In a sharply-divided grouping, India needs to turn conflicted values into shared interests.
The success of India’s G20 Presidency will depend on how deftly Prime Minister Narendra Modi can find paths and instruments to bridge the divides, peace the conflicts, and rebuild damaged supply chains.
The third challenge is energy. Russia is teaching the world that while sanctions against it could impact its economy in the future, but in the short term, these sanctions are failing. The most vulnerable to Russia’s reaction are the gas-dependent European nations. Sitting in the hot climes of July, the problem may seem distant. Come November, the shortage of gas in countries such as Germany will play out differently. The hot virtue-signalling economics will change, but more importantly, the cold politics of discomfort—an idea that’s new to Europe—will implode. Shifting the blame, to India for instance for buying statistically-insignificant quantities of oil from Russia, will only expose the hypocrisy of the West; it will not deliver solutions. On this front, India needs to transport three disparate G20 energy interests—broadly, energy producers (the US, Russia, and Saudi Arabia) versus energy consumers (Europe and others)—on a working platform. As rising food and energy prices lead to inflation, the fourth challenge is the manner in which countries are attempting to fix the problem. In democracies, high prices can cause political instability. Containing prices at any cost is not an economic necessity, it is equally a political priority. Using the blunt tool of monetary policy, the default policy knee-jerk, most central banks have been raising interest rates. This may curb excess consumption, but leaves the supply-side problem unaddressed. Other than China, Indonesia, Japan, Russia, and Türkiye, the central banks of all other G20 members have raised interest rates recently. This will increase the cost of doing business across the board and will slow down investments—without making a dent in primary inflation. India needs to set the G20 agenda that catalyses the creation of new food supply chains, while managing immediate food shortages, to contain inflation. Simultaneously, it must strengthen the growth argument, one aspect of which is lower interest rates.
India has strong relationships with both the West and Russia, and the two are engaging only through the currencies of war and weapons, the importance of India’s role as a mediator to bring both out of the bloody stalemate cannot be understated.
The fifth challenge is the threat of stagflation—the slowing or stagnation of economic growth going hand in hand with rising inflation. In developed countries, this shows up as a fall in consumption as households in the expectation of rising prices curtail their purchases, which, in turn, slows growth. The policy solution for this is easy—hand out cash to households. But in developing economies, the scope for the consumption-growth equation is limited, resources in the hands of governments are few, and the ability to hand out cash is difficult. Food distribution in food-sufficient economies, such as India, is the resultant policy action. India will need to put this issue on the G20 table and ensure that the grouping pays extra attention to food-short economies. If government pump priming is necessary, the condition is that green shoots of growth must be visible. All other debates such as greening the planet or making technology platforms more accountable to sovereigns will follow. Once the big challenges have been addressed, these will become easier to deliver. The 100 official meetings around employment, health, digital economy, trade, investment, climate, anti-corruption, tourism, culture, socio-economic development, education, and women empowerment will continue to stay on course. As will the 50 academic interactions and 40 meetings around the international financial architecture, financial inclusion and sustainable finance, financing for infrastructure, climate finance, and tax matters. These conversations must continue, even as the bigger problems take priority.
India needs to transport three disparate G20 energy interests—broadly, energy producers (the US, Russia, and Saudi Arabia) versus energy consumers (Europe and others)—on a working platform.
Finally, over the past 13 years, there has been a temptation to bring a unique sovereign signature on all G20 Leaders’ communiques. What began with a sharp focus on the economy in the November 2008 Washington Summit began to get fuzzy by the April 2009 London Summit with an expansion to “build an inclusive, green, and sustainable recovery”. The September 2009 Pittsburgh Summit included climate change, while the November 2010 Seoul Summit introduced the millennium development goals, marine environment protection, and corruption into the G20 discourse. The November 2014 Brisbane Summit urged the World Bank and the International Monetary Fund to budget US$ 300 million for the outbreak of Ebola in Guinea, Liberia, and Sierra Leone, while the November 2015 Antalya Summit had a statement on the fight against terrorism. The primary goal of the G20 was to act as the board of directors of the global economy. That it has expanded the mandate to include more issues shows a rising legitimacy of the G20. But it also shows governments bending before the narrow interests of those with zero skin in the game wanting to hijack such agendas. Resisting the temptation to further dilute the mandate of the G20 will remain an invisible challenge for all presidencies, including India’s.
The 100 official meetings around employment, health, digital economy, trade, investment, climate, anti-corruption, tourism, culture, socio-economic development, education, and women empowerment will continue to stay on course.
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Gautam Chikermane is a Vice President at ORF. His areas of research are economics, politics and foreign policy. A Jefferson Fellow (Fall 2001) at the East-West ...Read More +