India's focus on bringing reforms to multilateral development banks under its G20 presidency was wise and propitious, as these institutions need to be reformed to meet the challenges of the world on fire, renowned economist Larry Summers said on Saturday. Summers also stressed that India should aspire for an eight-fold growth of its economy to bring transformative changes to the lives of millions of people.
Giving a lecture at a Confederation of Indian Industry (CII) event on 'The World is on Fire', Summers spoke about the challenges of overcoming poverty as well as climate change. He said, "The efforts at combating global poverty need to continue. This is no time to let up on efforts to reduce global poverty."
He said that MDBs are at the centre of whatever chance the world has of meeting this challenge.
Responding to a question by Poonam Gupta, director general of the National Council of Applied Economic Research, on whether there is a need for a new institution to address the issue of climate change and climate finance, Summers said, "It may come to what you say. It is a fair issue but not quite yet."
The former US Treasury Secretary, however, added that "it would be my advice to the staff of existing institutions and the world is watching, and the world is not patient, and this is their last clear chance. If they are not able to move and move dramatically, then the direction you suggest is likely to be the one that would come."
Summers also said that carbon pricing was important but even more important is the dissemination of economically competitive renewable energy. "The world's peoples are not going to accept a vast and sharp increase in the price of energy… It is within reach to provide an abundance of energy that is renewable and that is not destructive of the world's climate."
He said that there was meaningful scope for new financial engineering to increase the lending level of the MDBs. Pointing out that the lending of the multilateral development banks to lower-middle-income countries this year will be just large enough to cover the repayments that those countries make to the multilateral development banks.
"At a moment of unprecedented challenge and unprecedented opportunity, that is not good enough," Summers said.