‘War is slowing down economic growth’

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‘War is slowing down economic growth’

Friday, 03 March 2023 | Kumardeep Banerjee

‘War is slowing down economic growth’

The G20 meeting stresses the inter-dependence of world security and economy

The G20 finance ministers and central bank governors meeting in Bengaluru last week, brought almost every important eco strategy policy maker, around the globe to sit across the table to deliberate on key policy issues. It also laid bare the interdependent nature of security and economic issues, the globe faces today. In the heart of the difference between the US-led alliance of nations and the Russia sympathising nations, lay two controversial paragraphs with strong condemnation of the ongoing war in Ukraine.

Paragraph 2 from the chair’s summary, released at the end of the meeting read “Since February 2022, we have also witnessed the war in Ukraine further adversely impact the global economy. There was a discussion on the issue. We reiterated our national positions as expressed in other fora, including the UN Security Council and the UN General Assembly, which, in Resolution No. ES-11/1 dated 2 March 2022, as adopted by majority vote (141 votes for, 5 against, 35 abstentions, 12 absent), deplores in the strongest terms the aggression by the Russian Federation against Ukraine and demands its complete and unconditional withdrawal from the territory of Ukraine. ... G20 is not the forum to resolve security issues, we acknowledge that security issues can have significant consequences for the global economy.”Ideally, there would have been a joint press communique but, due to the severe objection from Russia and China, regarding the two paragraphs, it was converted into a chair’s summary. The summary meanwhile highlighted risks of slow global growth, inflationary trends, a resurgence in newer variants of the pandemic and the vulnerabilities of several emerging markets due to tightening financial conditions.

India managed to push ahead with its stated agenda of bringing about reforms in the functioning of Multilateral Development Banks, in a nimble way, by including several small but effective tangible outcomes in the chair’s summary. The summary tasked the expert group under India’s G20 presidency to present a report in the next couple of months on the “World Bank’s Roadmap for evolving the Bank’s mission, operational approach, and financial capacity within their country engagement model and ..other MDBs to report on their efforts to address similar challenges.” The world banks' role, functions, goals and impact on national economies have come under severe criticism in the past several years, which was hugely aggravated during the pandemic. India has been championing multilateral institution reforms, to reflect the changing dynamic of the geopolitical landscape and the rise of several economic powerhouses, especially in Asia.

 The G20 finance ministers will seek a roadmap from the international financial architecture working group on implementing the recommendations of the G20 independent review, of the multilateral development banks, within India’s G20 presidency tenure. Similarly, India managed to stay firm on it being the torch bearer of the global south, by getting the right verbiage included in the summary, of maintaining a strong global financial safety net, with a strong quota-based and adequately resourced International Monetary Fund. The debt vulnerabilities of many low and middle-income countries, many of whom are or sitting on the fence before going bankrupt could create chaos in the global economy. India unilaterally has extended relief to its southern neighbour Sri Lanka.

Clearly, India did manage a good show at the first meeting of finance policymakers, but the underlying differences over security issues related to Ukraine prevented it from being the picture-perfect finish. India has to keep in mind these sensitivities as it proceeds with the remaining 200-plus meetings around G20, especially those with huge strategic interests such as external affairs, security and finance. It would be a tightrope that India needs to walk on, one step at a time like it has been doing for the last two years.

(The author is a foreign affairs commentator)

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