Established to tackle global crisis in 1999 at the level of Finance Ministers and Governors of the Central Banks and then scaled up to Summit level in 2009 at Pittsburgh, USA, the G-20 has evolved over the years not only to deliver in terms of coordination in dealing with various global challenges on finance related fronts. Since 2012 onwards it has also included key development issues, concerning global economic governance. At this point, the G20 grouping represents around 65 percent of the global population and 79 percent of global trade. With participation of selected countries the share in global economy has also continued to exceed 80 cent at any given point of time.
The current Indonesian Presidency has faced unprecedented challenge as aggression has polarized the world and post-pandemic tapering are still unfolding. The Presidencies of Italy and Saudi Arabia also dealt with the COVID-19 crisis and subsequent health challenges, whose spillover effects are still evident.
Against this backdrop it seems that the biggest challenge facing the Indian Presidency would be reigniting the spirit of global cooperation and bringing different actors back together. As we all aspire for a better world, fragmentation - as evident not only across actors but also in various modalities of engagement, be that in the realm of finance or even in the area of development where growth-related narratives bypass the wider development concerns - would have to be squarely addressed. With wider and vital connections and dynamic leadership, India may well be positioned to bring in greater convergence that global governance requires. In this brief write up, we would try to pick up some of the inter-related threads that make such convergences feasible.
In the current global macroeconomic scenario, the major task before the Indian Presidency would be to balance the spillover effects of the previous quantitative easing in the United States. This has led to large-scale asset purchases by the FED, typically of long-term government debt but also private assets, such as corporate debt or asset-backed securities. This is affecting middle income countries and emerging markets, including the LICs. The emerging market economies are facing an unprecedented challenge in coping up with inflation, capital outflows and associated balance of payment related imbalances. Coordination among G20 countries would be even more desirable as multipolar world order is confronting with polycrisis.
The rising import dependence and looming global debt crisis with shrinking ODA and deepening of migration and food crisis, has already led 55 countries to the doors of multilateral finance institutions, including the IMF. It is in this backdrop that the reforms of multilateral institutions are likely to be taken forward by the troika of emerging markets of Indonesia, India and Brazil. Carrying forward previous Presidency agenda on some of the themes like blended finance and urgency for reforms of multilateral organizations is important. Issues like the recapitalization of MDBs and doing away the distinctions between the development finance and climate resilient finance are also important.
India would also have to make an extremely important effort to combine the three tracks of 2015, viz. Addis Ababa of Action Agenda (AAAA), SDGs with the Agenda 2030, and the Paris Convention for Climate Change. Several global efforts have been launched, including during G20 Indonesia, but the convergence among these three tracks requires greater global determination. This would also imply providing more resources for our global commitment to sustainability.
The SDG Agenda, which has lately decelerated, also requires a new energy, as we all move towards the proposed, ‘Summit of the Future’, to be held in 2024, by the UN Secretary General. We need to place all our resources together with full commitment and create mechanisms for funding the necessary transitions. Mobilising those resources needed by climate finance will require a greater coordination and commitment. The unfinished agenda for global taxation, tax evasion and illicit finance flows would also have to be taken forward.
New approach to development
It has also become crucial to work towards developing a new narrative on inclusive, equitable and quality growth in the post-pandemic socio-economic environment. Growth should be judged in terms of wellness and wellbeing rather than solely in form of per capita monetary income alone. It must support universal principles, sustainable global governance, and the successful implementation of Agenda 2030. It is a pertinent question of how fundamental development principles can be included in the new notion of quality growth. This may need us to go beyond GDP as a measure of growth and development. Intrinsically linked to the development paradigm is the issue of reforming the global financial architecture and the measurement metrics of development. The role of multilateral institutions, particularly the Multilateral Financial Institutions and its layers - The Multilateral Development Banks, Regional Development Bank and National Development Banks, becomes extremely important, given the amount of endowments and leverage these institutions have in shaping the development trajectories of the countries. Financing for development, when we are particularly taking into account the adoption measures for climate sustainability, cost of just transitions and SDGs, require a lot of emphasis on the optimal allocation of resources available with these institutions. Furthermore, not just the allocation but also the funding mechanism of these institutions need to be evolved to generate the financial resources that are required to meet our developmental needs, particularly financing of SDGs, given the economic slowdown and recessionary tendencies in the advance economies and their spillovers over the developing world.
Back to Basics
Development strategy is to be based on stronger moral motivations, driven by a sense of integrity, honesty, and responsibility, including a willingness to compete on fair terms. The idea of LifE – Lifestyle for Environment - articulates an approach based on sustainable production and consumption. The global value system must adopt the idea of growth with sustainable approach as the centre of its new narrative. That would mean to consider the natural resources as intergenerational resources.
As Mahatma Gandhi said, “The world has enough for everyone’s need, but not enough for everyone’s greed.” Depletion of natural resources like water and biological diversity and pollution of air cannot be justified on ethical grounds. The use of resources for growth and development must become sustainable. That is what climate justice would involve. In this regard, the framework Access, Equity and Inclusion (AEI) provides efficient norms and values for assessing innovations and objectives for technological transformation, stressing that innovations should be accessible to all, and they have to distribute the benefits/gains equitably and in an inclusive manner. While the innovations themselves may not be seen as scale neutral, the challenge lies in adopting them to facilitate AEI. On the other hand, AEI provide values that can guide innovation processes and policies. Thus, the task before the Indian Presidency would be to infuse true spirit of international cooperation for meeting future growth challenges.