“The recessionary trend is slowly becoming a reality with the twin threats of the financial markets crisis and consumer anxiety... crisis has triggered serious liquidity problems, with the money market interest rates shooting up.

“If not addressed with speed and determination, the prolonged liquidity concerns could turn into solvency problems, further jeopardising the stability of the global financial system,” Finance Minister P Chidambaram said in his formal statement to the International Monetary and Finance Committee.

His statement was read out in absentia by Reserve Bank of India Governor D Subbarao, as Chidambaram had to cancel his visit to assuage fears at home about the global financial storm hitting the Indian shores.

India said that although the Fund's role in the crisis was so far perceived to be "peripheral," the IMF should gear up to meet the borrowing needs of member countries engulfed by the crisis, which has its origins in defunct mortgages in the US.

"The financial institution (IMF) should have the mending instruments and the financing capacity to address potential borrowing needs," according to Chidambaram.

Admitting that emerging markets economies (EMEs) "are not islands of tranquility and the crisis could be transmitted to them through multiple channels," he felt external corporate and bank borrowing was becoming scarcer and dearer and housing and real estate markets are slowing down. "The current crisis holds important lessons for EMEs which they should factor in as they move forward on financial sector reform," he felt. According to Chidambaram's statement, growth in EMEs would slow to 6.9 per cent in 2008 and further to 6.1 per cent in 2009.

Noting that there were a number of concerns over the attempts to resolve the current crisis, India suggested that IMF should step in to channelise fragmented efforts at different levels for more effective results. Besides, India wanted member countries to be "encouraged to approach the Fund in the incipient stages of a crisis".

Chidambaram's statement further said: "We are not too sure about the full magnitude of the problem. Despite some incipient signs of cooling, inflationary pressures arising out of elevated food and fuel prices have not fully subsided.

"Clearly, these are troubled times for the world economy. Nevertheless, crises do give us an opportunity to quickly take stock of what went wrong and to act."