Both global growth and trade turnover have slowed down, more than in 2014, and emerging countries, especially commodity exporters, have suffered the most (Brazil and Russia) while tightening financial conditions result in capital outflows even from relatively faster growing countries like India, which has, however, benefited from lower global oil prices.

IMF in a note to G-20 draws attention to moderating global growth, in the unsettled financial market conditions, the slowdown this year more pronounced for emerging economies, which would experience a tightening of financial conditions with a deteriorating market sentiment and capital outflows becoming another hit for them.

While prices have fallen across the board, the decline in equity and currency values across a range of emerging markets has reached “crisis proportions”, the Washington-based International Institute of Finance (IIF) says. There are fears of a revival of currency war among countries trying to keep themselves above water and these have to be assuaged in G-20.

India, one of world's largest commodity importers, looks better placed to meet cross-border repercussions, given its relatively favourable near-term growth prospects and reduced external vulnerabilities in the wake of sustained fall in oil prices. However. IMF cites 'some macro-economic imbalances remain'.

While the faster-than-expected fall in inflation has created space for considering modest cuts in the nominal policy rate, medium-term inflationary pressures and upside risks to inflation remain, IMF said. And with balance sheet strains in the corporate and banking sectors, financial sector regulation should be enhanced, provisioning increased, and debt recovery strengthened.

Already, the Finance Ministry is pushing for a further rate cut and the Chief Economic Adviser Mr Arvind Subramanian has gone to the extent of posing deflation threat to warrant a rate reduction, a view not shared by other top economists like Dr C Rangarajan. But the latter favours a cut in the next RBI policy review, if inflation remains at current low level.

RBI could then await how things evolve with the monsoon inadequacies and possible rise in CPI as well as the expected US Fed rate rise in coming weeks, according to Dr Rangarajan. Mr Subramanian talks of 'price deflation' and the Finance Ministry should tell us all which prices in consumer basket have come down, beyond perhaps petrol and diesel prices. Simply equating decline in indices - a statistical average of hundreds of items - with prices in the market.

In fact, Moody’s (rating agency) sees inflation as a real constraint, more than growth, in its assessments, because India has under-performed on inflation compared to peers. Dr Rangarajan sees the likelihood of CPI rising later and RBI would also have to take into account the fall-out from the monsoon failure and US Fed's rate rise expected in the coming weeks, before making further moves..

Financial market turmoils and the underlying causes would engage the G-20 Finance Ministers even as China would be expected to defend its policies on market-related adjustment of its currency, renminbi, and cite its monetary easing actions to stabilise its unsteady stock market. But the general concern is about the extent of its currency adjustments in the near future.

India’s Finance Minister is already on record that not a single domestic factor has contributed to the present international market volatility. But the facile assumption that China's slowdown and weakened outlook presents a unique opportunity for India to take a global growth leadership role is misplaced.

China's cheaper currency makes it much more competitive to command exports to all countries. China is determined to safeguard its exports and preserve growth at not less than 7 per cent in 2015. How far the G-20 Ministers go for 'joint actions' by advanced and developing economies to raise growth and mitigate risks as well as arrest decline in world trade remain to be seen..

Unless there are co-ordinated policy measures by these countries with a common objective of reversing the slide toward a global deflation and ensuring growth and employment with commitments by both advanced and emerging market economies, the risks and uncertainties would not abate,

India has recently seen some capital outflows and the stock market has turned bearish outright. Although domestic demand is on gradual rise, India will be performing well below its potential in 2015/16 and could see a pick-up next year, according to most forecasters. Badly hurt are the oil and commodity exporters though, India has gained some fiscal space and reduced external vulnerabilities as fall in oil prices has continued..

Like RBI earlier, IMF has emphasised for India structural reforms to raise growth potential including removal of infrastructural bottlenecks in the power sector along with labour and product market reforms to improve productivity.RBI has also envisaged only a 'modest pick-up' in activity against the bckdrop of tepid global recovery.

The challenges for Government remain - how to advance reforms encountering political difficulties as were seen in the monsoon session and in the September 2 labour strike, in order to be able to raise potential growth and alleviate structural constraints. Unexpectedly, the global environment has also turned less conducive for India to push ahead with certain initiatives.

Global growth in the first half of 2015 declined relative to the second half of 2014, IMF note to G-20 said. It reflected a further slowdown in emerging markets and weaker recovery in advanced economies where there are protracted weaknesses in productivity growth. In USA, growth was only 1.8 per cent in the first half of the year as compared to3.8 percent in the latter half of 2014.

Relentless pressures on Indian currency and losses on Dalal Street are also making investors wary and some leading investors seem headed for exits. In August alone, the outflow was 2.52 billion dollars from equity market, the largest for a month since October 2008.

There is no doubt that problems of the type which worried UPA in pushing for growth and reforms are now afflicting the BJP-led NDA Government and its credibility on reforms for faster easing of doing business and job-creating growth is currently at a low ebb. (IPA Service)