By G. Srinivasan
The upcoming G-20 Heads of State meeting in Brisbane, Australia in mid-November is being convened when urgent policy actions from major economies, advanced and emerging, call for coordinated and focused approach to get the world economy out of the anemic recovery. Latest economic data from global financial institutions such as the World Bank, the IMF, OECD and the WTO do not inspire hope that economic growth can pick up pace and verve to allay the jittery nerves of policymakers, planners and political leaders who have a lot of stake in the faster and decisive recovery of the global economy. There is a distinct lack of sustained demand to drive growth the world over that dodges every economy, though massive amounts of countercyclical steps in the form of injection of liquidity through monetary easing with attendant ultra low interest rates in rich countries and fiscal stimulus in emerging economies and tax concessions to stoke demand continue unabated for quite a long time since 2008 when the global financial crisis struck like a tsunami.
In fact, the G-20 was set up as a coordinated response by global community to the global financial crisis. That crisis underscored the inadequacies of the extant institutional arrangements such as the IMF, touted to be the lender of the last resort, when major financial crisis abruptly broke out in one major epicenter but spread its octopus-like tentacles to the rest of the universe through fast and fraught transmission effects. That is why post-crisis, leaders of G-20 including India at the highest level meet once a year regularly to take stock of the situation and evolve a coordinated policy response. So beginning in Washington in 2008, the G-20 conclave was held subsequently in London, Pittsburgh, Toronto, Seoul, Cannes(France), Los Cabos (Mexico) and St Petersburg every year and this year the G-20 leaders including India’s Prime Minister Mr. Narendra Modi will gather together for two days on November 15-16 in Brisbane, the capital city of picturesque Queensland, Australia.
Canberra has already stated that building on the St. Petersburg summit, it is easier to structure leaders’ discussions around the key themes of promoting stronger economic growth and employment outcomes, making the global economy more resilient to deal with future shocks and to maintaining a tight focus on practical results that would lift growth, boost participation, create jobs and build resilience of the global economy. In preparing a “Brisbane Action Plan”, Australia has contended that these growth strategies would need to include “practical actions to improve productivity and competitiveness, strengthen investment in infrastructure, encourage trade, make it easier to do business and boost employment”.
At September 2014 meeting of G-20 Finance Ministers and Central Bank Governors in Cairns in which India’s Minister of State for Finance Mrs. Nirmala Sitaraman and RBI Governor Dr. Raghuram G. Rajan took part as the Finance Minister Mr. Arun Jaitley was indisposed, the leaders discussed the agenda of the G-20 summit. The IMF and OECD reckoned that the new growth strategies of G-20 members collectively would deliver two per cent increase in global GDP over five years. This would imply $2 trillion to the global economy and millions of new jobs. The host has already made it amply clear that its priority for Brisbane Summit is to link development actions to growth, by creating the conditions for developing and emerging economies to attract infrastructure investment, by reinforcing tax systems and by improving access to financial services. Canberra promised that its Presidency of G-20 would make it a priority to complete financial reforms in four principal areas directly related to the causes of the crisis, viz., building the resilience of banks, helping prevent and managing the failure of globally important financial institutions, making derivative markets safer and improving oversight of the shadow banking sector.
For India, this is a key issue as a member of the Financial Stability Board (FSB) with FSB members under the G-20 umbrella having committed to adopt the maintenance of financial stability. Hence it already sought IMF/World Bank to conduct their joint Financial Sector Assessment Programme (FSAP) a couple of years ago. The mission worked in concert with RBI, the Insurance Regulatory Authority of India (IRDA), the Stock Exchanges Board of India (SEBI) and the Ministry of Finance. One of the FSAP reports—Financial Stability Assessment Update—on India was published by IMF in 2013. In hailing the comprehensive review recognizing that the Indian banking system remained largely stable on account of tightly controlled regulatory and supervisory regime by RBI, the assessment found gaps and constraints in the implementation of regulatory and supervisory framework. It however hastened to note that RBI has been striving to address these gaps and even when the RBI lacks de jure independence, there has been no de facto interference from the government. But this is a refreshing and qualified plaudit from a neutral observer, though the country’s apex bank is now fighting a losing battle to keep its inflation-setting function unhampered from interference by the Finance Ministry!
Be that as it may, the final working session of the G-20 Finance Ministers and central bank governors under Australia’s Presidency was held on the margins of the recent Fund-Bank meeting in Washington on October 10. At a media interaction later, Treasurer of Australia, Mr. Joe Hockey said that “we want to achieve outcomes that will secure the global economic recovery as we head to the leaders meeting in Brisbane”. He said that as infrastructure investment is critical to G-20 plan, a global infrastructure initiative comprising a multi-year set of actions to increase the quality and quantity of infrastructure across the G-20 and beyond is to be flagged off. The G-20 leaders will announce a global infrastructure hub in detail at the Brisbane summit which will bolster and augment the flow in particular of private investment into global infrastructure, a demand that is estimated to be around 80 trillion dollars over the next decade. The global infrastructure hub meant, “you have someone to bring it all together with common information, common documentation, best practice models, a training programme for public servants, wherever they may be located”, Mr. Hockey said, adding that this will help multilateral organizations to go back to the community and identify that work for lending assistance.
It was also agreed on measures to stabilize the global financial system by looking forward to the challenges and getting on with the job of implementing the priorities of the FSB. There have also been some major initiatives to be delivered on in relation to the base erosion, profit shifting and international tax. In sum, as the leaders of the world’s most powerful 20 economies gather in Brisbane when at the end Turkey will assume the next year’s Presidency, there would be seamless continuity “in delivering our goals, in relation to the FSB priorities, in relation to the growth target of 2 per cent, in relation to the taxation initiatives and in relation to infrastructure and closer partnerships with the private sector”, according to Mr. Hockey. In sum, as India’s Prime Minister Mr. Modi visits Down Under with a renewed remit to his growing popularity, the world awaits his interaction with global stalwarts in setting policy agenda and taking them up for implementation back home to crank up India’s economic growth, analysts say. (IPA Service)