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Little to bring to the table

The holding of the G-20 summit is an acknowledgement that the emerging economies, through a dint of high rates of growth, now have heft that cannot be ignored.

india Updated: Nov 17, 2008 19:46 IST

The world’s main bourses, out of indifference or disappointment, slipped a few points with the conclusion of the G-20 summit. However, the G-20’s lack of impact on the global financial crisis does not distract from its symbolic importance. This is the first time the leading developed economies have felt it necessary to call upon the leading 12 emerging economies to join them in even the theatrics of restoring market confidence. That the summit’s communiqué was filled with commonsensical principles is not a surprise. Nor will eyebrows be raised if the leading economies refuse anything more than the lightest of transnational regulatory oversight when the G-20 finance ministers meet next spring. Like Rome, new economic orders are not built in a day. Even the original Bretton Woods took two years of genesis and a decade of evolution to emerge.

The holding of the G-20 summit is an acknowledgement that the emerging economies, through a dint of high rates of growth, now have heft that cannot be ignored. Emerging economies represent well over a quarter of world gross domestic product, greater than the share of the United States. Particularly eye-catching has been the amount of foreign exchange reserves held by these countries, led by China’s coffer-busting $2 trillion. At a time when ‘extra liquidity’ and ‘financial stimulus’ are the buzzwords of regulators worldwide, such amounts of money matter.

But money alone does not make a country worthy of a seat at the high table of global finance. The strength of a domestic financial market in terms of sophistication, depth and resilience also matter. So long as China and India, the two largest emerging economies, decline to have convertible currencies and semi-isolated financial sectors, the developing world’s ability to contribute to a global financial solution will be limited. Prime Minister Manmohan Singh’s own implication that electorally-driven programmes like the farm loan waiver or the Sixth Pay Commission fulfilled India’s contribution to the need for global stimulus was a reminder of how little, in the end, New Delhi had to put on the table. The G-20 summit gave a glimpse of the future that might be for emerging economies. The summit’s wet conclusion was a reminder of how much more has to be done by these economies before real influence will come their way.