The agenda of a G20 summit is generally set by the country holding the chair. China’s presidency of G20 is being looked at with a lot of anticipation, as it is not only the second-largest economy, but is also the largest trading partner of several countries, including India.
The economic backdrop underpinning the Chinese G20 presidency is not much different from other G20 presidencies. The world economy is posed with several risks including the slowdown in the Chinese economy, slow and negative growth in EMEs such as Brazil and Russia, debt concerns in several G20 nations, ongoing EU problems related to migration flows, Greek debt, and the possible withdrawal of the UK from the EU. Hence, the G20 needs to be alert to the evolving economic environment and stand ready to respond to any contagion that erupts.
The agenda of all the G20 meetings in run up to the G20 summit in September would revolve around this year’s theme, “Towards an Innovative, Invigorated, Interconnected and Inclusive World Economy”. This not only expands on the three ‘Is’ of the 2015 Turkish presidency—inclusiveness, implementation and investment—but also incorporates Chinese policy preferences. China has added an extra I—‘innovation’. Under this framework, members can discuss how to formulate a G20 blueprint for innovative growth and deepen international cooperation in the areas of innovation and digital economy. The key agenda items of the Chinese presidency include breaking a new path for growth, maintaining the momentum of world economic recovery, lifting mid- to long-term growth potential, etc. Other agenda items include continuing financial sector reforms, developing green finance, improving international taxation, mobilising climate finance, eradicating poverty, etc.
According to India’s G20 Sherpa Arvind Panagariya, the country will push for poverty eradication and sustainable development, besides trade and investment. Trade and investment have been part of the G20 agenda from the beginning; however, China is trying to take trade and investment to a higher level and, therefore, it is imperative that India connects this to the issue of poverty.
Another important area where India is going to push is clean energy. However, India is not in a good position to implement the same. There are reports suggesting that electricity demand would double by 2022, and much would be sourced from coal-based power plants. Although government has been very proactive on renewable energy, it is difficult to generate investment to replace fossil-fuel-based power generation progressively. Therefore, India’s commitment of cutting the intensity of its carbon emissions by 33-35% by 2030 looks difficult. Any agreement forcing the country to cut carbon emissions would result in either lack of sufficient power or a high cost of power. India can only try to achieve its generous offers on climate change if developed countries help both in terms of finance and technology. This issue is expected to be taken up by India in the forthcoming meetings. But, at some time in the medium term, it is expected that India will eliminate fossil fuel subsidies. However India and other EMEs and China need to collaborate in this regard.
Automatic exchange of information among countries to check black money is one of India’s top priority. Although there is an agreement amongst all countries on this issue, there is hardly any concrete progress. Also on the country’s agenda is the BEPS (base erosion and profit shifting). BEPS refers to tax planning strategies that exploit these gaps and mismatches in tax rules to artificially shift profits to low or no tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. BEPS is of utmost significance for countries like India due to their heavy reliance on corporate income tax, particularly from MNCs. However, India has decided to refrain from discussion on the devaluation of the yuan in the G20. For India, which has also been experiencing declining growth rates since the last couple of years, the priority would be issues including the spillover of the global slowdown on EMEs as well as quota reforms of the IMF.
China heading the presidency has raised huge expectations and excitement in the world economy. China sincerely hopes that its advocacy for an innovative, invigorated, interconnected and inclusive world economy (four ‘I’s) can help coordinate and implement G20 members’ national policies for a robust and sustainable growth model for the world economy. It will have to ensure that all differences between developed and developing countries in the G20 are taken up for discussion, including currency wars, implications of mega FTAs, etc, and countries reach a consensus on all outstanding issues. However, at the same time, it is important to remain realistic in the expectations from the G20 presidency and best to focus on a small and achievable agenda at the annual G20 summit.
The author is policy lead (knowledge partnership programme), IPE Global and DFID India, and senior fellow, ORF