G-20

Prime Minister attends seventh G-20 summit at Los Gabos, Mexico.

What is G-20:

• It is a group of finance ministers and central bank governors of 20 major economies.
• With the economic crises of 1990s a global conclave was started was started in 1999 featuring finance ministers and central bank governors of emerging economies. The idea was to include the so far isolated developing economies in global economic discussions.
• Till 2008 this group met annually to shape global financial system.
• But the recession of 2008 similar to great economic depression 1929 sounded alarm bells.
• Result was the birth of G-20, a biennial summit till 2011  November, now meets annually.

 Objectives:

• Policy coordination between members to achieve global economic stability and sustained growth.
• Promote financial regulation and prevent future financial crises.
• Create a new financial architecture.
• Reforms in multilateral financial institutions like IMF and World Bank.

Actions:

      G-20 has organised its activities under two focus areas:

•  The Finance Track: (The finance Ministers and central bank governors of all member nations meet )
• Focuses on financial and economic issues; these include providing solutions to the current economic problems, economic stabilization and structural reforms, increasing international coordination for crisis prevention, correction of external, fiscal and financial imbalances, providing resources to increase global liquidity, and strengthening the international financial system.  
• Current Focus:
• Framework for strong, sustained growth (group co chaired by Canada and India).
• Financial regulation including consumer protection.
• Financial Inclusion.
• Disaster risk management.
• Climate finance study.
• The Sherpa track:( Personal representatives of Heads of state and Heads of government meet)
• Focuses on political, non-financial issues, such as: employment, agriculture, energy, the fight against corruption and development, among others. The Sherpas carry out important planning, negotiation and implementation tasks throughout the entire process.
• Current Focus:
• Energy efficiency, Green growth.
• Food security.
• Structural reforms contain recession.
• Fight against climate change.
• Prevent protectionist measures.
• Transparency, anti corruption measures.

Members:

• 20 members- 19 nations with European Union.
• Members- Australia, Canada,Saudi Arabia, United States, India, South Africa, Turkey, Russia, China, Mexico, Brazil, Indonesia, Japan, South Korea, Germany, Italy, France,United Kingdom, Argentina.
• Leadership- Rotating chair based on regional grouping, involving past, present, future chair-called The Troika.

2012 summit- Relevance:

• Indian Prime Minister has given a strong message towards the European union for landing themselves at such a critical position  and expecting even poor nations to lend out helping hand.
• India has promised to give $10 billion to IMFs $430 billion firewall fund to bailout euro zone countries, in the light that Europe is a big trading partner to India, which India cannot standby and see to suffer.
• The Prime minister has asked them to combine their austerity measures along with efforts to growth, as austerity alone in a period of recession cannot work on.
• India has played a major role on placing the demand for investing heavily in infrastructure sector in  developing nations to be included in the preamble of g-20.
• India has also given a push to hasten the reforms in multilateral institutions like IMF, World bank from 2013.

Basics:

Recession:

• There are no agreed official concrete definitions, differences between Recession and Depression. Yet most agreeable one:
• Recession refers to drop in  national GDP, fall in county's productivity continuously for two quarters of a year.
• It is a less severe form when productivity, spending falls, unemployment rises.
• 2007 period is usually stated a period of recession, literally as Economic Meltdown.

Depression:

• Fall in country's GDP continuously for 1 year is a depression, with the amount of fall exceeding 10%.
• It is a severe case of economic reversal, with high rates of unemployment, productivity falls.
• Example Great depression of 1930s in US.

Reforms in Multilateral Institutions:

• Mainly targeted towards quota, voting powers in international institutions like IMF, World bank to make them more representative of emerging markets and the developing world.
• For example in IMF each member country is allocated a quota in accordance with the size of its economy, the larger the economy the larger is its quota.
• The significance of the quota is that it determines the voting power of the nation in the grouping, also determines the amount it can borrow as loans from the institution.
• The quotas are reviewed every five years, but the international community feels the formula deciding the allocation of quotas have become outdated want the quotas to be representative of dynamic emerging markets, a greater say for developing countries in institutional decisions.
• India has been leading these arguments pushing to hasten the process of quota reforms.