A Monthly Round up of G20 Themes
The newly sworn in President of India, Droupadi Murmu has made clear the importance India attaches to the upcoming G20 meeting of the heads of state next year. In her inaugural address President Murmu noted her expectations from the meeting. “In this grouping, twenty big countries of the world will brainstorm on global issues under the chairmanship of India”. She also added “I am sure that the conclusions and policies that will emerge from this brainstorming in India will determine the direction of the coming decades”.
It was the right note to strike for the G20 process, as it gathers speed during the Indonesian Presidency. Writing in a blog for the IMF, President Kristalina Georgieva warned the global economic outlook “has darkened significantly”. She made the point that when the G20 had last met in April, the IMF had just cut its global growth forecast to 3.6 percent for this year and next. Georgieva warned this could get worse given potential downside risks. “Since then, several of those risks have materialized—and the multiple crises facing the world have intensified”.
The risks IMF and other agencies are worried about are that inflation is higher than expected and has broadened beyond food and energy prices. “This has prompted major central banks to announce further monetary tightening”.
The results are evident in the slowdown of growth in the G20 countries, as per an OECD report.” In the first quarter of 2022, gross domestic product in the G20 area rose by 0.7 per cent quarter-on-quarter according to provisional estimates, down from the 1.3 per cent increase recorded in the fourth quarter of 2021”. Looking at the data country wise shows growth has slowed by more than 2 percentage points in Australia and Indonesia. Growth has also slowed but “to a lesser extent” in Canada, China, India, Italy, Korea, Turkey and the United Kingdom. In France, Japan and USA, GDP has contracted 0.2 per cent, 0.1 per cent and 0.4 per cent respectively.
In this backdrop the finance ministers and the heads of the central banks met at Bali in Indonesia this month. It was expected that overwhelming financial issues, food insecurity and trade protection measures will take the centre stage, quite naturally as the world grappled with one after another shortages ranging from wheat, to lithium and even in other commodities that weren’t short but were ensnared in supply side issues. Despite the concerns, due to divergence of perspectives on political issues notably the asymmetric attitude towards Russia predominated. As a result the need for an evidence based policy making framework to guide economic recovery, was found missing.
This is what Indian finance minister Nirmala Sitharaman emphasised on in her speech As an example she alluded to the fact that India has based its long term growth prospects as a predictable outcome that will come from the emphasis on public capital expenditure programmes. In her Tweet she said India's #growthstory is embedded in public #CapitalExpenditure programmes. “#EvidenceBased #PolicyMaking is vital for resilient economic systems,” she noted.
Due to persisting differences between US-Europe on one side and Russia on the other side the G20 meeting could not take any decision on arriving at a Common Framework for Debt Treatment. The meeting ended without a formal communique mirroring the developments in the other tracks.
In August, the G20 ministerial conference on social empowerment is scheduled for the third week, as well as meetings of the working groups on development and those on environment. The issues are critical, but will need a willingness among the participating countries to agree to examine the long term priorities.
Before leaving, we append a note on how import of coal has become the stiffest challenge in India’s current account deficit