When India took over the G20 presidency on December 1, 2022, the global community found itself grappling with uncertainties not seen since the end of WWII. Back then, major powers recognised that an institutional vacuum was caused by a dysfunctional global order resulting in deep fissures among countries, which needed to be fixed for a peaceful post-war transition. This led to the formation of an array of multilateral institutions for enabling countries to arrive at negotiated solutions to build a better future for the succeeding generations.
Eight decades later, the post-war multilateral institutions are reduced to empty shells as the spirit of “living together in peace” for the “economic and social advancement of all”, as articulated in the UN Charter, has all but dissipated. Most vexed problems facing humanity have remained unaddressed as consensus among the countries has been elusive. Therefore, when Prime Minister Narendra Modi underlined that the Indian presidency’s priorities are “healing our ‘One Earth’, creating harmony within our ‘One Family’ and giving hope for our ‘One Future’”, realising these priorities seems challenging. Further, the PM’s call to the G20 to “work together to shape a new paradigm—of human-centric globalisation” appears daunting.
Protagonists of globalisation argued that the process would usher in a more inclusive economic order. However, more than three decades since globalisation came into vogue, disparities between countries remain considerable. For instance, global trade in goods has expanded four-fold since the turn of the millennium, but the situation of the poorest countries remains unchanged. In 1999, the then 46 least developed countries (LDCs), whose data are available, had a 0.6 per cent share in goods trade, and more than two decades later, in 2021, the share of these countries was just 1.1 per cent. With their inability to increase their export earnings, it is hardly surprising that 28 of these 46 LDCs are Heavily Indebted Poor Countries (HIPCs), which, according to the World Bank, have unmanageable or unsustainable debt burdens.
In 2020, the G20 took an important initiative to address the “significant debt vulnerabilities and deteriorating outlook in many low-income countries” that had suffered after the Covid-induced economic crisis. The finance ministers and central bank governors of the grouping decided to go beyond the World Bank’s Debt Service Suspension Initiative (DSSI) initiated earlier in the year, under which bilateral official creditors had agreed to temporarily suspend debt service payments from the 73 most vulnerable countries, subject to requests being made by the debtors. The G20 countries agreed to go further for dealing with the increasingly vexed problem of rising developing country debt by adopting the ‘Common Framework for Debt Treatments beyond the DSSI’.
But the ‘Common Framework’ has three major weaknesses that have to be urgently fixed. First, it considers only the debt owed by severely indebted countries to “bilateral official creditors”, implying that the debt owed to private creditors and multilateral financial institutions are excluded from this G20 “debt relief” initiative. This has rendered the Framework largely ineffective since at the end of 2019, bilateral official creditors accounted for 25 per cent of the total outstanding external debt stocks of developing countries, which had declined to 21 per cent by 2021. The vacuousness of the initiative was exposed further when 30 of the 73 eligible countries decided not to join the initiative.
A second major flaw is that it targets only low-income countries, ignoring the significant external debt liabilities that several middle-income countries, especially Sri Lanka and Pakistan, are burdened with. And finally, the rationale of the Framework is to bring to the table the “new donors” from the developing world, especially China and India, alongside the traditional “Paris Club” donors. Interestingly, the “Paris Club” donors had drastically reduced their bilateral aid over the past two decades, preferring to channelise their funds through private sector lenders and multilateral institutions instead.
It is beyond doubt that the Framework is aimed at protecting the interests of global capital while the indebted countries remain condemned to bear the burden of debt. Importantly, PM Modi had flagged the threat of unsustainable debt facing some developing nations in his message before the recent G20 finance ministers and central bank governors. Therefore, India needs to pull its political weight to alter the rules of what is a grossly inequitable debt management strategy of the G20 countries.
Yet another critical area where the Indian presidency must play a critical role is to enhance the effectiveness of global responses to climate change, of which energy transitions have emerged as a key component. When India assumed the presidency, PM Modi had argued that energy transitions are one of the greatest challenges that the global community faces at this juncture, signalling that this issue would be one of the most important planks for G20 engagement under the Indian presidency.
It may be pointed out in this context that Indonesia, the G20 president in 2022, had identified two critical issues for accelerating energy transitions. While laying down the Bali Energy Transitions Roadmap through to 2030, Indonesia had highlighted the need for scaling up smart and clean energy technologies and advancing clean energy financing. With regard to scaling up smart and clean energy technologies, the Bali Roadmap underlined the imperative for global public and private funding of the development, demonstration and deployment of clean energy technologies, as also G20 engagement in global clean energy technology partnerships. Financing clean energy projects has long been a contentious issue, and the Bali Roadmap called upon developed countries to provide enhanced support—including through financial resources to assist developing countries—in continuation of their existing obligations under the UNFCCC.
Getting the advanced countries to agree on concrete steps to provide necessary financial resources and access to relevant technologies is a daunting ask. However, if the Indian presidency can extract an honest set of commitments from the advanced countries, the energy transition agenda can make rapid progress.
Biswajit Dhar
Professor, Centre for Economic Studies and Planning, School of Social Sciences, JNU