Perhaps for the first time, we have a situation where synchronised global economic growth has been followed by a global downturn and then by largely fiscal responses. For the latter, Prime Minister Manmohan Singh deserves due credit.
Singh being seated next to US President Barack Obama at the Pittsburgh G-20 summit was no mere symbolism. The Indian Prime Minister had indeed assumed centrestage at the summit by setting the agenda for a global economic revival. No wonder that the summit declaration overwhelmingly contained the suggestions put forth by Singh in his speech where he had stressed the need for a maintained stimulus as well as issued a warning against trade protectionism and stressing on better capitalisation for the World Bank and its affiliates.
At the summit, Singh argued more as a representative of the developing world and not just as the Prime Minister of India. His views found full support from the leaders of the developed world too. Perhaps for the first time since Nehru’s days India has been on the forefront of global politics once again. Despite the economy lagging and being smaller than many other emerging economies, Singh took the lead with most of his specific proposals accepted. If the G-20 has replaced the G-8 and has been designated as the “premier forum for our international economic cooperation,” a large degree of credit goes to Singh who strongly argued the case of the unrepresented countries in global economic forums.
The Pittsburgh summit also illustrated for the first time that times have indeed changed for global business cycles.
Earlier, whenever America sneezed, Europe caught a cold. But now, the developed nations have accepted, in some cases perhaps reluctantly, that their own economies can’t emerge unscathed from this crisis without significant growth in the emerging economies. This, in turn, can only take place with increased investment from the World Bank and its affiliates.
The $100 billion that Singh proposed to enhance the balance sheet of the World Bank by is, after all, small compared to the vast sums committed by the developed world to their own economies. The Prime Minister was spot on when he stated that emerging economies were not responsible for this crisis but were now central to a global recovery.
Singh also made the point of stating how India had weathered the crisis. No one could have drawn a balance between globalisation and domestic demand better than him. After all, it was Singh, who some 20 years ago as finance minister, accepted globalisation along with fiscal reforms that ensured growth based largely on domestic demand and less on exports and more savings. It was the economic model drawn by Finance Minister Singh in the early 90s and that was adopted when India’s gold reserves were mortgaged with the World Bank for foreign exchange. As Prime Minister, Singh has ensured that the Indian economy continued to be largely buffered from global fiscal turbulence.
While some may refer to the G-20 summit as a ‘transitional summit’, we may very soon come to accept it to be as significant an event as the Bretton Woods Accord of 1944 that led to the creation of the World Bank. It will be impossible for developed economies to offer India a lesser position at the high table in the future. The challenge now for India is to produce future prime ministers who will continue the pace that the present PM has set.
Surinder Singla is a former Finance Minister of Punjab The views expressed by the author are personal