AIR Spotlight: G20 Finance Ministers And Central Banks Governors Meeting

AIR Spotlight is an insightful program featured daily on the All India Radio News on air. In this program, many eminent panellists discuss issues of importance which can be quite helpful in IAS exam preparation.

This article is about the discussion on: G20 Finance Ministers and Central Banks Governors meeting.

Participants: 

1. Siddharth, Economic Analyst
2. Gaura Dhawan Lal, AIR correspondent

Context:  First meeting of Finance Ministers and Central Bank Governors under India’s G20 Presidency was held in Bengaluru.

Introduction:

• Finance is the lynchpin of every economy and with means, methodologies, and requirements of the sector, all countries are interconnected and have common issues.
• Some of the serious economic difficulties faced by the world are the COVID-19 pandemic and its after-effects on the global economy, increasing geo-political tensions, global supply chain disruption, increasing prices, food and energy security, unsustainable debt levels, etc.
• The Finance Ministers and Central Bank Governors meeting is the first Minister-level dialogue under India’s G20 Presidency.

Highlights and Significance of the Meeting:

• It will set the tone for India’s G20 presidency as it is the first ministerial meeting under its ambit.
• Prime Minister Shri Narendra Modi has clearly highlighted to focus on vulnerable sections of society that have been hardest hit by the pandemic as well as the spiralling inflation in several parts of the world.
• He also asked the dignitaries to focus on countries that are reeling under the impact of the high level of debt. Infact India’s neighboring countries like Sri Lanka and Pakistan are also suffering from economic stress.
• Prime Minister also pointed out that it is the responsibility of the custodians of the leading economies and monetary systems of the world to bring back stability, confidence, and growth to the global economy.
• He also talked about the need to review and revitalize the multilateral development banks to deal with the present-day challenges of climate change.
• During the meeting, it was also highlighted how India used digital technology to deliver public goods and services. Digital payments enabled contactless and seamless transactions during the pandemic.
• It was also stated that India has created a highly secure, trusted, and efficient public digital infrastructure in its digital payments ecosystem over the past few years. This transformed governance, financial inclusion, and ease of living in the country.
• However, caution was raised against some innovations in digital finance that could cause destabilization. For instance, the unregulated use of cryptocurrencies.

Challenges in the global economic order:

• Inflation:
  • Several countries are battling increased inflation as a fallout of the pandemic and the Russia-Ukraine crisis.
  • Notably, high levels of inflation seep into the economy and increases the cost of living. It creates a vicious cycle of inequality and poverty.
  • In order to control inflation, Central banks raise interest rates. If the interest rates are raised by developed economies like the U.S., it might lead to the flight of capital from other countries.
  • High-interest rates also impact the debt levels of poor and developing countries. Many countries in India’s neighborhood are facing such a crisis with their economies in shambles.
• Role of multilateral institutions:
  • Multilateral banks like the World Bank and the International Monetary Fund have certain issues like the changes in global orders that need to be addressed.
  • Many countries led by India are asking to redefine the role of multi-lateral banks and reposition themselves to reflect the modern-day realities of emerging economic powers of countries like Brazil, China, and India.
  • However, the institutional changes would require building global consensus, particularly where certain countries would be required to give up their power.
• Climate Finance:
  • The idea of climate finance is that developing and low-income countries have access to capital in order to mitigate the climate threat and take their responsibility for climate change.
  • One of the major issues in this regard is the lack of financial support by the developed countries for the developing countries to scale up their model of economic transition and have adequate resources at their disposal.
  • In this direction, multilateral agencies and the public sector should make the initial efforts and then the private sector can join in.
  • Many developed countries are already struggling with poor economic growth and thus would not prioritize financing climate change.
  • It is important to create a framework and make the finances available for the long term, otherwise, the entire world will have to suffer from serious repercussions.
  • It should be noted that the world is interdependent and inter-connected as evident by the fallout of the pandemic.
• Regulation of cryptocurrencies:
  • Cryptocurrencies are issued by private entities and are not regulated by the central banks. Their role in the economic system is closely debated. It has the potential to hamper the banking system, financial system, and overall economy.
  • Governments across the world are trying to regulate it. Despite such attempts, it cannot be completely banned/blocked.
  • There is a need to build consensus that will further require a high level of political will and coordination of central banks and regulators
• Another area of concern is strong views on the Russia-Ukraine war that has divided the world into two groups which are:
  • One group holds a strong view against Russia and intends to completely block out Russia.
  • Whereas, another group validates that every country should have the space to pursue its own policy keeping economic interest in mind.
• There is also the impact of the policy actions of one country on the other (especially of the developed countries on the developing countries). 

Digital Public Infrastructure:

• One of the key priorities of India is the role of digital public infrastructure in advancing financial inclusion.
• India has very well adapted to digital technology and has deployed Jandhan Adhaar Mobile (JAM Trinity) to deliver banking services, social security, and services like Direct Benefit Transfer (DBT).
• The Digital infrastructure can not only reach out to the poor but also bring productivity gains and strengthen public trust.
• It is an open-source model that is not tied to any particular entity and can be tweaked, worked upon, or built to suit each country,

Also read: Direct Benefit Transfer: History and Structure for UPSC Polity

Read previous AIR Spotlight articles in the link.

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