For a country that’s the poorest among the 19 nations (I’m excluding the European Commission) that comprise the Group of 20 in terms of per capita income, India, over the past 19 months has been able to get a substantially larger voice-share in the four summits. The expression “fighting protectionism”, for instance, is an issue Prime Minister Manmohan Singh raised in the very first summit in November 2008. That was when, in the time epicentre of the ongoing financial crisis, developed countries — after preaching the importance and power of “free markets” — began to raise trade and finance barriers against India and other emerging economies.
“We renew for a further three years, until the end of 2013, our commitment to refrain from raising barriers or imposing new barriers to investment or trade in goods and services,” the June 27 Toronto Declaration stated. This takes the November 15, 2008 Washington Declaration that underscored the “critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions…”
The two statements in the middle — the April 2, 2009 London Statement and the September 25, 2009 Leaders’ Statement at Pittsburgh — echoed much of the same. While the G20 leaders reaffirmed the commitment against raising trade barriers in London, they further strengthened the financial protectionism in Pittsburgh. Among many other things, this has turned out to be a geopolitical high for Singh, whose PhD in Economics makes him (along with Russian President Dmitry Medvedev and Indonesian President Susilo Bambang Yudhoyono) the most educated among all G20 leaders.
But it’s not just his education — or age — that has given Singh a leg into a club of 19 countries that are setting the global agenda on recreating the world’s financial architecture, also known as the Bretton Woods II. As the leader of the world’s 12th largest economy in real terms and fifth when adjusted for prices (PPP or purchasing power parity) that is also the world’s second-fastest growing, India has had its voice heard in other areas too. Increasing the voting share of emerging economies at IMF and World Bank as well as membership to the Financial Stability Board are also Singh-led initiatives.
In relative terms, India has escaped the recession and economic contraction that gobbled countries like US, UK and France. Fiscally, India’s deficit, at 5.5 per cent is comfortably lower than theirs — 8.8 per cent, 12.0 per cent and 8.4 per cent, respectively (and I’m not even beginning to discuss Greece and Spain whose deficits stand at 9.9 per cent each). Going forward, India is going to grow by 8.8 per cent according to the conservative IMF, though Singh sees it at 9 per cent-plus.
But even if India grows at 10 per cent for the next 10 years — not unlikely but nothing to take for granted either — its GDP will cross what Germany’s is today and still fall short of Japan’s and China’s by more than 30 per cent. And it’s not like those countries are going to be staying put. The global stakes could change in the middle — India may cross Russia, Canada, Brazil, Italy, Britain and France. After that, the road is going to be steep and for India to be able to back its current intellectual stature at the G20 with some real numbers a decade later is going to take some doing.
The other issue India needs to confront is that of income disparity within as well as outside. To his credit, Singh had raised this issue — tentatively in Washington and firmly in London. But he could well be extending the India story of abject poverty amid high growth and seeking a more equal, more egalitarian world. Words, however, will not be enough.
In order to take the next big leap of growing by, say, 12 per cent per annum, Singh needs to usher in economic reforms, the list of which is only increasing. From reforms in the financial sector (pension, insurance or banking, where he needs to ensure that the consumer interest is protected and not just blandly and unthinkingly increase FDI) to real sector transformations (land acquisition, mining policy or urban infrastructure push), the task is daunting.
But with the hydra-headed protectionism under control (thereby saving India’s exports) and the financial sector safer (and hence the illiterate across-the-board bank tax snuffed out), these are the issues Singh must address on priority before he flies into Seoul for the fifth G20 Summit in November 2010.