he said, business and industry must play an active role in policy making.

Adding a different perspective to the discussion on the challenges faced by the global economy and the road ahead, Mr Yuval Steinitz, Finance Minister of Israel, shared how Israel had, even in a time of global financial crisis, recorded economic growth of 5% in 2010 and 4.8% 2011, succeeded in reducing unemployment and increasing investments. While Israel was impacted by the global financial crisis, the country took a very unusual step of moving from a 12-month budget cycle to a 24-month cycle, he said. This lent stability and confidence and gave the government a much longer period to implement the plans budgeted for, resulting in economic growth. He advocated the adoption of this method of planning and implementation, and said that with the IMF acknowledging that this has helped Israel handle the crisis better, he felt confident that more countries would move to this model. Mr Steiniz said he looked forward to greater cooperation and ties with India, especially in the areas of technology. The Israeli industry, he said, is a high-tech industry with 3-4 times more R&D investments than in most other Western countries, he explained. The country has devised the technology to desalinate sea water, and was willing to share the technology with India.

Mr Winston Dookeran, Finance Minister, Republic of Trinidad and Tobago, said that Caribbean and Latin America are neither insulated nor isolated from the global economic crisis. Latin America has shown a sense of economic resilience. However, given the current global economic scenario, he said, we need to ask whether this slowdown will be protracted, and if yes, how do we cope with it. The first requirement he said, would be the flexibility to adjust, the second would be the resilience to cope and the third would be the capacity to employ buffers – resources put away for a rainy day. The second question which we need to address, he said, was whether we can build a consensus in the global financial scenario and the third is whether the global financial crisis is a reflection of a deeper development crisis. He said the time has come for a new leadership to emerge from the developed and developing economies which will identify a new paradigm of growth and sustainability.

In his closing remarks, Mr Chandrajit Banerjee, Director General CII, said that as we enter a difficult period for the global economy, the challenges must be met. India has benefitted from globalization in the last two decades, and the strong growth has fuelled the aspirations of the people. Even as India copes with the challenges, the global community must play its role by removing any constraints, he added. He further said that India needs investments to meet its growth targets, and the policy regime should encourage such investments – whether domestic or foreign.