G20: Importance of the summit & possible takeaways for India

By Sreeram Chaulia
The ninth summit of the G20 group of major economies in Brisbane, Australia, is a meeting ground for politicians that matter at a moment when the world is struggling to move past the economic crisis which began six years ago.

Heads of governments convening in Brisbane have the challenge of a lifetime on their hands. The International Monetary Fund (IMF) has downgraded economic growth projections for both advanced and emerging markets, forecasting gloomy “clouds”, “uncertainties” and unresolved “legacies” from the crash of 2008.

Advanced economies apart from the European Union (EU) are staring at just 2.35% growth next year while the austerity-laden EU is expected to wobble at 1.76%. The ray of hope lies in some emerging market economies (EMEs) such as China, India and Indonesia which are tipped with a collective average growth of 6.63% in 2015. But with other EMEs in a shambles, the G20 summit features a chastened bunch of world leaders who are lacking in momentum and bounce due to sustained macroeconomic underperformance.

One of the intangible achievements of G20 summits is their morale-raising quality through goal-setting and problem-highlighting. When the chins are down, it helps to pat one another’s backs, candidly exchange views on where we are going wrong, and pledge to do one’s bit for the health of the global family. Markets and economies are psychological animals and it is only thanks to G20 summits that they get periodic assurances that leaders are not sleeping at the wheel. Since the growth funk is the most pressing concern, the ‘Brisbane Action Plan’ at this year’s G20 summit is amalgamating more than one thousand specific policies submitted by member countries as measures to cumulatively drive world GDP up by an additional 2% in the next five years.


Need for Implementaion

Although such a laundry list conveys that each country has a road map for economic revival, these commitments tend to be high on formality and low in implementation because of their nonbinding nature. The G20’s lack of an enforcement machinery and domestic political obstruction to reforms that plague individual member countries have nullified the noblest of intentions. As an institution predicated on the principles of consensus and non-hierarchical decision-making, the G20 can only move incrementally so as not to upset any single member state. Nonetheless, the Action Plan will be on the record and it can be subjected to the soft monitoring and evaluation methods that the G20 adopts to track progress inside each country.

One concrete takeaway from Brisbane, which took up much pre-summit lobbying and persuasion by the host Australia, is the establishment of a Global Infrastructure Hub in Sydney to serve as a clearing house and powwow facility for needy governments and wealthy investors to sit across the table and strike deals. In the run-up to the summit, the Australian Prime Minister Tony Abbott telephoned his Indian counterpart Narendra Modi and secured the latter’s consent for “innovative mechanisms” to enhance infrastructure funding.

With China unveiling its own Asian Infrastructure Investment Bank (AIIB) and the World Bank historically involved in this sector, India should welcome other alternative venues like Australia so as not to avoid dependence on either Western or Chinese-dictated terms. The BRICS Development Bank in Shanghai, with an Indian Governor, will of course also make its contribution to infrastructural uplift, which is the surest guarantor of GDP growth. Modi’s debut at the G20 summit is armed with the confidence of an Indian GDP growth rate that promises to rise to 6.4% next year, and with the satisfaction of settling a nagging row at the World Trade Organisation (WTO) over food subsidies.

India’s ‘sherpa’ (personal representative in the preparations for the summit) Suresh Prabhu has rightly insisted that the G20 must also direct further liberalisation of trade in services, where India has a comparative advantage and which has the potential of unlocking exponential global GDP growth far greater than the benefits of freer trade in goods.

Unexpected Dividend

India is also gladly signing up to the G20’s “aggressive approach” to check blatant tax evasion by multinationals. With the chorus for recovering black money reverberating in India, a G20-level information-sharing network to expose shell companies and tax havens can assist our cleanup act. In spite of sceptics who dismiss G20 summits as “talkfests”, their unexpected dividend is a global impetus of principles and norms that can positively propel domestic economic reforms and overhauls in member countries.

India must also pursue deliverables in a couple of themes where the G20’s attention is fading. The task of regulating the global financial sector and reordering international bodies like the IMF is as unfinished today as it was when the economic crisis struck in 2008. Inequalities of income and persistent unemployment have caused a huge drag-down effect on growth, evoking laments from Suresh Prabhu. India’s call for focusing on the quality and content of growth sounds clichéd but is essential to reiterate if the G20 is to live up to the expectations of a sullen world. Looking beyond the Brisbane summit, humane values are the most essential ingredients for reshaping the world economy during a prolonged crisis.

The writer is a professor and dean at the Jindal School of International Affairs