New Delhi, Dec. 2: Finance minister P. Chidambaram today said the US must tackle its current account and budget deficits and China needed to make its exchange rate more flexible as he called for an international effort to mitigate global financial risks.

“We can contribute to mitigating those risks but others will have to join hands. The US would have to control its twin deficits, China would have to have a more flexible exchange rate,” Chidambaram said at the India Economic Summit.

He said problems such as the high price of crude oil were beyond the control of India.

To check the risks, the US must address its sizeable current account and budget deficits. The US and the European Union have been pressing China to let its currency appreciate and trim its current account surplus.

Experts suggested strong measures to curb the appreciation of the rupee by tagging it to a bunch of currencies rather than the dollar alone. This will help overcome the problems of exporters.

Suman Bery, the director-general of the National Council of Applied Economic Research, said, “The government could tighten external commercial borrowings for the short term. However, this cannot be a long-term solution.”

Nath advice

India and the US, which are on opposite sides of WTO’s multilateral trade negotiations, should examine a bilateral agreement to boost two-way commerce, commerce minister Kamal Nath said today at the India Economic Summit.

“This is something which we should examine. The world wonders why the oldest and the largest democracies in the world cannot have an agreement in trade,” Nath said.

He was responding to a question on whether an India-US free trade pact was feasible.