Hope springs eternal, especially in times of crisis. With the global economy still buffeted by the tailwinds of a festering downturn, all eyes are on the G20 summit of the leaders of the world’s most powerful economies in the Russian city of St Petersburg September 4-5. The 8th summit of the G20 grouping, which accounts for 90 per cent of the global economy and two-third of the global population, should seek to bridge the hope deficit in the world economic system and map the way forward for intensified macro-economic coordination for sustainable global economic recovery.
Born in the immediate aftermath of the 2008 global economic crisis, the G20, from its first summit in Washington DC, has over the years morphed into the world’s preeminent forum of global economic coordination. Besides the G8 grouping of developed economies, the G20 has emerged as a more representative grouping bringing in its fold top emerging developing economies, including India. In the first three years after the 2008 downturn, the G20 acted as an effective crisis manager, and is now evolving to provide leadership on key global economic issues.
The context and challenges for the St Petersburg summit are different as compared to the earlier Los Cabos and the Cannes summits in 2012 and 2011 respectively when the focus was on terminal gloom in the eurozone and its corrosive impact on emerging economies. Since then, the US economy has shown an upswing and the eurozone is proving that all is not lost. This time round, the spotlight will, therefore, be on developing effective coordination mechanisms and policy innovations to spur sturdy, balanced, sustainable and inclusive growth.
The operative mantra here is sustainable recovery as the global economic debate has moved beyond growth versus austerity to a decisive shift in favour of growth and greater international coordination to sustain growth and recovery. In this context, the leaders are expected to come out with a more sharply focused St Petersburg Plan of Action to stimulate and sustain global economic recovery.
Focusing on job-creating growth will be another important theme that will occupy attention of leaders at the St. Petersburg summit. Unemployment levels in several countries, including the US, have become excessively high and untenable, breeding large-scale discontent. In some of the Eastern European countries, the unemployment rate has soared to nearly 60 per cent. The leaders will, therefore, be required to unveil tangible steps to achieve the twin objectives of growth and job-creation. These will include rebalancing global demand, reducing financial market fragmentation and backing up reforms with monetary support and fiscal consolidation.
For India, there is a lot riding on the outcomes of the G20 summit as New Delhi has proactively contributed to shaping the discourse for a comprehensive and inclusive global economic growth within the G20 process. Against the backdrop of a perceptible dip in India’s growth rate over the last two years, New Delhi’s topmost priority will be to focus on issues of growth and financing investment to protect its economy from the spillover effects of quantitative easing by advanced economies. As India has not been a contributor to imbalances in the global economy and its economy did reasonably well in the first three years after the crisis, it is expected to press developed economies to keep in mind the larger interests of emerging economies whose growth rates have been dented by the festering global crisis. India, along with other emerging economies, is expected to make it clear that volatile capital flows resulting from quantitative easing of advanced economies are affecting economies of emerging countries and hence the burden should be shared. Indian interlocutors should also defend the capital controls as legitimate and acceptable defence against speculative capital flows and press for creating an effective framework for the adjustment process.
In terms of likely tangible outcomes, the G20 economies are expected to come together on the interlinked issues of tax evasion, money laundering and combating corruption. This issue is also one of the pet themes of the 2013 Russian presidency of G20. If all goes well, the summit could see a sort of breakthrough on coordinated measures to combat tax evasion and a collective endorsement of the OECD’s proposal for a global model for multilateral and automatic exchange of information relating to tax avoidance. The summit is expected to come out with a plan for coordinated action to ensure the independence of anti-corruption agencies cutting across borders and unveil steps to tackle money laundering. India is expected to back these initiatives designed to inject greater transparency in the international financial system and to protect the interests of common people cutting across boundaries.
Another key priority of India for the G20 summit will be to keep the grouping’s focus on long-term financing for investment in infrastructure and SMEs. In previous summits, India’s Prime Minister Manmohan Singh had drawn the attention of world leaders to the urgent need to build institutional frameworks to ensure steady and uninterrupted flow of finance for a range of developmental activities, specially in countries and regions with massive infrastructure gaps. In this context, the leaders of G20 countries are expected to focus on closer coordination between multilateral development banks (MDBs) to mobilise private capital to address infrastructure needs in public-private partnerships.
Finalising broad parameters for financial inclusion and country-specific targets and commitments will also be among important issues at the upcoming St. Petersburg conference. In this context, the recommendations of the Global Partnership for Financial Inclusion and a host of advocacy groups are likely to be backed by the leaders’ meeting.
Recasting global financial architecture
Most important, the perennially elusive quest of fashioning a representative, inclusive global financial architecture will see a renewed push at the St. Petersburg summit. With the status quoist developed economies prevaricating on accommodating emerging economies in the reformed financial system, the emerging and developing economies are expected to make a robust pitch for speedily implementing the quota and governance reform in the IMF. From India’s point of view, this will be among top priorities. One can expect a strong statement from India’s prime minister on spurring the reform of the global financial architecture, asking the advanced economies to honour their promise to implement the 2010 IMF quota and governance reforms. If the plan to complete IMF quota reforms by 2013-14 had to be completed, the process has to be fast-tracked. The ambivalence on this front has to end sooner rather than later. The time-bound IMF quota implementation is absolutely necessary to raise the credibility, legitimacy and effectiveness of international financial institutions. This is also necessary for reviving faith in the G20 process as the world’s inclusive forum for international economic decision-making and cooperation.
Don’t lose the focus
Five years and seven summits later, the G20 is still a fledgling grouping in search of the right script in the scrambled alphabet of multilateral geopolitics. While it remains a work in progress, there is a pervasive feeling that the G20 agenda has become sprawling and unwieldy. There is a temptation to do too many things and take on too many issues, which has diluted the focus of the grouping whose core mandate is engineering and sustaining a robust mechanism of sustainable global economic growth and stability. Issues like food security, energy security and climate change are urgent cross-cutting global issues that should engage the attention of the leaders of the world’s 20 most powerful economies, but there is no point in overburdening the G20 agenda. This sin of excess must be shunned so that the G20 can be back to doing what it was created for: to keep the wheels of the global economy rolling and to shied it from imbalances and excesses.
Manish Chand is Editor-in-Chief of India Writes, an online magazine (www.indiawrites.org) and journal focused on international relations, the India Story and emerging powers. He is also Editor of “Two Billion Dreams: Celebrating India-Africa Friendship.”)
- Manish Chand is Founder-CEO and Editor-in-Chief of India Writes Network (www.indiawrites.org) and India and World, a pioneering magazine focused on international affairs. He is CEO/Director of TGII Media Private Limited, an India-based media, publishing, research and consultancy company.
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