Modi makes his debut in a global gathering at G-20

As leaders of the G-20 meet in Brisbane, the capital city of the picturesque and placid Queensland, Australia on November 15, India’s Prime Minister Narenda Modi makes his debut at the global gathering, rubbing shoulders with the high and the mighty. The two-day summit of world leaders is being convened to initiate urgent policy actions for a coordinated approach to get the world economy out of its sluggish mode. But the latest estimates by the IMF have put the world economic growth down to 3.3 per cent from its earlier 3.7 per cent projection six months ago. This bears out the apprehension that most major economies around the world continue to underperform relative to pre-crisis trends.

What is noteworthy is that in the five years leading upto the 2008-10 North Atlantic banking crisis, average world economic growth was around 5 per cent per annum, whereas growth since then has averaged 3.5 per cent. Advanced, emerging and developing economies have atrophied, China’s economic slowdown being illustrative and India’s growth slowdown was reflected in sub-five per cent growth for two years in a row during 2011-13. Prof Tony Makin of Griffith University said as a group, advanced economies have grown at a feeble 1-2 per cent, while emerging and developing ones have managed between 4-5 per cent, well down on their 7-9 per cent pre-crisis rates. Interestingly, most of the G-20 members had fiscal stimulus measures in place. This profligate fiscal policy in response to the banking crisis led to the subsequent public debt crises that broke out in advanced economies, notably Greece and other Southern European economies.

It may be worth recalling that the advent of G-20 was a collective response by the global community to the global financial crisis that exposed the inadequacies of the existing institutional arrangements such as the IMF and other major multilateral bodies. So right from its very first gathering in Washington in 2008, the G-20’s agenda of action has underscored aggregate demand management issues. It was stated that though important financial stability issues have also been addressed, the supply sides of economies have largely been treated in a cavalier fashion, ignoring that it is from the supply side source that all production (output) and employment originates.

 Hence, it is widely expected that at the G-20 leaders’ summit in Brisbane, they are likely to focus on improving economies’ supply side performance by addressing input and product market aberrations, including employment-destroying labour market rigidities to boost productivity. Narendra Modi can pat himself on the fact that India has instituted a modest labour policy reforms by ending the inspector-raj in factories and has drawn plans to do away with archaic laws that stymie the functioning of a vibrant economy through legislation in the winter session of Parliament.

The G-20 host Australian Treasurer Joe Hockey was on record that at the Brisbane meeting “we want to achieve outcomes that will secure the global economic recovery”. He also referred to the importance of the infrastructure investment in the G-20 plan and a global infrastructure initiative comprising multi-pronged actions to increase the quality and quantity of infrastructure across G-20. Plans are afoot to announce a global infrastructure hub which will bolster and augment the flow of private investment into global infrastructure, a demand that is estimated to be around 80 trillion dollars over the next decade.

With India recently putting in place a raft of reform measures ranging from decontrol of diesel price, higher natural gas price, e-auction of cancelled coal blocks, power sector reform to facilitating business,  Narendra Modi’s visit to Australia and his interaction with world leaders are eagerly awaited both here and by other bilateral partners elsewhere.

The author is a free-lance journalist based in New Delhi