India is one G-20 country that has the luxury of being able to invest in preventive care when it comes to its economy. Which is why the core of Prime Minister Manmohan Singh’s agenda at the Pittsburgh summit is about spotting possible problems and then immunising the global system against them.
One priority is to continue to ward off anti-trade sentiment around the world. “Protectionism is very much on the radar of this meeting. Prime Minister Singh will speak about this, as will the Chinese leader. The draft communiqué already has a mention of this,” said a senior Indian official.
It is not that India has been affected by protectionism. Though it hasn’t been quantified, said one of the prime minister’s advisors, India’s drop in exports has been largely about falling demand rather than trade barriers. The same is true for service trade. “There has been no real evidence of protectionism in services. Our understanding is that the need for cost-cutting by US corporations means demand for BPO services will continue.”
Nonetheless, India will push hard against protectionism at Pittsburgh. “Having this endorsed at a G-20 summit makes it politically a little more difficult for countries to raise trade barriers,” said the advisor. All countries have curtailed free trade, India included, she said, but the degree of rollback is much less than what would have been expected given the extent of the present crisis.
Another concern is how the crisis has affected capital flows from rich nations to poor nations. While foreign investment into India has held up so far, New Delhi wants an insurance policy against it suddenly drying up because of problems in the West. “The concern is that non-oil trading nations, like India, will be marginalised if foreign investment comes down,” said the senior official.
India’s solution is to have bodies like the IMF and the World Bank be repeatedly topped up with money. “We would like to see if multilateral financial institutions can step into the breach given that developing countries will be worse-affected than developed nations if foreign investment disappears. There is a worry that we will slip below 6.3% growth otherwise.”
Singh’s pre-G-20 statement calls for “a continuous increase in the capital base of multilateral development banks to finance the massive infrastructure needs of emerging markets”.
Similarly, India will be urging caution against any talk of an unwinding of the present policy of cheap money. India benefits from the demand this produces globally without being expected to spend much more than it already does.