World’s premier geopolitical rendezvous, the G-20 leaders’ summit in Delhi just got over. India’s success in handling it adroitly and issuing a joint communique without any amendments have ensured her place at the diplomatic high table. Pulling off a successful G-20 summit in a deeply divided participants group requires political vision and marketing skills of high degree. For a considerable period G-7 members were the most influential participants in G-20, these are basically advanced economies of the West and Japan. However, in the current meeting both India and other emerging economies have articulated the aspirations of Global South quiet forcefully. African Union (AU) has been inducted in as a member. Share of voice is often linked to economic performance of the country. From that point of view the trend decline in GDP, higher inflation and elevated interest rates had somewhat whittled down the spirit of Europe in the meeting.
G-20 was set up as a crisis management group in 1999 as a response to Asian financial crisis and currency crisis in several other countries. Initially its participants were Finance Ministers and Central Bank Governors, during 2008 crisis the participation got elevated to a leaders’ meeting around the time of global meltdown. Currently G-20 is a key forum of international co-operation, it attempts to play a major role in improving the governance in participating countries and suggest reforms for major multilateral organisations including banks. To be candid it can nudge the participants in a particular direction, however it does not have any rule making or mandating authority. It can carry out a dialogue with the participants to highlight approaches to growth and development, as many areas of global concern such as climate change require an unified response.
One needs to bear in mind that the purpose of G-20 dialogues is not to interfere with ‘country owned strategies’ but to look for a joint response or a co-operative approach for solving Global macroeconomic problems. Similarly there could be supply chain issues. For example, supply of food, fuel and fertilisers to the weaker economies of Global South including Africa are issues which need immediate attention. There could be a need for stabilising the financial system in a co-ordinated manner, in such a case G-20 can provide a platform along with multilateral lending institutions. Currently, debt crisis in developing economies is a major issue. Belt and road initiative of China in countries like Sri Lanka and Maldives have driven them towards bankruptcy, in both the cases India along with multilateral lending institutions have chalked out a guiding path. The requirement of fundings such as short term liquidity finance, project finance and trade finance from Global South countries are increasing steeply. Consequently, the financial resources of Multilateral organisations may have to be augmented.
India’s G-20 presidency has given the opportunity to highlight her economic, infrastructural and technological prowess in various fields, all this can be useful when businesses consider the China plus one option. Secondly, focusing on the cultural diversity and history by holding meeting in sixty towns would create a buzz for tourism industry in India which is still underrated. No other G-20 country had organised meetings across the length and breadth of their country during their presidency.
G-20 summit listed out a number of initiatives for both developed and emerging economies, the ones which are particularly interesting for India are (1) India, Middle East and Europe economic corridor, which will improve connectivity and bring down cost (2) Global biofuel alliance which focuses on ethanol, it can improve affordability, provide cleaner fuel and help in energy security and (3) Digital Public Infrastructure which has played a major role in improving inclusiveness, transparency and direct benefit transfer. This can be of great help to many developing countries.
The G-20 presidency in India’s hand has been a major success, however looking ahead one does not feel very confident about G-20 which has fragmented power centres. In fact one of the key players is facing sanctions from some others, no one knows for how long Indo-Pacific region will remain peaceful. While Global South has an increased share in G-20, one does not know how multilateral banks and G-7 private lenders would perceive that risk. Many developing countries of Africa (AU) already have unsustainable debt levels. Further, if the war in Ukraine goes on some more time EU and UK economies and their industrial sectors would be in deep distress due to high energy costs. Higher inflation, higher interest rate and elevated fuel and commodity costs will only lead to higher protectionism through non-trade barriers in different forms.
Starting from October 1, India’s Steel and Aluminium exports to EU will come under “Carbon Border Adjustment Mechanism” (CBAM) EU will implement CBAM in two phases from Oct 1st 2023 to Dec 31st 2026. The second phase will start from January 1st 2027. In the first phase, exporting firms have to submit granular data on production and emission. Subsequently, a higher tariff regime will be implemented. The data requirements are quite extensive, so the process will add to cost as it will have to be updated periodically. All these are meant to discourage exporters. Given this fragile situation in world trade , the best way out is to look for bilaterals in trade and investment flows for both goods and services across countries with whom we have complementarities, i.e. both of us export different kinds of products.
From a geo-political point of view’G-20 2023’ was an outstanding success, however from trade and investment perspective how much of it can be leveraged remains to be seen. The major cause of discomfort is the poor economic performance in majority of the G-20 countries however India, Saudi Arabia and a few others are doing quite well.
Siddhartha Roy is the former Economic Advisor of the Tata Group. Currently he is the CEO of SR Associates an Economic Advisory and Strategic Consultancy enterprise.
Disclaimer: The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of Indiastat and Indiastat does not assume any responsibility or liability for the same.
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