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BUSINESS
Can G-20 help revive world economy?
By
Devajit Mahanta
Billionaire investor George Soros said, “The G-20 Summit is a make or
break event because unless they do something for the Developing World there
will be serious collapse in that part of the world”.
The recent Group of 20 (G20) Summit
concluded in London
on April 2, with consensus on how to get the world out of the financial
crisis and thereby revive the world economy. The G-20 leaders agreed that
international financial system has collapsed and cannot be restored in its
current form. Now the countries will have to came together to fight back
against the global recession, not with words but with a plan for global
recovery and with a clear timetable. A substantial fiscal and monetary
stimulus is required to bring economic recovery but to regain and restore
confidence requires the design of a new world growth model.
The G-20 Forum of Finance Ministers and Central Bank Governors, which have
been meeting annually, was created on September 25, 1999, to broaden the
dialogue on key economic and financial policy issues to achieve stable and
sustainable world growth. The G-20 includes Argentina,
Australia, Brazil, Canada,
China, The European
Union, France, Germany, India,
Indonesia, Italy, Japan,
Korea, Mexico, Russia,
Saudi Arabia, South Africa, Turkey, The United Kingdom, and
The United States of America.
Leaders of the world’s largest economies, including India, on
the recent London Summit pledged a $1.1 trillion package to help restore
bank lending, boost economic growth and create jobs. Out of $1.1 trillion,
$250 billion will be given to the IMF to lend at cheaper rates in the form
of special drawing rights.
Of great concern to India
and other Developing Country economies, India
has been asked by the African Union and by Bangladesh to take up in the
summit the issue of development. The G-20 leaders agreed to another major
Indian demand by deciding to sell IMF gold reserve to raise $6 billion for
helping out the world’s Underdeveloped and Developing Countries with cheap
loans over the next two to three years. India has sought to send out a
clear message that protectionism will not be tolerated and that flow of
credit to needy countries must continue.
The G-20 leaders should agree on extending regulation and oversight to all
systematically important financial institutions for a big boost to the
lending resources of the International Monetary Fund, which will help
struggling governments in the Developing World. The G-20 should commit to
fighting protectionism to cope with the loss of international capital
flows. When we talk about growth in our country, we have to be articulate
on the need for inclusive growth across the globe.
The pertinent question in front of G-20 today – which one is overlooked at
the London
summit also – is “Do non-member countries have any relevance for the G-20?”
Hardly at first, because none of the non-member countries have been invited
to the London Summit. But to argue for these non-members, countries like Middle East should be invited to G-20 summit. This is
the time for G-20 to give much attention on Middle
East countries whose share of world trade has dropped by 75
percent in the last 25 years.
The G-20, which accounts for more than 80 percent of the world economy,
agreed that the current global financial and economic crisis require global
solution. For this purpose leaders should strengthen the financial system,
which means establishing a new financial stability board to collaborate
with the IMF to provide early warnings about financial risk and taking
action against non-cooperative jurisdictions.
The US$ 1.1 trillion G-20 package will hopefully kick start growth and save
jobs.
Readers can send their feedback at devajitmahanta@gmail.com
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