India assumed G20 presidency in December, 2022. It has set three priorities for its one-year term as the group’s chair. These are strengthening global economic recovery, promoting free and fair trade, and addressing global challenges. It has started pushing for an equitable global trade architecture. India has proposed the creation of a new global trade architecture that would be more inclusive and fair. It also seeks to promote regional trade agreements, while addressing the issue of protectionism.
India sees the G20 presidency as an opportunity to address some of the most pressing challenges facing the global economy in areas such as trade and investment.
CUTS International organised an event on May 28 in New Delhi to discuss the challenges before G20. The event was part of a series being organised to commemorate the 40th anniversary of CUTS. Amitabh Kant, India’s G20 Sherpa, Sachin Chaturvedi, director General of RIS, and Pradeep Mehta, founder and Secretary General of CUTS International, spoke at the event. Harsh Vardhan Shringla, Chief Coordinator for India’s G20 Presidency, addressed the audience remotely. Here’s the edited transcript of the discussion.
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India’s G20 presidency agenda
Pradeep Mehta, Secretary General, CUTS International
Warm welcome to this event, and we are here to commemorate the 40th anniversary. We’re celebrating it in the form of a series of lectures. The first one we had in Geneva with the DG of WTO. This is the second one to commence the proceedings. May I invite our distinguished guests from the G20? I invite Dr. Sachin Chaturvedi, DG of RIS, and Sri Pradeep Mehta, Secretary-General of CUTS International and Chairman of CILS. Thank you very much.
With that, let me warmly welcome all of you, and particularly, what I see in the audience is a very large number of distinguished civil servants as well as old friends who I value very highly. In my career of 40 years, I have interacted with a very large number of you, and today I have the pleasure of having two very friendly and affectionate civil servants par excellence, I would say.
Therefore, it is a very solemn occasion for us that we are celebrating our 40th anniversary. As Navneet said, this is the second of the series of events that we are organizing around the world. The first one was held in Geneva on April 6 with the Director-General of the WTO, and that again was an excellent occasion. We had an interactive chat. It was the first kind of thing which is what Amitabh has asked me to do, institute and elaborate into a lecture series, and I’ll be happy to do that. But before that, let me give you a bit of a background about CUTS.
We started in 1983, it was a zero-budget out of a garage in my little flat, and since then, we have grown organically, rather than without any mentors or rich supporters or something, just sheer hard work. Look, I hope it is not immodest to say that on myself, but then that’s what has happened, and there are a large number of comments which we received from people from the first lecture itself, that this is a model which other NGOs should replicate.
So, we are both a think tank and an action pack. We are not just a think tank. Whatever work we do, we do it with a purpose, and even these series of lectures that we’re doing follows a series of lectures which we did in the year of the 30th anniversary, and the same was published as a book, which is available on our website. And what we are doing is we are religiously following all the advice given in these lectures by eminent people like Amitabh and Harsh. And let me also acknowledge my friend Sachin Chaturvedi, who has been with us since long on many of our events.
Now, the purpose of this is how we can chalk out a future strategy for the next 10 years, at least, and how we will shape out particularly from the issues. Fortunately and fortuitously, now we see this G20 event which is happening now has come in as a kind of a shake-up event, particularly among the policy circles. There is a huge amount of churning which is going around, not only in the policy circles but also in the official circles.
What we are looking at is also to take it beyond India, India Brazil, South Africa. You’re looking at it as a part of the global South agenda, which was so clearly elucidated by Honorable Prime Minister Narendra Modi when he did the event on global South. How do we, as civil society, add substance to it, add weight to it, and so on? If there is an important role of civil society in this world, which has been recognized, and this is what we’ve been doing since the year 1983.
We got into international economic issues in 1991 when the era of the WTO was at its peak. Therefore, some of our work in the area of trade policy is probably one of the most recognized in the world as a civil society organization. Another area of work is on competition law and policy.
We have been in the vanguard of promoting competition reforms in the developing world, including about 27 developing countries, which have been documented. Also, now we are also doing work at the grassroots with women and children. We’re running 50 farmer producer organizations, another initiative of the honorable prime minister, which I think will show some good results.
As time flows by, there are a lot of good things happening in the country, and we hope to advance them to the best extent possible. And therefore, we’re using this particular opportunity to get some more ideas, particularly from a dynamo like Amitabh Kant.
Amitabh Kant, G20 Sherpa, India’s Presidency year
I would like to compliment Pradeep Mehta and CUTS for the milestone. Pradeep kept going against all odds to do path breaking work particularly in the field of trade at a point of time when there was so much of protectionism that impacted both growth and our ability to lift people from poverty.
People do not realize this, but trade has lifted vast segments of the population above the poverty line. However, every time we have a pandemic, historically, the next five years are marked by protectionism. This is exactly what we are witnessing today. A great example of this is the United States of America, with its implementation of the Inflation Reduction Act and CHIPS Act, which are classic cases of protectionist measures. Unfortunately, such acts will lead to a slowdown in global growth.
In India’s case, we have observed that our growth is closely tied to the growth of exports. If exports don’t thrive, it will be extremely challenging for countries to achieve significant growth. Moreover, the current cost of living crisis and the pandemic have had a devastating impact. More than 200 million people have fallen below the poverty line, and over 100 million people have lost their jobs worldwide. To make matters worse, approximately 75 countries are facing a global debt crisis, with one-third of the world in recession. Germany, just two days ago, officially entered into recession. I foresee recession affecting vast parts of Europe.
In light of these circumstances, the foremost challenge we face is to achieve inclusive, resilient, and sustainable growth. Only through sustained growth can we uplift people out of poverty. It is also crucial to acknowledge that we are now at the midway point towards achieving the Sustainable Development Goals, which were supposed to be accomplished by 2030. However, only 13% of the outcomes have been achieved so far. Sadly, due to the pandemic, we have regressed significantly.
Furthermore, there is a crisis when it comes to climate action, and substantial resources need to be allocated to address this issue. We find ourselves in a scenario where the financial policies pursued by the developed world have resulted in an excess of liquidity, leading to high interest rates. Consequently, resources are flowing from emerging markets to the developed world, even though the majority of future growth will stem from emerging markets, not the developed world. The policies of multilateral institutions have failed to effectively manage the global financial architecture and inflation.
These are the critical challenges that the world faces today. Rather than continuing with monologues, I believe it would be more beneficial to engage in a lively and interactive session, aligning with the philosophy of promoting dialogue and exchange of ideas.
We should design for another era, focusing on financing for climate action and sustainable development goals, which are the key challenges of today. It’s not that there is a shortage of resources in the world. The total liquidity available is approximately $350 trillion, including institutional funds such as pension funds.
The challenge lies in the varying risks across different parts of the world, resulting in different lending rates. Developed parts of the world may receive financing at 2%, while countries like India may face rates around 8%, and sub-Saharan African countries could encounter rates as high as 22%. The goal is to de-risk these regions globally and promote project development.
Project development, which allocates around 8-10% of project funds to de-risk projects, needs greater attention. Private sector funds are available in significant quantities but will not flow in unless multilateral institutions engage in blended finance and utilize critical instruments such as credit first loss guarantees and credit enhancements.
The World Bank must play a more substantial role in this regard, shifting from direct lending to pooling resources, co-financing, and establishing partnerships with the private sector. The eminent group headed by Tharman of Singapore recommended this shift five years ago, and it is now gaining attention, particularly with the impact of U.S. financial policies on inflation and interest rates, leading to resource flows.
However, implementing these recommendations and transforming them into action is the critical part. The forthcoming report from the Larry Summers committee by the end of June or the first week of July will be a significant step. It is essential to realize that in today’s world, India’s economy is valued at $3.5 trillion, while World Bank lending in India stands at just $3 billion.
The lending by Chinese banks, along with institutions like AIIB and the New Development Bank, surpasses the lending done by the World Bank and IMF. The Paris Club, which historically supported African countries and managed global debt, is becoming less relevant due to the increasing lending by Chinese banks and institutions, as well as private sector lending. Acknowledging China’s critical role in decision-making is crucial.
These challenges highlight the need to address the global financial architecture and international financial institutions effectively.
Sachin Chaturvedi, Director General, RIS
I congratulate CUTS for its great contribution. It has filled in a huge space, and some of us who have been following your work from the early ’90s and particularly at the Cancun WTO ministerial, the role that CUTS played is known to everyone. So, congratulations for that.
Following back on the point that Sherpa made just now, I think one point that is important here is also to realize the fact that and that’s what probably my question would be to Sherpa in terms of if we are on the split format, trade doesn’t come up. It would not fit in well, and this is what I wanted to ask you. This whole emphasis that you made and also guided Ministry of Agriculture to come up with the paper on food security and has been your emphasis right from day one.
Fortunately, RIS was involved as a knowledge partner, so we prepared that. But as the issues are emerging, we have not made much emphasis on trade, which is very much our emphasis when it comes to WTO. And WTO has expanded in several areas over the last couple of years, though things have not moved. But when it comes to G20, food security has a huge implication because we have to export.
It was on President Biden’s personal request that the Prime Minister encouraged the states which are growing wheat, and we helped Egypt. It was done, though the peace Clause Etc have not been turned into the assets that we wanted. So, how you see those issues which are related to trade but so crucially connected with global food security? After the Ukraine war, almost 25 countries have knocked the door of IMF for support, financial support for food security.
There are 38 countries which are facing huge food crises, and that has multiplied over the months. So, something that is so crucial is that countries are still not leaving the old positions at WTO. G20 is not the platform to turn that into anything else, but how you are dealing with this major problem which the agriculture working group I am sure is grappling with, but it would definitely get escalated at Sherpa level because U.S and Europe would have a very different position.
On your point about the potential financial crisis, as mentioned by the Sherpa, France’s aim to become irrelevant with the Paris Club is an ongoing initiative. Some of us are part of President Macron’s initiative, launched eight months ago, to engage in dialogue with China. We have managed to bring aboard three Chinese banks for the forthcoming June Summit, in which India is also a partner.
The aim is to explore the possibility of incorporating a portion of their loans into the Paris Club. This development is underway, and through our calculations with Homi Kharas and his team, we estimate it would represent around 18 percent of China’s total credit to Africa. This is significant for Africa. Once again, I congratulate CUTS for its exceptional work in Africa.