Click to play videoNew Delhi: Finance Minister P Chidambaram left for Washington on Friday morning to attend the fall meeting of International Monetary Fund and World Bank in the midst of a global market turmoil.
Chidambaram, accompanied by Reserve Bank of India Governor D Subbarao, Economic Affairs Secretary Ashok Chawla and Chief Economic Advisor Arvind Virmani, will also attend a special meeting of the Group-20 countries called by the US to discuss ways to deal with the global financial crisis.
Chidambaram is expected to address both IMF and World Bank before they meet for the plenary on Monday. Besides, he would be attending the meeting of the G-20 nations, of which India is a member, called by US Treasury Secretary Henry Paulson on Saturday.
The International Monetary Fund said on Thursday it was ready to lend to countries hit by the global credit crunch and had activated an emergency financing mechanism first used in the 1990s Asian crisis.
The Fund already sent a mission to Iceland, where the government has seized control of its largest bank, and has warned that the worst financial crisis since the 1930s Great Depression could inflict lasting economic harm on the world. "Yesterday I activated emergency procedures of the IMF to respond quickly," IMF Managing Director Dominique Strauss-Kahn told a news conference. "We are ready to answer any demand by countries facing problems," he said, adding that no country is immune from the crisis. The IMF chief said the IMF was willing to provide financial assistance not only to emerging and developing nations, but also to Western countries.
"Nobody knows if some ... advanced economies will not also be in need of some help by the IMF," he said, adding that countries needing to borrow will face more streamlined conditionality than normal and funding will be made available quickly. "Very quickly means two weeks at most," he added.
Emerging markets are under pressure again after strains in the United States and Europe spread. Investors are fleeing their securities for safer assets, foreign banks are cutting lending and the countries' exporters are braced for weaker demand from Western consumers.
Strauss-Kahn renewed calls for more coordinated steps to calm panicky markets beyond the unprecedented simultaneous action of central banks on Wednesday to cut interest rates. He said the global economy was on the cusp of recession but with quick and forceful action, the spreading crisis could be contained. "All kinds of cooperation has to be recommended. All lonely acts have to be avoided, if not condemned," he said.
His calls for more coordination were backed by World Bank President Robert Zoellick who said he hoped a meeting of Group of Seven industrial nations on Friday will indicate they "are getting ahead of the curve."
He said while countries will take different actions, tailored for their own circumstances, they should coordinate beyond just the G7 members to target the same basic problems. "The actions need to be coherent and reinforcing," he said, referring to Wednesday's simultaneous rate cut by central banks.
Meanwhile, the US markets were relatively steady during initial trading but plunged in later sessions, despite extreme measures by the US.
The cut in Fed rates did inject some optimism earlier on, but it wasn't enough. The Dow Jones plummeted nearly 700 points on Friday, closing below 9,000 for the first time in five years.
The Dow has lost 39 per cent, since closing at 14,198 a year ago.
CNNs Ali Velshi explains, “Investors are waiting for the medicine to work, but it's been one trick after another: the bailout plan, the fed rate cuts, but none of the measures seem to be working. There's also an idea to invest directly into ailing banks in exchange for stocks. We'll have to wait and watch if the Dow picks up or the selling continues into Asian markets.”
The Standard & Poor's 500 Index, which also fell more than seven per cent to 909.92, is off 655 points, or 42 per cent, since recording its high of 1,565.15 a year ago.
The Nasdaq ended at below 1,700 points, after dropping nearly six per cent.
Investors welcomed the Fed's emergency rate cut, coordinated with central banks around the world, but remained gloomy about the outlook for the economy.
Europe's major stock markets hovered around the break-even point, London's FTSE 100 was down nearly 53 points.
Other European banks were being battered on as nervous investors sold their stocks.
The selling pushed into Asian markets as well. Nikkei dropped a whopping 802 points and looks poised for its biggest one day drop since the 1987 stock market crash.
It's been a week of intense damage control by the US, but none of that has inspired confidence in the markets.
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