India Country Report

G20 summit: what to watch

  • A joint leaders’ declaration will probably emerge from this year’s G20 summit in India, but ongoing differences between members over text related to the Russia-Ukraine war suggests that negotiations will go to the last minute. A failure to issue a declaration would suggest that the G20 is losing its viability as an organisation. 
  • Multilateral reforms, digital infrastructure uptake and making the bloc more inclusive will be key areas of progress.
  • Making demonstrable progress on economic decisions will be increasingly difficult for the G20, which is increasingly hamstrung by geopolitical competition.

India will host the leaders of G20 member states for the group’s annual summit in the capital, New Delhi, on September 9th‑10th. As the president of the G20 this year, India has set a broad agenda spanning areas from climate-based transition to the inclusion of more developing countries in the grouping. It had hoped to set aside differences between members over Russia’s invasion of Ukraine, although the issue is still set to complicate the issuing of a joint communiqué. EIU takes a look at a few of the key areas upon which the G20 summit is expected to touch.

A presidency tested by consensus-building

  • A draft of a G20 leaders’ declaration was formulated in July. However, text related to the Russia-Ukraine war has pitted the G7 nations against Russia and China, much as it did at the G20 summit in Indonesia last year. Russia and China have argued against bringing security issues into the G20 forum, whereas G7 members believe it would be inappropriate not to do so, given the cascading effects of the war on the global economy. 
  • We believe that a leaders’ statement will ultimately be released, as in 2022. Japan, as the chair of the G7, is helping India to co‑ordinate the diverse positions. Meanwhile, Indian diplomats have been holding bilateral talks with G20 counterparts to forge a consensus.
  • However, if India is forced to issue only a “Chairman’s Outcome Statement” that is not endorsed by other G20 countries, this would be the first such occurrence for the group. This outcome would probably raise questions about the viability of the organisation in an increasingly multipolar world.

Limited progress on debt-restructuring framework and multilateral bank reforms

  • We expect one area of focus in the G20 statement to be the strengthening of multilateral development banks (MDBs) and the related issue of debt treatment for distressed nations. India wants the G20 to encourage MDBs to raise money from different sources, including financial markets and the private sector.
  • A G20 roadmap for the implementation of capital adequacy frameworks for MDBs was developed in July. We expect this to be adopted formally and further deliverables on this cemented at the 2023 summit. These could include exploring risk transfer options to the private sector; strengthening shareholders’ ability to set parameters for capital adequacy; an annual capital benchmarking report with harmonised definitions; and hybrid capital issuance that could target private investors and shareholders. 
  • The G20 will help to strengthen multilateral co‑ordination to address the deteriorating public debt situation of distressed nations such as Chad, Ethiopia, Zambia and Sri Lanka. The summit could expand the scope of the G20 Common Framework for Debt Treatment (CF), which deals with bilateral governmental loans, to include private-sector creditors; this would reduce the drawn-out nature of debt-restructuring negotiations and put creditors on the same page.
  • The CF is estimated to generate additional lending capacity of US$196.5bn over ten years, which will help to alleviate debt crises in highly leveraged nations, as well as funding needs associated with areas such as climate change in vulnerable nations. However, the framework is susceptible to holdouts by sovereign lenders, most notably China. Even as China is a signatory to the CF, it will retain a preference for bilateral debt negotiations.
  • The G20 statement is also likely to focus on climate transition, including the scaling-up of blended finance, partly through an enhanced role for MDBs. The G20 could recommend using fiscal, market and regulatory mechanisms to create carbon-pricing mechanisms or incentives for carbon neutrality. Nevertheless, the debate on climate financing for developing nations is unlikely to move far beyond platitudes.
Developing economies in the G20 will remain vulnerable to climate change

African Union G2O membership to amplify the voices of developing countries

  • India has proposed including the African Union (AU) in the G20—a move which has reportedly received support from G20 members. This mirrors India’s broader desire to reform international organisations so that they better reflect its concerns and those of the developing world. The move will boost the representation of developing economy voices in the G20. Developed economies currently constitute nearly 70% of the G20 in terms of nominal GDP share.
  • The AU would be expected to raise issues of concern to its members, including food and energy security. It would also give these nations access to initiatives on technological advancement, trade and financial flows within the bloc. 
E I U FORECASTS INDICATE THAT CHINA AND INDIA WILL STRENGTHEN THEIR PRESENCE IN THE G20 IN OUR FORECAST PERIOD, AS THEY TAKE A GREATER SHARE OF THE GROUP'S OVERALL NOMINAL G D P

The digital economy and crypto regulations

  • The G20 is likely to endorse a common framework for digital public infrastructure, although work on this remains to be done.
  • The framework would help countries to implement policies such as digital payment systems and to create digital identities for citizens, allowing targeted delivery of public services.
  • The G20 is also likely to announce the creation of a Global Digital Public Infrastructure Repository, as well as incentives and tax breaks for women-led technology and tech-enabled start-ups.
  • India has stressed the need for a global regulatory framework for cryptocurrencies, transcending international borders and taking into account the concerns of emerging economies.
  • An initial draft note prepared by a G20 sub-group on potential global crypto regulations is likely to become part of a “synthesis paper” to be issued jointly by the Financial Stability Board (FSB) and the IMF later this year. 
  • The final declaration is likely to emphasise the need for co‑ordination between standard-setting bodies, led by the IMF and FSB, focusing on issues such as data gaps and cross-border information sharing. It could also mention the need for security (including anti-money-laundering/combating the financing of terrorism strictures), education (including information dissemination and capacity building) and the need to ensure that innovation and the development of new technological solutions are not hindered. 
Crypto regulations will need to become harmonised across the globe

India’s leadership objectives

  • India has traditionally not led multilateral organisations, and its growth has not translated into commensurate influence on global policies. However, the country has recently been lifting its voice, and the stewardship of the G20 forum is an opportunity to gain prominence in global decision-making.
  • As India attempts to position itself as an attractive manufacturing hub, the exposure granted by its leadership of the G20 will translate into trade and investment opportunities for Indian businesses, especially as the country remains reluctant to join multilateral trade alliances. India’s challenge in terms of funding for climate-conscious transition may also receive a boost, as the G20 presidency can help to attract global investment in this area. 
FDI flows to India have steadily risen
  • Despite the significant geopolitical obstacles, the previous G20 summit in Indonesia successfully issued a joint communiqué. A failure to do so this year would reflect badly on India’s ability as a leader to drive consensus. In turn, this could weaken its negotiating ability, even in bilateral areas such as security and trade, while making the country a less potent leader of the developing world. Given India’s strong diplomatic ties, however, a joint declaration is still likely.
  • India will try to be a credible voice that can facilitate dialogue between the global north and south, using its strengthening relationships with developed nations to bridge the gap on global challenges.     
  • India’s presidential legacy could include making the G20 more representative of developing countries; a global challenges funding mechanism for MDBs that will allow them to tap into private-sector financing; and the sharing of knowledge on the uptake of digital public goods.