G20 Summit: What’s at stake?

Source: The post is based on the following articles

“Making G20 relevant: The body works best when it makes an enabling global economic environment its focus. India should take note” published in The Times of India on 15th November 2022.

“G20 Summit: What’s at stake?” published in the Indian Express on 15th November 2022.

Syllabus: GS – 2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Relevance: About the performance of G20 in the past and present.

News: A two-day G 20 summit meeting will commence in Bali, Indonesia. This is the 17th annual summit. At the end of this meeting, India will assume charge of the G20 presidency.

Why India’s G20 presidency is significant?

How effective was the performance of G20 in the past?

It was formed in 1999 in the wake of the Asian financial crisis. Its major achievements include,

Role in Financial crisis: The G20 was most effective in 2008 and 2009. As its coordinated policymaking mitigated the economic fallout of the financial crisis. Further, G20 also laid the platform for subsequent agreements on sharing tax data to curb tax evasion.

Expansion of G20’s ambit: Since 2008, the core goal of improving the economic policy environment has expanded to tackling climate change and terrorism, among other things.

Dismantled protectionism: It was perhaps the single most important reason that more than 1 billion people globally escaped extreme poverty in the three decades before Covid.

Why did the performance of G20 reduce at present?

Global growth and the promise of globalisation of G20 have received a severe setback ever since the pandemic. This is because,

Output losses due to Covid: Most of the G20 constituent countries have suffered significant output losses since the start of the Covid-19 pandemic For instance, India would have lost almost 14% of its total output — the highest loss among all G20 countries.

Russia’s invasion of Ukraine and sanctions against Russia by West has not only created massive geopolitical uncertainty but also spiked global inflation due to supply chain bottlenecks and curbs

Impact of Central Bank’s decision: To control high inflation, central banks across countries have raised interest rates. This in turn has dampened economic activity. For example, the US and the UK are set to face a recession.

A slowdown in China: China, one of the major engines for global growth, is witnessing a sharp slowdown as it struggles with a real estate crisis.

Geopolitical rifts: Such as a) Tensions between the US and China, the two biggest economies in the world, b) The decline in trade between the UK and the euro area in the wake of the Brexit decision.

What should be done to improve the performance of G20?

Requires joint action: G20 countries can grow faster if they grow together. For growing together, they require peace. So, in the present summit, the leaders have to a) Find common ground such as multilateral action on climate, debt, taxation, and pandemic preparedness, etc., b) Secure peace in Ukraine and prevent further fragmentation, and c) Rule out the differences in the policy landscape.

Contain raging inflation: 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”.

So, the G20 countries have to a) Contain inflation, b) Find ways to help the vulnerable without increasing the debt levels, c) Ensure proper monitoring of external risks.