India and G20 : Agenda for action
Ajay Seth & Michael Debabrata Patra
India assumes the Presidency of the Group of 20 (G20) amidsta daunting global environment riddled with policy challenges. A ‘polycrisis’ landscape confronts the G20 with headwinds from slowing global growth and trade, high inflation, aggressive monetary policy tightening and associated spill-overs, geopolitical tensions, debt distress, climate change and the lingering pandemic.
Amidst centrifugal forces pulling at the fabric of globalisation, the role of the G20 in fostering global policy cooperation is crucial. As the third largest economy in the world in purchasing power parity (PPP) terms and the fifth largest in terms of market exchange rates, India accounts for 3.6 per cent of G20 GDP in nominal terms and 8.2 percent in PPP terms. The IMF projects that India’s GDP will grow at 6.1 per cent in 2023, which would be the highest among G20 Nations. India’s G20 Presidency priorities envision a balance between responsibility and ambition, encapsulating the vision of unity and interconnectedness.
Our progress in digital technologies and our experiences drawn from a thriving FinTech ecosystem uniquely position us in expanding financial inclusion, leveraging technology to buttress productivity and economic integration, and in dealing with challenges developing countries face in mitigating the effects of climate change. In these areas, we believe our Presidency can make substantial contributions.
The first Finance Track (FT)event of India’s G20 Presidency – the meeting of Finance and Central Bank Deputies (FCBD) –is set to be held in Bengaluru during December 13-15, 2022. At this meeting, India’s priorities and associated deliverables will be unveiled. The FT has eight workstreams, focusing on international financial architecture, the global economy, infrastructure investment, sustainable finance, international taxation, health and finance, financial sector regulatory issues and financial inclusion.
Accepting the Presidency of the G-20, Honourable Prime Minister Shri. Narendra Modi said : “India’s G-20 priorities would be shaped in consultation with not just our G20 partners, but also our fellow travellers in the global South, whose voice often goes unheard.” India’s key FT priorities translate his commitment into action. They include strengthening global financial safety nets, managing global debt vulnerabilities, assessing macroeconomic implications of food and energy insecurity, and financing sustainable and resilient cities of tomorrow. We will also work on mobilising timely and adequate financial resources for climate action, as most G20 countries have declared their net-zero target dates. On international taxation, we will build upon significant progress made by the G20, including addressing tax challenges, capacity building and enhancing tax transparency. We will continue developing G20-driven finance and health coordination for identifying and addressing risks and vulnerabilities associated with pandemics and improving preparedness to mobilise in response to new pandemic threats.
Within financial sector regulation, we would focus on risks and opportunities offered by technological developments. The recurring turmoil in crypto markets, the de-pegging of some stable coins and the fall of broader crypto markets have raised apprehensions about threats to financial stability from cryptocurrencies. It is, hence, necessary to broaden the G20 crypto-asset dialogue by addressing aspects such as monetary policy and macro economic concerns, data privacy, market integrity, competition policy and taxation by synthesising the work of various international organisations.
Rapidly growing digital financial services and increased dependence on third-party services expose the financial system to operational, liquidity and concentration risks. We seek to promote international cooperation in risk management frameworks to manage these risks. As the economy becomes more digitised, cyber risk poses a threat to the financial system – an outage anywhere in the chain may cause cascading effects impacting the entire financial system. A chain is only as strong as its weakest link. During our Presidency, we would also like to see increased global cooperation in mitigating system-level vulnerabilities from cyber risk.
To supplement the sustainable development goals (SDG) of reducing transactions costs of migrant remittances to less than 3 per cent by 2030, our approach will be to reduce both high transaction costs and the time between origination and settlement of payments through inter operability of National fast payment systems. We would leverage digital public infrastructure to advance financial inclusion and harness productivity gains. Constructive and actionable policy recommendations for developing a sound and vibrant digital financial ecosystem would help to achieve these goals while contributing to economic development.
In this milieu, the G20, which owes its genesis and raison d'etre to the conviction that global problems need globally coordinated solutions, offers hope to the world as it brings together the world’s major economies in a renewed effort to achieve its mandate of strong, sustainable, balanced and inclusive growth. Every crisis affords an opportunity. Therefore, let us hope that the current poly crisis leads to the reinvigoration of global policy cooperation to meet emerging challenges, repair the multiple fractures the global economy faces and position the global economy on a trajectory that fulfils the G20’s mandate. Equitable and inclusive human progress hinges on ‘Vasudhaiva Kutumbakam’-One Earth, One Family, One Future.
Shri Ajay Seth is Secretary, Department of Economic Affairs, Ministry of Finance and Dr Michael D Patra is Deputy Governor, Reserve Bank of India