India Makes Its Stance Clear

This is one high table India has only recently got onto. Reflecting the new economic world order, G20 meetings are seen as more important than G7 meetings.

This is one high table India has only recently got onto. Reflecting the new economic world order, G20 meetings are seen as more important than G7 meetings. It is therefore not surprising that India asserted its worldview at the G20 gathering in South Korea. Finance Minister Pranab Mukherjee steered India’s position on three issues—banking reforms, fuel subsidies and protectionism. On banking reforms, India, like Canada and Australia, wants strong measures to prevent another banking sector failure. The West, led by the US, has suggested the creation of a fund by taxing banks. India, on the other hand, believes that tighter regulation and ongoing oversight is the answer. This is one opinion gap that was not narrowed down at the meeting. This has forced the group to postpone any major decision on how much liquidity banks should hold and how much leverage they’d be allowed to take on. Says DK Joshi, chief economist at Crisil, a rating agency, “India has three main concerns, and on all three it has to stand firm when the leaders of G20 meet later in the year. On the issue of banking, India has done the right thing by pointing out that regulation, not taxation, is the right strategy. You are likely to see a lot of tightening up in the developed world despite their stand on tax. India’s second priority has been to ensure that protectionism does not come back into vogue in the face of a possible further slide in the world economy. Lastly, India has been able to keep demands on its fuel subsidy [regime] at bay.” 

The strength of the G20 is that it is a flexible discussion group with no permanent staff to dig heels in.  India did well to voice its sovereign concerns and stand up to pressure.

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Ninad D. Sheth