Just a year after the collapse of Lehman Brothers, there are voices saying the worst is over for the world economy. Many governments feel freer to use the Group of 20 summit to sell political symbols as well as hawk economic substance. India is no different.
On at least three issues, New Delhi is carefully avoiding walking the talk.
The first is Barack Obama’s favourite: global rebalancing. This argues the crisis was a consequence of Chinese overproduction feeding American overconsumption. This equation was fueled by too much Chinese credit and too much American debt – a mix that led Wall Street to take absurdly risky investments.
New Delhi’s initial concerns this would mean binding commitments on domestic consumption and exports have since been allayed. The present draft communiqué has only broad wording on the issue.
Officials point out India was party to neither the US’s nor China’s excesses unlike, say, Britain or Germany “because of our domestic consumption driven growth.” They also believe fiscal rebalancing will happen organically and over a long time.
The G20 statement on this issue, therefore, is a no-cost concession to Obama. “Whether a country increases consumption or savings is a sovereign decision,” said an official. .
Officials are also playing down any talk of transferring IMF votes from rich to poor nations. “India supports the broad principle of increased emerging and developing economy representation in bodies like the IMF and World Bank,” said an official. “But it does not feel it is a matter that needs to be taken up in haste.”
India, after all, no longer taps the IMF for capital.
New Delhi is emphasizing that such a transfer is a tricky business. Even the BRIC (Brazil, Russia, India China) governments’ agreement to transfer seven per cent of the IMF votes to emerging economies like themselves has not been worked out, said an official. For example, there is no understanding on how that seven per cent will be divided among the four BRIC nations.
There may be another reason for India’s lack of enthusiasm. In the past, Indian diplomats are known to have voiced concerns that such a transfer would disproportionately benefit a cash-rich China.
On climate change, the government’s approach, with its emphasis on the “historical burden” of the developed world’s past carbon emissions and different obligations for rich and poor countries, is embedded in the UN framework. If negotiations are shifted from the UN to the G20, these hard-earned negotiating principles will either be lost or diluted.