Dollar, climate top India's G8 summit agenda

By Krittivas Mukherjee

NEW DELHI (Reuters) - India will be receptive to debate about replacing the dollar as the world's global reserve currency when Prime Minister Manmohan Singh attends this week's G8 summit in Italy.

Traditionally quiet on the subject of reserve currency, India's position generated interest after a key policy adviser last week said the country's currency basket could be diversified.

India's Foreign Secretary Shivshankar Menon on Monday removed any doubt, saying India was open to discussing all issues relevant to finding a way out of the world financial downturn including the dollar's status.

"This would be one of the ideas which is on the table. There have been ideas expressed and we are ready to discuss all of them," Menon told reporters.

Menon said the discussions would focus on "what might have caused the imbalances, what enables the world to prevent future imbalances."

While any public opposition to the dollar would mean jeopardizing warming ties with the United States, highlighted by a landmark civilian nuclear deal last year, financial realities may force India to consider diversifying its reserves.

China has asked for a debate on a new global reserve currency when leaders from the Group of Eight (G8) meet with the G5 emerging economies in Italy, G8 sources told Reuters.

Analysts said India's stand was likely to boost the Chinese and Russian demand for discussions about possible reforms to the world financial systems and the dollar's role in it.

"The global financial crisis has showed the vulnerability of the dollar. This would worry India," said D.H. Pai Panandikar, head of New Delhi-based economic think-tank RPG Foundation.

"India, in principle, will have to go with China because their concerns are similar."

In June, Prime Minister Manmohan Singh said after a meeting with India's BRIC partners Brazil, Russia and China that replacing the dollar was a highly complex issue and more discussions were needed to examine the options.

Along with four other leaders of major emerging economies, India will likely speak only when asked but could push for a voice in the summit communique as it tries to emerge from the shadows of giant neighbor China.

The summit will primarily focus on winding down expensive stimulus packages for recession-hit financial systems.

As a trillion dollar economy still growing at around 7 percent a year, India's presence is seen as an endorsement of its expanding clout and recognition it has to be part of any economic recovery plan, analysts say.

But that clout is limited, as China's economy is almost three times as big as India's and New Delhi's foreign reserves are much smaller.