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

1. The battle for relevance

A grouping of the world’s top economic powers, G20 has effectively brainstormed global economic challenges, ranging from the 1999 Asian financial crisis to the 2008 global financial crisis. However, many countries are now looking to support local businesses or finding new outsourcing destinations closer home. US and Canada are exploring the potential in Mexico, Colombia and Chile. Such self-reliance also reduces the impact from shocks like covid. Countries now want to be 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 WTO charter, promoting closer trade and business ties; however, adhering to it will be a challenge. US president Joe Biden has indeed spoken for multilateralism, and he can prove his intentions at the G20 platform.

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However, as countries battle for their self-interest, the space for multilateralism may be shrinking. Biden himself has taken unilateral decisions on America’s battle for tech supremacy with China. Still, the G20 summits bring major powers together hold bilateral meetings, sometimes deflecting the focus from the main summit. Former US president Donald Trump met Russian president Vladimir Putin for the first time in 2017 at the G20 summit in Germany. The next year, Trump and Chinese president Xi Jinping met during the summit and agreed to defer tariff hikes. This time, Xi and Biden will meet ahead of the G20 summit in Bali.

2. The fault lines that run deep

Divisions in the G20 have only gotten worse with the outbreak of Russia’s war in Ukraine. Putin will not attend the Bali summit, but he has support from China and South Africa. India has been ambivalent in its stance on the invasion. G20 members may fall into two camps, with the Western countries on one side seeking to punish Putin, and others such as China, India and South Africa 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 drags on, the G20 may remain paralyzed. There are hopes that India may be able to mediate a truce, being perhaps the only global power that enjoys goodwill and credibility with both the west and Russia. It’ll 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 be greatly enhanced. It may even attract further support in its pursuit of a permanent seat in the UN Security Council.

3. The need for a joint assault on inflation

Global central banks have been focused on fighting inflation, but uncoordinated action may lead to overtightening of monetary policy, the International Monetary Fund has warned. And that could lead to a hard landing for the global economy in the months ahead. Coordinated global central bank action may be more effective in tackling inflation, and the G20 provides a platform to brainstorm ways of doing it. The need for such action is even more important since many countries including India suffer from imported inflation. Demand-supply mismatches following the Ukraine war have had a cascading impact on food and energy prices globally.

4. The need to support IMF, World Bank

India may also have to work at evolving a consensus to help emerging economies hit by covid and the Ukraine war, which have driven up food and energy prices. More than a hundred countries have sought emergency assistance from the IMF, which has extended $140 billion worth of aid in 2022 so far. The developed countries which cornered much of the available vaccine stock in the early days have a special responsibility to keep international agencies like IMF and World Bank well-funded to help the poorer countries. If India takes the lead on this by pushing US and China to help multilateral lending agencies, it stands to gain greater goodwill in the developing world.

5. The India growth showcase

For India, the G20 presidency is an opportunity to showcase its growth story across the world. The IMF projects India will be the fastest growing major economy in the world in 2023, and for Modi it’ll be an opportunity to push “Make in India” across the world. The fact that India has robust diplomatic relations on both sides of the geopolitical divide — the US on one hand and Russia on the other – can position it well to capitalize on the gradual erosion of China as a manufacturing hub. Of course, the country has to keep improving on the ease of doing business quotient to stave off competition from other lost-cost destinations like Vietnam.

6. The global race for talent

Even as countries become more insular and self-sufficient, the fight for skilled labour is escalating globally. Canada, Australia, Germany and the UK are already competing for talent from emerging economies like India. The US too is considering ways to prevent talented workers preferring other countries. Given its wide pool of skilled labour, India could aim to become the world’s “talent factory”. India may use G20 to showcase its skilled labour and push for easier immigration policies in the developed world.

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