As India gears up to officially assume the G20 presidency this year, it must recognise and address the core challenges it is likely to face. There are several aspects that India will need to consider while setting up its agenda—how can it take forward the work done by the past presidencies? Which issues should it prioritise? How can it pursue its own agenda in the global context?
The pandemic and the Ukraine crisis have elevated global debt levels to new heights, beyond the stress nations were already facing before the pandemic. According to the recent IMF World Economic Outlook
, the debt-to-GDP ratio in the median emerging market and the middle-income country was about 60 percent in 2021, as compared to 40 percent in 2013 at the time of the taper tantrum. Similarly, for low-income countries, it was double the amount in 2021 as compared to 2013.
With the expiry of DSSI and the tightening of monetary policy across the world, including in the highly indebted countries, it becomes necessary to ensure that the framework is developed fully and delivered quickly.
In 2020, the extraordinary G20 Finance Ministers and Central Bank Governor’s Meeting recognised
that support for debt relief may be required beyond Debt Service Suspension Initiative (DSSI) for nations to recover from the crisis. Consequently, the Common Framework for Debt Treatments
was proposed to address protracted liquidity and insolvency problems. However, the Common Framework has been only sought by three countries so far—Chad, Ethiopia, and Zambia—all of which have been delayed
. With the expiry of DSSI and the tightening of monetary policy across the world, including in the highly indebted countries, it becomes necessary to ensure that the framework is developed fully and delivered quickly. It is also important for the G20 to encourage the participation of private creditors and other official bilateral creditors in committing to debt relief on favourable and comparable terms, without which the effort may seem futile.
Moreover, the G20 committed to pledging US $100 billion
through voluntary channelling of Special Drawing Rights (SDRs)—of which US $60 billion has been recycled to date. The SDR channelling includes the newly established IMF-led Resilience and Sustainability Trust (RST)
and IMF’s Poverty Reduction and Growth Trust (PRGT). However, while RST can prove to be a crucial achievement of the G20, there could be certain stumbling blocks ahead for the Indonesian and Indian presidencies. RST is designed such that the loans of credit will be linked to policy conditions and released in tranches—conditionalities that several critics find problematic
and restrictive for emerging economies.
Furthermore, the uncertainty induced by the pandemic and the Russia-Ukraine war has added to the global supply shocks, leading to more shortages beyond the agriculture and energy sectors. The war-induced supply shortages have amplified the inflationary pressure, especially in the energy and agriculture sectors. According to the IMF
, these supply shortages are expected to last until 2023, thus leading to elevated inflation, both in advanced and emerging economies. For 2022, the inflation is projected to be at 5.7 percent
in advanced economies and 8.7 percent
in emerging market and developing economies.
According to the IMF, these supply shortages are expected to last until 2023, thus leading to elevated inflation, both in advanced and emerging economies.
The inflationary pressures have led to a tightening of monetary policy in most G20 economies, similarly, the crisis-induced fiscal support is also gradually being withdrawn. Many advanced economies also witnessed tapering asset purchases (Australia, Japan, and the United States). The monetary policy is likely to differ across countries, thus, it would be crucial for the G20 to ensure that central banks effectively communicate their outlook on inflation and monetary policy to be transparent and avoid policy surprises.
Proving Global Public Health Goods
The recovery from the pandemic has been largely uneven due to inadequate access to essential healthcare. By 2021, only half
of the WHO member states reached the target of vaccinating 40 percent of their populations, and only 10 percent
of the population in low-income countries have received at least one dose of the vaccine. Given that countries have varying capacities in addressing health threats and unequal access to public goods, health financing will become crucial in overcoming future health threats.
In 2019, the G20 held the first
G20 Finance and Health Ministers meeting and recognised that developing a coordinated global approach to manage health threats would not be possible without an adequate financing system in place. The Indian presidency needs to explore a new financial mechanism for Pandemic Prevention, Preparedness, and Response. It should aim to identify the PPR financing gaps and further develop the finance and health ministerial collaboration to ensure that future health threats do not lead to fiscal, monetary, and economic crises and that decisions related to global public health are more coordinated. According to the IMF, closing the US$23.4 billion
funding gap for the access to COVID-19 Tools (ACT) Accelerator is another important step towards providing global public health goods.
The Russia–Ukraine war has led to resurfacing of concerns
regarding the illicit use of crypto-assets and its impact on the global financial stability. The crypto-assets are evolving quickly, thus G20 should play a key role in the regulation of digital assets through close global coordination with standard-setting bodies. The regulation of the assets must ensure supervision that creates necessary conditions for safe innovation.
The G20 held the first G20 Finance and Health Ministers meeting and recognised that developing a coordinated global approach to manage health threats would not be possible without an adequate financing system in place.
Moreover, to make the digital economy more accessible, there is a need to build a global framework to enable cross-border trade that respects the different economic speeds, market competitiveness, and supply chain characteristics of the developing nations. Currently, views on e-commerce negotiations are divided
between WTO members. In case of a prolonged impasse, an alternate paradigm that addresses digital trade as well as cross-border data flows, data localisation, and online consumer protection will have to be provided by those opposing the Joint Statement Initiative (JSI) on e-commerce.
Additionally, there are growing concerns regarding monopolistic practices and unfair competition being used by a few big technology firms. The regulation of internet platforms is important for emerging economies. Better access to digital platforms may enable smaller enterprises to compete with larger multinationals and ensure fair access to digital markets.
Unlike several other multilateral groupings, the G20 does not have a permanent secretariat. While this ensures equal opportunity for the member states to set the G20 agenda, it could also mean that with each new presidency, there may be a discontinuity of expectations and unfinished agenda items. Whilst addressing new challenges, India must consider ensuring continuity in G20 agenda-setting by leveraging the G20 Troika mechanism and recognising the core challenges faced by the Indonesian presidency.
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