The G-20 summit in London set out to do two things: put more money into the global pot and take away lessons from a global classroom. On both counts India has come away richer. First the money. The $1.1 trillion the world is stumping up to free trade and capital flows across nations will mainly benefit the emerging markets. And here India is a frontline State.
We don’t need any of the extra cash the IMF is getting to rescue embattled economies, but some of the $250 billion credit line for trade will find its way to our shores. It is heartening that the Indian position at the previous G-20 summit—global recovery is not possible without a lifeline for the developing world — topped this meeting’s actionable agenda.
Next, the lessons. India finds itself in working groups that will set new rules for containing risk in financial markets and the banking industry. The experience gained will be valuable in regulating our deepening financial market. Heightened accountability for credit rating agencies, for instance, should coincide with the evolution of a corporate bond market in India.
Not that all the experience need flow from mature economies. Since they started operating here, hedge funds have been required to register with the stock market regulator or operate as sub-accounts of foreign institutional investors, which has ensured a modicum of monitoring. The G-20 line on hedge funds is comfortingly close to what our central bank and government have maintained for years.
Any multilateral attempt to get offshore tax havens to disclose more will address a particularly thorny policy nettle New Delhi has been trying to grasp: the trip rupees make to Mauritius, returning as dollars from an island that is our biggest source of foreign direct investment — $11 billion of the $26 billion FDI India received in 2007-08. A significant portion of the money pouring out of letter-box companies in Port Louis is suspect to have originated in the subcontinent. The G-20 has signalled its intent to flush out an estimated $7 trillion dodging taxes worldwide. This was overdue. Individual economies, unless they have the heft of the US, have found it tough going on their own.