AIR Spotlight: India’s G20 Presidency: Trade, Investment and Infrastructure Priorities

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: India’s G20 Presidency: Trade, Investment and Infrastructure Priorities.

Participants

• S.P Sharma: Economic Analyst
• Rajesh Lekh: AIR Correspondent

Context – Trade and investment summits become important for the growth of the economy and expansion of the growth trajectory. The first G20 Trade and Investment Working Group (TIWG) under India’s G20 presidency commenced in Mumbai. The deliberations during the three-day meeting will facilitate cooperation on trade and investment in view of India’s G20 Presidency priorities.

Introduction

Investment and trade are key drivers of growth and employment creation and in order to find a common solution it is important to create a shared knowledge of the difficulties that come while accelerating global trade and investment.

• India is a growth leader in the G20 countries and has the fastest growth trajectory among all the G20 countries.
• India targets $1 trillion in merchandise and $1 trillion in service exports by 2030. 
• About 50% of India’s exports are to G20 countries. The prospects of expansion of exports with G20 countries are immense and merchandise shipments can be scaled up.
• The 1st TIWG meeting under India’s G20 Presidency is scheduled in Mumbai (28 – 30 March 2023). During the three-day meeting, over 100 delegates from G20 member countries, invitee countries, regional groupings and international organisations will engage in deliberations to accelerate global trade and investments. 
• The G20 countries together represent around 85% of global GDP, over 75% of global trade and two-thirds of the world population. 

Trade Finance

Trade finance supports economic growth and is integral for maintaining international trade flows, for mitigating risks associated with tight liquidity. There is a need for trade finance cooperation among G20 countries to help reduce the widening trade finance gap. As estimated by ADB (Asian Development Bank), the gap was $1.5 trillion in 2018 and now has increased to $2 trillion.

• Banks, financial institutions, development finance institutions and export credit agencies could play an important role in identifying the gaps and addressing the challenges in the trade finance arena amidst the uncertain global trade landscape.
• There is a need to accelerate digitalisation and also to adopt fintech solutions for improving access to trade finance. The digitalisation of international trade is an effective solution towards achieving cost reduction in trade and trade finance. 

International Trade in Rupees

In July 2022, RBI put in place a mechanism to settle international trade in rupees to promote the growth of global trade with an emphasis on exports from India and to support the increasing interest of the global trading community in the rupee.

• RBI has given approvals to domestic and foreign AD (Authorised Dealer) banks to open Special Rupee Vostro Accounts (SRVAs) of correspondent banks from 18 countries. (A vostro account is an account a correspondent bank holds on behalf of another bank).

Integrating MSMEs into Global Trade

MSMEs (Micro, Small & Medium Enterprises) are the backbone of a resilient national economy. Prioritising their development is critical to the future of the country. MSMEs are the major growth drivers of the Indian economy and contribute around 30% to India’s GDP and nearly 50% to its exports. 

• Integration of MSMEs in Global Value Chains (GVCs) cannot only support economic growth but might also help in post-pandemic recovery and other global headwinds.
• In the process of integration into the global value chain, MSMEs face many challenges, therefore efforts must be made to strengthen the sector locally to enable their penetration and reach globally. 
• The ministry of MSME has undertaken several initiatives to modernise the sector. These include putting in place financial support mechanisms through Fund of Funds, broadening the definition of MSMEs, and introducing IT-based Champions platform to provide solutions to issues of MSMEs.

Inclusive, Resilient and Sustainable Cities

There is a great emphasis on infrastructure development in the country. To achieve a GDP of $5 trillion by 2024-25, India needs to spend about $1.4 trillion (Rs 100 lakh cr) over these years on infrastructure.

• The GoI introduced the National Infrastructure Pipeline (NIP). NIP is a group of social and economic infrastructure projects in India over a period of five years (2020-25) with an initial sanctioned amount of Rs 102 lakh cr.
• During the fiscal years 2020 to 2025, sectors such as Energy (24%), Roads (19%), Urban (16%), and Railways (13%) amount to around 70% of the projected capital expenditure in infrastructure in India.
• PM Gati Shakti Scheme – Also known as the National Master Plan, aims at the coordinated planning and execution of infrastructure projects in India to reduce logistics costs.
• Several ministries (more than 16) of the government have been brought on one platform under this mission.

Conclusion – The aim under India’s G20 Presidency is to build a shared understanding of the challenges being faced in accelerating global trade and investment, and how existing opportunities can be harnessed to formulate human-centric concrete outcomes and deliverables.

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