Concerned over sluggishness in the domestic economy and deepening financial crisis in Europe, Indian finance minister Pranab Mukherjee on Tuesday said the global community can't afford to lose its nerve and will have to deal collectively with the situation.

"A series of bad news are coming. First we had the IIP index (at 3.3 per cent in July) lowest in two years... and (second) lengthening shadow of the Eurozone crisis all over the market in the world is matter of concern. But at the same time, we cannot lose our nerve," he said on sidelines of an Icrier conference.

Describing the high commodity and food prices a threat to growth and food security in energy dependent emerging economy, the minister called for collective global action to overcome the crisis.

"We shall have to work collectively and see that we can overcome the impasse," Mukherjee said.

His comments came a day after the country's industrial production fell to a 21-month low of 3.3 per cent in July, and the likelihood of a sovereign debt default by Greece looming large again.

The developments in Greece have rattled markets globally, with India's BSE benchmark Sensex falling over two per cent Monday.

Mukherjee said the growth in most advanced economies has declined in the second quarter of 2011 and emerging markets are witnessing a combination of moderation in growth and rising inflation.

"There is wide spread apprehension that even the tepid global economic recovery that we have seen so far, is stalling," he said.

Mukherjee added that globally the economies are facing the challenges of fiscal imbalances, regulation, development, and commodity markets.

He said the recent commodity and food price rise and their volatility have further induced considerable threat to economic growth and food security in energy dependent emerging economies.

He added, however, that factors behind the recent price hikes are yet to be pinpointed and even the G20 is undecided on the role of excessive liquidity on the international commodity prices.

Mukherjee said large and volatile capital flows to the emerging markets can be destabilising as they lead to high exchange rate volatility.

"Large and volatile inflows are also associated with asset price boom and encourage excessive risk taking by traders and investors and therefore threaten financial stability," he said.

On the G20 development agenda, the finance minister called for recycling of global savings for infrastructure investments.

"Enhancing infrastructure investments in emerging economies and developing countries would have positive spin-off for rebalancing global demand. It would result in real investment with tangible growth," he said.

The G20, Mukherjee said, is well placed to coordinate various stakeholders including government, especially the one that have large surpluses, the private sector and multilateral development bank, for investment in developing economies.