G20 - INTERNATIONAL RELATIONS
News: G20 Summit: What’s at stake?
What's in the news?
● Heads of State and Governments belonging to 20 of the world’s major advanced and emerging economies will commence a two-day summit meeting in Bali, Indonesia.
Key takeaways:
● This is the 17th annual
summit, and will be a culmination of numerous
ministerial meetings and working groups that have been working for the past one
year on key priority areas.
● At
the end of the meeting, India, represented by Prime Minister Narendra Modi,
will assume charge of the G20 presidency.
● The 18th summit will be held in India next year.
What’s on the agenda for the 2022 summit?
The
Bali summit will have three key priorities.
1. Global Health Architecture:
● This
involves deliberations towards strengthening global health resilience and making the global health system more inclusive, equitable, and responsive to
crises.
2. Digital Transformation:
● Deliberations
here have centered on achieving the full potential of rapid digitalisation of the global economy by
creating a new landscape of cooperation among nations.
3. Sustainable Energy Transition:
● Under
this rubric, the discussions have focussed on ways to accelerate the transition
towards cleaner energy sources.
● In particular, since any such transition requires substantial investments, the efforts have been focussed on finding a platform for such investments.
Concerns of G20:
● The
G20 countries account for 60 per cent of the world’s population, 80 percent of
the world’s GDP and 75 percent of the world’s exports. As such, they contain
the engines of global growth.
● Since
the October 2021 summit in Rome, prospects
of the global economy have worsened.
● The Chart sourced from a recent report of the International Monetary Fund on G20 countries shows, most of the G20 constituent countries have suffered significant output losses since the start of the Covid-19 pandemic. Example: India, for instance, would have lost almost 14 percent of its total output, the highest loss among all G20 countries.
Causes for the economic hangover of G-20:
There
are many reasons why global growth and the promise of globalization have
received a severe setback.
1. Russia-Ukraine Crisis:
● Russia’s
invasion of Ukraine has not only created massive
geopolitical uncertainty but also spiked global inflation through the supply bottlenecks and curbs across a
whole host of commodities.
● The
associated sanctions by the West have further queered the pitch.
● Persistently high
inflation - at historic highs in several countries
has eroded purchasing power across these countries, thus dragging down economic
growth.
2. Rising interest rates:
● In
response to high inflation, central banks across countries have raised interest
rates, which, in turn, have dampened
economic activity further.
● Some
of the biggest major economies such as the US and the UK are set to face a
recession; others, such as those in the euro area, are likely to slow down to
almost a halt.
3. Crashing of Real estate sector:
● China,
one of the major engines for global growth, is witnessing a sharp slowdown as
it struggles with a real estate crisis.
4. Geopolitics:
● The world economy is struggling with geopolitical rifts such as the tensions between the US and China, the two biggest economies in the world, or the decline in trade between the UK and the euro area in the wake of the Brexit decision.
WAY AHEAD:
1. Growth with peace:
● The
G20 countries can grow faster if they grow together.
● Such growth, in turn, requires peace. Given the scope of G20 countries, the summit thus affords an opportunity for the leaders to find common ground and iron out the creases in the policy landscape.
2. Price stability and debt sustainability:
● According
to the IMF, “the overarching priority for policymakers in most economies is to
ensure price stability, while bringing
down debt levels and protecting the most vulnerable”.
● In
other words, the first job at hand is to contain
raging inflation. But at the same time, governments have to find ways to
help the vulnerable without necessarily ballooning the debt levels.
● A
key concern in this regard would be to ensure that external risks are carefully
monitored.
3. Joint action:
● The
IMF said, “a strong, sustainable, balanced, and inclusive recovery requires
joint action by the G-20”.
● This
kind of joint action, in turn, requires not just securing peace in Ukraine but
also “help prevent further fragmentation”.
4. Rules based trade order:
● On
trade, the G20 leaders need to push for a “more
open, stable, and transparent rules-based trade” that would help address global
shortages of goods.
● “Strengthening
the resilience of global value chains would
help protect against future shocks,” said the IMF.
5. Global problems need global solutions:
● Lastly, as is mentioned in one of the three key priorities for the Bali summit, “a durable recovery requires multilateral action on climate, debt, taxation, and pandemic preparedness”.
G-20:
● The
G20 was formed in 1999 in the
backdrop of the financial crisis of the late 1990s that hit East Asia and
Southeast Asia in particular.
● Its
aim was to secure global financial
stability by involving middle-income countries.
● Together, the G20 countries include 60 percent of the world’s population, 80 percent of global GDP, and 75 percent of global trade.
Members:
● Argentina,
Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy,
Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey,
the United Kingdom, the United States, and the European Union.
● Spain is invited as a permanent guest.
Other backdrops of G-20:
● The
presidency of the G20 rotates every year
among members.
● The
country holding the presidency, together with the previous and next
presidency-holder, forms the ‘Troika’ to ensure continuity of the G20 agenda.
● Italy, Indonesia, and
India are the Troika countries right now.
● The
first G20 Summit took place in 2008 in Washington DC, US. In addition to
Summits, the Sherpa meetings (that
help in negotiations and building consensus), and other events are also
organized throughout the year.
● Each
year, the presidency invites guest countries.
● The
G20 has no permanent secretariat.
● The
agenda and work are coordinated by representatives of the G20 countries, known
as ‘Sherpas’, who work together with the finance ministers and governors of the
central banks.
● India
recently appointed ex-NITI Aayog CEO Amitabh Kant as the G20 Sherpa after
Piyush Goyal.