Mint Explainer: 6 things to know as India prepares for G20 presidency

1. Battle of Relevance

The G20, a grouping of the world’s top economic powers, has effectively brainstormed global economic challenges, from the Asian financial crisis of 1999 to the global financial crisis of 2008. However, many countries are now looking to support local businesses or find new outsourcing destinations closer to home. The US and Canada are exploring possibilities in Mexico, Colombia and Chile. Such self-reliance also mitigates the impact of shocks like Covid. Countries now want to become as self-sufficient as possible, reducing the allure of free trade and globalization. India is no exception.

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The G20 is committed to a global economic order based on the World Trade Organization Charter, which promotes closer trade and business ties; However, adhering to it will be a challenge. US President Joe Biden has indeed spoken of multilateralism, and he may prove his intent at the G20 forum.

However, as countries fight for their own interests, the space for multilateralism is shrinking. Biden himself has taken unilateral decisions on America’s war of technological supremacy with China. Nevertheless, G20 summits bring together major powers, holding bilateral meetings, sometimes taking the focus off the main summit. Former US President Donald Trump met Russian President Vladimir Putin for the first time at the G20 summit in Germany in 2017. The next year, Trump and Chinese President Xi Jinping met during the summit and agreed to postpone the tariff hike. This time Xi and Biden will meet before the G20 summit in Bali.

2. fault lines that run deep

With the outbreak of Russia’s war in Ukraine, the division in the G20 has worsened. Putin will not attend the Bali summit, but has the support of China and South Africa. India has been ambiguous in its stand on the invasion. G20 members may split into two camps, with Western countries seeking to punish Putin, and others such as China, India and South Africa being more restrained or even neutral. India has been quietly engaging with the Kremlin in pursuit of its strategic interests in energy and security.

If the Ukraine war continues, the G20 could remain paralyzed. There are hopes that India may be able to mediate a ceasefire, perhaps the only global power that enjoys goodwill and credibility with both the West and Russia. This will be a test of Modi’s diplomatic skills. If India can be the balancing factor between the West and Russia during its G-20 presidency, its international stature will increase significantly. It may also find further support in its pursuit of a permanent seat on the UN Security Council.

3. The need for a joint attack on inflation

The International Monetary Fund has warned that global central banks are focused on fighting inflation, but that unrestrained action could lead to more tightening of monetary policy. And that could lead to a hard landing for the global economy in the coming months. Coordinated global central bank action may be more effective in tackling inflation, and the G20 provides a forum for brainstorming ways to do this. The need for such action is even more significant as many countries, including India, are suffering from imported inflation. The demand-supply mismatch after the Ukraine war has had a massive impact on food and energy prices globally.

4. Need to support IMF, World Bank

India may also have to work on developing a consensus on helping emerging economies hit by Covid and the Ukraine war, which has pushed up food and energy prices. More than a hundred countries have asked for emergency aid from the IMF, which has provided $140 billion through 2022 so far. Developed countries have given the special responsibility of keeping most of the vaccine stocks available in the early days to well-funded international agencies like the IMF and the World Bank to help poorer countries. If India follows through on this by pushing the US and China to help multilateral lending agencies, it stands to gain more goodwill in the developing world.

5. The India Growth Showcase

For India, the G20 Presidency is an opportunity to showcase its growth story to the world. The IMF projects that India will be the world’s fastest growing major economy in 2023, and for Modi this will be an opportunity to push “Make in India” around the world. The fact is that both sides of India have strong diplomatic relations. The geopolitical divide – the US on one side and Russia on the other – may well position it to capitalize on China’s gradual erosion as a manufacturing hub. Certainly, the country will have to improve its ease of doing business to keep up with competition from other lost-cost destinations such as Vietnam.

6. Global Race for Talent

As countries become more insular and self-sufficient, the battle for skilled labor is intensifying globally. Canada, Australia, Germany and the UK are already competing for talent from emerging economies like India. The US is also looking at ways to stop talented workers from giving preference to other countries. Given its wide pool of skilled labor, India can aim to become the “talent factory” of the world. India can use the G20 to showcase its skilled labor and push for easier immigration policies in the developed world.

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