Source: Indian Express, Indian Express
- Prelims: Current events of international importance, G20, Global south, Inflation etc.
- Mains GS Paper II & III: Significance of G20 countries, Bilateral, regional and global grouping and agreements involving India or affecting India’s interests.
- India formally assumed the G20 Presidency, from
- The Prime Minister said that India looks forward to a Presidency of healing, harmony and hope.
- The finance track is to ensure that G20 nations come up with a credible policy framework.
INSIGHTS ON THE ISSUE
- The G20 is an informal group:19 countries and the European Union, with representatives of the International Monetary Fund and the World Bank.
- The G20 Presidency rotates annually: according to a system that ensures a regional balance over time.
- For the selection of the presidency: 19 countries are divided into 5 groups, each having no more than 4 countries.
- The presidency rotates between each group.
- Every year the G20 selects a country from another group to be president.
- India is in Group 2 which also has Russia, South Africa, and Turkey.
- The G20 does not have a permanent secretariat or Headquarters.
Why is the finance track needed in G20?
- Tame inflation: especially food inflation
- Protecting growth and ensuring overall financial stability.
- The fear of recession during Covid-19: has come back in the form of excess liquidity, causing inflation.
- The Russia-Ukraine conflict has flared fuel and food prices
- Climate change in the form of intense heat waves, floods and droughts, is hitting food prices in several countries.
Food inflation in G20 countries:
- In Turkey: Food inflation is surging at 103 percent.
- Argentina: Food inflation is at 91.6(ninety one point six) percent.
- Germany: Food inflation is at 7(seventeen point seven)percent – an unprecedented phenomenon in decades.
- India: Is in a better position with 7 percent food inflation.
- IMF’s World Economic Outlook: India is taming inflation while scoring the highest GDP growth (1(six point one) percent in 2023)
GDP growth of major economies:
- China: It is likely to be at 4(four point four) percent
- US: 1 percent
- Eurozone: 5(zero point five) percent
- UK: at 3(zero point three)percent
- Likely to tumble from 6 percent in 2021 to just 2(three point two)percent in 2022 and 2.7(two point seven) percent in 2023.
- Advanced economies: likely to see even lower growth at only 4(two point four) percent and 1.1(one point one) percent in 2022 and 2023 respectively.
- China’s growth: It has been downgraded to 3.2(three point two)percent in 2022 (the lowest growth in more than four decades, and 4(four point four) percent in 2023.
Fiscal deficit of India:
- The Fiscal Responsibility and Budget Management Act of 2003 (FRBMA): It envisioned bringing down the fiscal deficit to 3 percent of GDP.
- The fiscal deficit at 9.9(nine point nine) percent (Centre and states combined): It is the highest amongst all G20 countries.
The case of Subsidies:
- The overshooting of subsidies, both in 2022-23 and 2021-22: budget estimate was Rs 336,439 crore(approx), against the provisional final of Rs 446,047 crore(approx)
Reasons for overshooting of subsidies:
- Russia-Ukraine war
Reasons for increased subsidies in India:
- Offtake of rice and wheat through the PDS under various welfare schemes, like Pradhan Mantri Garib Kalyan Anna Yojana (PMGKY) during Covid
- fertilizer and petroleum: The higher subsidy outgo has been due to a surge in global prices.
- Government cushioning farmers and consumers from the shock.
- Insulating the farmer and consumer: It meant compensating fertilizer and oil marketing companies (OMCs) for selling below cost or under-recoveries.
- Inflation and protecting growth: 2023 will be a test case for the collective wisdom of the G20 in taming inflation and protecting growth.
- Against this global backdrop of inflation and growth: India can surely stand tall and may be able to guide G20 on how it has managed not to let food inflation go out of control and yet maintained the highest rate of GDP growth.
- Food inflation in several African nations where the purchasing power of people is very low: If India is to represent an agenda for the Global South, it should invite the African Union to the G20.
- African nations need support from the
- Finance Minister: Managing inflation with growth has to be done in a synchronized manner by the RBI, the Ministry of Finance, the Ministry of Food, and many other ministries.
- Government needs to bring down the fiscal deficit of the Centre in a calibrated manner somewhere between 3 to 4 percent in the next year or two, without jeopardizing growth, that would be the real feather in India’s cap for macro-economic management.
- Case of freebies: The best way to proceed is to set up a high level committee of credible professionals to look into this and suggest ways and means to bring efficiency in public expenditures of the Centre and the states
- making it more growth oriented, creating more jobs and livelihoods, and more environment protecting.
- Some relief can be expected on all the “3F” subsidies – food, fuel and fertilizer: In food, the government is unlikely to extend PMGKY beyond December.
- The food subsidy outgo for the coming fiscal is likely to be contained within Rs 2 lakh crore: The same should not exceed Rs 1 lakh 50 thousand crore for fertilizer and Rs 25 thousand crore for petroleum – assuming no new geopolitical, climate or pandemic shocks.
QUESTION FOR PRACTICE
Q. The long sustained image of India as a leader of the oppressed and marginalized nations has disappeared on account of its new found role in the emerging global order.’ Elaborate(UPSC 2019) (200 WORDS, 10 MARKS)