World Bank President David Malpass has welcomed India’s move to begin selling oil from its stockpiles, asserting that the world needs to take important steps to address the current set of crises.
Speaking on the sidelines of the annual Spring meeting of the IMF and the World Bank held here, Malpass told reporters that allowing more trade and opening of markets were "very important" steps.
"I was intrigued to see and welcomed India's moves yesterday and today to begin to sell from its stockpiles. I think market opening steps by many of the advanced economies could add a lot to the global supplies and alleviate some of the impact on the poor countries,” he said on Wednesday.
"And they themselves need to build up their systems to produce more. One of the drawbacks is that, in recent years, there's been a shortage of investment, especially in the developing world. We need to find policies going forward that will add investment,” he said.
One of the solutions for the world is to recognise that markets are forward looking, he said.
“If you announced policies today, it has an immediate impact on where people begin to invest. I think the world can take steps to say that the capital allocation of global resources can be improved. What we have now is a capital allocation that leads to deep inequality,” Malpass said.
The inequality is growing worse. That means more countries falling further behind, not making advancements, and not having the investment that is needed. Some of that owes to the macro policies of the advanced economies. They've been borrowing very heavily from the global capital markets, which leaves less for other countries. That can be improved, he asserted.
As central banks raise interest rates, it's important for them to use all their tools and not be undercut by the government demand stimulus, Malpass said, adding that the central banks can use tools that add to supply and that allow capital allocation to be improved.
"I think that's going to be vital. They've been talking about, not just interest rates, but also shrinking the balance sheet, which I think would have a stimulative effect on the global investment climate, because it would occupy less of the capital at the central banks from the current situation.
“Also, they have regulatory policy tools that can be used to allow and encourage more investment in small businesses, in new businesses, that will be the dynamic portion of a new economy,” he said.
Stressing that markets are forward looking, he said announcements on currency stability have an impact and announcements on capital allocation have a positive impact, as the world tries to confront various crises.
Malpass said it was vital in global growth that there continue to be trade and cross-border trade flows and cross-border investment flows.
"Neighbours are some of the best trading partners, and that openness is important. I wanted to give that background, because trade and investment needs to cross borders, and fragmentation would subtract from the productivity of global capital,” he said.
The World Bank president said there will be a strong effort to have less dependency on Russia for energy supplies and on China for the supply chain.
“There had been an over-dependence on that, and that could be good for China. As specific supply chains are less dependent on China, it allows China to move into other sectors and to look forward to the markets of the future,” he said
“I don't see this as a negative step; it is a necessary step for the world to look at regional trade growth. Near-shoring is important for the United States. Mexico and Canada are key markets, powerful markets, and vice versa. For Mexico, a powerful trading partner is the United States. That can be built on and made into an even bigger trading relationship,” he observed. .(With PTI inputs)