G20 should guard against losing focus on economic growth: Chidambaram

19 Sep 2013

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India has called for a pro-growth bias in the G20's economic policies in the context of weak global recovery, and a careful calibration of procyclical policies so as not to affect growth in developing countries.

Since growth in emerging markets is crucial to the strength of the global economy, the G20 should coordinate policy action in a way to boost growth in developing countries, India's finance minister P Chidambarm said while addressing a conference on governance and development.

''It is critical that G20 find ways to develop strong links of coordination and cooperation and take up issues of importance to emerging economies as otherwise, G20 may evolve as a loose forum instead of a powerful steering wheel of global governance'', Chidambaram said.

He was addressing an international conference on 'Governance and Development: Views From G20 Countries', organised by ICRIER.

He said there is widespread concern that the G20 agenda is losing focus and rather expanding too widely, covering far too many unrelated issues.

This he said, is partly due  to the outreach process followed by subsequent chairs of the G20 both influenced and encouraged by outside players, including civil societies, academics and international agencies who seek to advance their various causes through high level discussion and endorsement by leaders.

While the outreach programme itself is not a bad idea, Chidambaram said, interaction with various players should not result in the G20 losing its focus.

''I do believe that to be able to play a meaningful role in the global governance, the G20 agenda should be sharper, and focused only on those issues on which it can make a distinctive contribution particularly on economic and financial issues, as premier forum for international economic cooperation.''

G20 also seems to have lost focus on the much needed governance reforms of the international financial institutions like the IMF, World Bank and the Financial Stability Board, as well as in many standard setting bodies, which have been among the top priorities, he said.

Most advanced countries have now clearly indicated their unwillingness to move ahead with governance reforms of international financial institutions and capital market reforms. This has hampered credibility of the G20, and makes progress on other issues also difficult, he added.

India and other emerging economies have repeatedly underscored the critical role that investment, particularly in infrastructure could play in sustaining the global recovery and rebalancing.

The G20 leaders at their Los Cabos summit in 2012 decided ''to consider ways in which the G20 can foster investment in infrastructure and ensure the availability of sufficient funding for infrastructure projects, including multilateral development banks' (MDBs) financing and technical support''. While the issue has been taken up during this year, a broadening of the subject to cover financing for all kinds of investment resulted in a loss of focus, so that in the 2013 Summit, they could only just endorse the work plan of the Study Group, Chidambaram pointed out.

This is surely an opportunity loss, and we hope that the matter would be taken up more meaningfully during the next presidency of the G20.

The issue deserves priority as recycling global savings for enhancing infrastructure investment in emerging economies and developing countries, would have positive implications for rebalancing global demand, he said.

The G20 meeting at St Petersburg committed to remain mindful of the risks and unintended negative side effects of extended periods of monetary easing while carefully calibrating and communicating clearly, future changes to monetary policy settings and to cooperate to manage their spillovers on other countries.

Similarly in the backdrop of the upcoming WTO ministerial in Bali in December 2013, G20 Leaders have called on all the WTO members to show the necessary flexibility so as to achieve a successful outcome in Bali.

These are important issues needing consensus and cooperation for the interests of both the developed as well as the developing countries.

Australia will now assume the presidency of the G20 and ''we must make use of the opportunity provided by the St Petersburg leaders declaration to ensure that we study the complex issue of labour mobility as the free movement of capital with restraints on movement of the necessary skills does hamper productivity.'' Chidambaram added.

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