The G20, constituted in 1999, is a forum consisting of the 19 largest economies and the European Union. It consists of all the members of the G-7 and BRICS, and seven other emerging economies. It is still not a permanent institution in a technical sense because it doesn’t have the headquarter and permanent staff. Its presidency rotates annually and decisions are made by consensus. The agenda is decided by a ‘troika’ consisting of the former, present and succeeding host nations.
Next month India will formally hold the presidency of G20. During its G20 presidency, India should strongly raise the concerns of the Global South, especially related to financial stability, credit, sustainable development and aid. The tightening of monetary policy in the US is causing economic volatility in emerging economies. More than a hundred countries are seeking help from the IMF. Greater coordination at the G20 is required. “India should raise the issue of aid to vulnerable countries, reforms of the financial institutions, climate change and terrorism. Financial support to developing countries for adapting to clean energy is another immediate requirement,” says Dr Rajan Kumar, School of International Studies, Jawaharlal Nehru University, Delhi.
“G20’s evolution is associated with financial crises. It began in the wake of the Asian financial crisis in 1999, and a decade later it was elevated to the Summit meeting in 2008 which again was a year of crisis in Europe and America. Its decision to commit spending worth US$4 trillion to revive economies and efforts to avert trade protectionism in 2008-9 contributed to financial stability in the coming years. But its cohesion was short-term, and Russia’s annexation of Crimea in 2014 invited the spectre of a new Cold War,” Dr Rajan explains.
What is the significance of G20? Expert Views
Prof Meeta Mehra, expert on International Trade, School of International Studies, JNU, Delhi, tells Financial Express Online: “The G 20 is an intergovernmental forum comprising of the all the major economies of the world that constitute as high as 90 percent of global GDP, 80 percent of international trade flows, and two-thirds of the world population. Envisaged as an international mechanism for governance of the global economy, it is perceived to be a reflection of the emerging global order that has attempted to bring together the G 7 and emerging economies as equal partners in addressing key economic and financial issues facing the major economies, especially in the aftermath of financial crises that surfaced in a number of emerging economies in the 1990s.”
India’s Presidency — Challenges
According to Prof Meeta Mehra, “As India assumes the G 20 Presidency on December 1, 2022, a rotational responsibility, it is staring at several complex challenges and opportunities in the broad areas of the economy, finance, development, and the environment.”
“The world economy had barely emerged out of the travails of the two-year-long COVID-19 pandemic when it was afflicted by the fallouts of the Russia-Ukraine conflict. The growth prospects for the global economy have been lowered from 3.2 percent in 2022 to 2.7 percent in 2023 (0.2 percentage points lower for 2023 as predicted by the IMF’s World Economic Outlook estimates of October 2022),” she states.
Impact of war in Ukraine
“The war in Ukraine, consequent sanctions on Russia and a fresh spate of lockdowns in China have caused widespread supply chain disruptions and trade bottlenecks culminating in inflationary pressures on commodities, especially fuel (oil and gas), food, and fertilizers,” Prof Mehra opines. Adding, “These are having far-reaching adverse implications for the poorest of the world. Ukraine and Russia account for as high as 30% of global wheat exports, and reduced exports of key food commodities from these countries have created a situation of high food prices and food insecurity for vulnerable populations, more so in low-income and emerging economies. Inflationary pressure on food and fuel has translated into a rise in core inflation across advanced and emerging economies of G 20, further deepening recessionary trends.”
In her opinion the labour market dynamics in the emerging economies of G 20 have shown a sluggish revival of employment relative to those in the advanced economies. The efforts to lower unemployment have, in fact, been marred by growing inflation and upward pressure on nominal wages, constraining the recovery of employment and output growth alike.
According to the International Trade expert, “Double-digit inflation in the Euro Area and high inflation in the US and China have led to monetary policy tightening by their central banks. Most of the other advanced economies and select emerging economies of G 20 (including India, Brazil and Mexico) have also been adopting tighter monetary measures to curtail inflation. As one would expect, this, combined with the economic uncertainty created by the Russia-Ukraine conflict, has added to financial market volatility. Concomitantly, a strengthening US dollar has caused capital outflows from emerging and developing market economies, thus putting downward pressure on their currencies. Alongside this, the rising cost of public debt, a consequence of a tighter monetary policy, runs the risk of aggravating vulnerabilities due to fiscal imbalances.”
Supply constrictions, inflationary pressures and labour market dynamics are having ramifications for human development. “Spiralling food and fuel prices, lack of adequate access to health infrastructure and vaccines, and vagaries of extreme climate events are intensifying humanitarian crises, inequality, and worsening geo-economic fragmentation,” she opines.
With its upcoming presidency of G 20, India will have to navigate a complex path to reconcile conflicting and myriad interests of countries in the trade, investment and development arenas.
“With its emphasis on multilateral approaches, as well as focus on free trade, investment flows, inclusive and greener development, and climate protection, India is suitably positioned to bring to the fore the collective voice of emerging economies to shape the deliberations of this influential forum. It is also eminently situated to tread the middle path and resolve economic and financial concerns arising from the Russia-Ukraine conflict, particularly between Russia and other G 20 member nations, through discussions and dialogue,” Prof Mehra explains.
Sharing his views, Dr Rajan Kumar says, “It offers a historic opportunity for India to play a proactive role in global governance. Despite its limitations and reservations, India is uniquely positioned to bring the warring parties together or at least facilitate a preliminary dialogue. Both Washington and Moscow have repeated the significance of India in their strategic calculations. New Delhi should not fear the outcome but rather seek to facilitate the process. That itself will have a moderating impact on Washington and Moscow. New Delhi’s ties with both Washington and Moscow are unique and exceptional. Both countries consider India to be an indispensable partner. Western media is also pushing India to take proactive measures. Winter is the right time, some back-channel diplomacy can start.”
In his opinion “A standard behaviour of New Delhi is to restrain itself from offering mediation. It apprehends a similar offer from big powers in its own border conflicts with Pakistan or China. Therefore, it prefers either silence or back-channel diplomacy. However, New Delhi should shed its apprehensions and be ready to facilitate a dialogue through back-channel or open negotiations. It is hardly a secret that both the US and Russia have done the same in India’s border conflicts with Pakistan and China. New Delhi’s stature will grow even when its attempts do not succeed.”
Expectations from the Bali Summit:
According to Dr Rajan Kumar, “The G20 is a divided house thanks to geopolitical tussles between NATO and Russia, and the US and China. It would be naïve to expect that any substantial negotiation on the issue of the Russia-Ukraine crisis will happen. The fact that Indonesia managed to ensure the participation of all the G20 members is itself a big contribution. Putin will skip the Summit.”
Nonetheless, the Summit will have a moderating impact on Russia and perhaps the US too. The attention of the media would be on the Biden-Xi meeting on the sidelines of the Summit. They would certainly discuss the issue of war in Ukraine, supply chain disruptions of food and energy, and Russia’s nuclear threats. The West would take the opportunity to put pressure on President Putin through Xi Jinping. Xi is unlikely to change his policy towards Russia, but the two leaders might agree on the futility and dangers of a nuclear conflict.
The G20 Summit at Bali is unlikely to culminate in a joint communiqué or declaration. Given the geopolitical tussle, no consensus can be achieved and Indonesia would seek to scuttle the contentious issues.
However, “it is a great opportunity for the countries of the Global South to put forward their agenda as the next three Summits are to be held in India (2023), Brazil (2024) and South Africa (2025), respectively. Essentially, the following three summits would be hosted by BRICS states,” Prof Rajan adds.
