Prime Minister Manmohan Singh could not have got a better birthday gift as he walked away with much of what New Delhi wanted in the Group of 20 Summit at Pittsburgh. Not only did the Summit pledge continuation of stimulus till a durable recovery is secured but it also acknowledged the shift in the global balance of power by designating the G-20 as the premier forum for discussing international economic issues. The G-20 will, in effect, replace the Group of Eight (G-8) that was increasingly being seen as an outdated club not reflecting contemporary economic realities.
Addressing the media after the G-20 Summit declaration, Singh said continuation of stimulus and emergence of G-20 as a premier forum were very significant from India?s point of view. ?We need an external environment that will enable us grow our exports, attract larger capital inflows and better technology transfers,? he said, emphasising how crucial it is for developing countries that stimulus was not prematurely withdrawn.
Also, with the G-20 emerging as the next big platform, India now finds itself on the high table with an opportunity to influence decision-making on global issues. Backed by buoyant growth of an average 7% in the last decade, New Delhi has long been pushing for changes in the global governance structure to reflect the growing stature of emerging economies.
The global crisis seems to have forced this reality upon the developed countries. ?No country, howsoever powerful it may be, can take on the entire burden of economic adjustment and decision making that may be required to manage the global system. It is this reality that has persuaded many in Europe and the US to acknowledge that the G-8 cannot handle all global issues, especially with the rise of Asia (India and China), Brazil and Russia,? Singh said on G-20 replacing G-8.
Developing countries, especially the Bric (Brazil, Russia, India and China), have also been able to push their agenda for a higher voice in multilateral institutions. India can now expect an almost doubling of its quota at the International Monetary Fund from 1.87% now. The quota of developing countries in IMF will go up 5 percentage points (against 7 percentage points demanded) to 49% by 2011. ?That?s a compromise,? said Singh, but India is happy to live with it.
Further, India and other developing countries can also expect their representatives to be at the helm of international institutions. The G-20 summit has agreed that the senior leadership would be appointed through an open, transparent and merit-based process. Similar to the IMF, the next shareholding review in the World Bank will see an increase of at least 3% voting power for developing and transition countries.
Interestingly, the Leaders? Statement that launches a framework for ?strong, sustainable and balanced growth? also calls for monitoring the economic growth in the G-20 countries. ?There will be sort of a peer review that will provide for exchange of views and give all an opportunity to understand the weaknesses of other countries? economies,? Singh said.
?India?s stimulus options limited?
Prime Minister Manmohan Singh said India had limited fiscal and monetary space for taking additional stimulus measures.
?Our special circumstances have to respond to our domestic situation,? he said, explaining why India could not continue with stimulus, though it was necessary for the developed world to do so.
Acknowledging that India had a high fiscal deficit (estimated at 6.8% of the GDP for 2009-10), Singh said the scope for accelerated fiscal stimulus in India is rather limited. While on the monetary side there was some leeway, the fear of inflation in coming months will constrain further use of monetary measures, he said. ?Monetary policy had some scope, but that also will become limited if inflation becomes a problem,? Singh said. ?As of now, inflation is not a problem and is under control. But, yes, our options are limited,? he said.