25 August 2020, NIICE Commentary 5871
Dr. Swasti Rao
Amidst the COVID-19 Pandemic, India is carving a well-defined commitment towards multilateralism. A whole lot of speculation has been around the sudden power vacuum at World Health Organisation (WHO) with US withdrawing and China getting embroiled in suspicion for hiding sensitive information regarding COVID-19. On the contrary, India’s multilateral position looks better than ever at WHO and with the upcoming G-20 Presidency coming in 2022. However, challenges before India range from economic to strategic to domestic. Hence, how the path towards securing national interest be pursued in such times becomes a key ponderable.
Ambivalent World Order
The world is simultaneously dealing with an unprecedented pandemic; a disruption of neo-liberal world order with its leader, the USA retreating under Trump; an aggressive and an assiduously enigmatic China in borders and at sea; a return of Great Power rivalry between the US and China; global economic recession; an unprecedented rise of right wing populism across the board; a pervasive frustration with globalization and a return of the “nation state”; and a fervent anti- China sentiment. This definitely seems like a barrage of intertwined factors, a mumbo jumbo of a world order. Chaos has always preceded a new order. We require smart power states, which can work up a combination of hard and soft power strategies for legitimizing their actions in pursuit of national interest.
Usurping the Power Vacuum at WHO
It is important to mention the WHO because while Trump has made US to withdraw from it, India looks in a good position to usurp the space thus created in its favour. PM Modi, at the April 2020 Extraordinary summit, stressed the reform of WHO and called for a commitment to “humanitarian” values, a sentiment widely upheld world over. Early this year, India’s Sowmya Swaminathan was appointed as the Chief Scientist and Dr. Harsh Vardhan got elected to chair the WHO executive board coming in effect from 2021. In a world bitten by the anti-China bug, the G-20 presidency definitely opens up new avenues for India to deliver responsible and sustainable economic leadership and offset the influence of its arch rivals. .
Importance of G-20
Amidst the furor of multilateral organizations losing their relevance due to the return to upholding national interest, what sets the G20 apart from other organizations is its origins as a rapid-response, crisis-management group and its unique size and flexible structure, making it a particularly well-suited platform to take on transnational factors like the economic and the human cost of the pandemic that we all face today.
Hence, when it comes to problems that can be addressed only cooperatively at the global level, there is no alternative to bodies like the G20 given the total percentage of global trade, global wealth and global population that the G-20 club represents. It emerges as the best tool and apparatus for effective strategies for smart global governance in our times.
G-20 is especially important because it provides India, a developing populous country, with an opportunity to display its global, political, economic and intellectual leadership on the same platform with the world’s most powerful countries.
Main Challenges
Economic Challenges before India: As trade tensions escalate among major powers and global growth decelerates, the G-20 countries will find it hard to present a common framework to tackle global challenges. Ensuring a smooth ride back to normalcy for economies marred by the lock -down hibernation will be tough to nail and necessitates that India caters to its own economic woes first. Further, it shall be expected of India to develop coordinated action in line with the Extraordinary Summit where an unflinching commitment to address the issue of debt vulnerability declared the joint communiqué for ‘debt freeze’ alongside IMF setting up a ‘catastrophe containment and relief trust’ for the same. The challenge facing India then is two-fold, that of taking on the massive task mentioned above and recovering its own economy.
Immediate need of Additional Stimulus Packages: Despite the nationalistic rhetoric, according to Moody’s, the Indian economy is likely to be in a freeze this year, with recovery picking up only by the end of 2020 given that additional stimulus packages are announced. The government’s Rs 1.7 lakh crore stimulus package has been called “modest compared with support packages implemented in many other countries, particularly given the breadth of India’s nationwide lockdown measures.” However, better news is that they also predict the Indian economy is likely to bounce back at a 2 percent-2.5 percent in FY2021 and a 6 percent in FY2022 if necessary measures are taken.
The Role of the Reserve Bank of India: There has been criticism regarding RBI’s decision to not cut down interest rates to boost the economy when most professional forecasters expect the Indian economy to contract between 5 percent and 6 percent in the current financial year. Further, there is compelling evidence that the RBI may continue to not cut interest rates even in October. However, this might also check retail inflation if and only RBI also makes the banks reduce their lending interest rates to people commensurably enough.
In other words, the onus of reviving the manufacturing sector and through its employment and the national economy at large- lies solely in the hands of the central leadership. The decisions they take now are going to significantly impact the outcomes of FY2021 and FY2022 when India will be hosting the G-20 in New Delhi.
Deferment of Basel-III Norms and Averting a Banking Crisis: The RBI, in view of the Coronavirus pandemic, has deferred the implementation of Basel-III norms for banking services by a year till 1 January 2023 which were scheduled to come into effect from 1 January 2022. Although this would provide a breathing space and additional operational capacity for banks to respond to the immediate financial stability priorities amidst the impact of the COVID-19 on the global banking system. But India has to make sure that this deferment does not trigger a brewing banking crisis in the absence of regulative norms which are already adopted by major economies of the G-20 including China.
Inter-Disciplinary Intellectual Dynamism and Freedom of Expression: If PM Modi has called for strengthening international organizations; it requires India to encourage deep inter-disciplinary research on issues of the international monetary system, global financial architecture, global trading system and trade wars, and the shared commitment to global climate and sustainability. This calls for a robust intellectual environment of analyzing expectations and outcomes at such mega multilateral platforms much ahead of the actual event. There has to be foresight, freedom of expression and coordination among the finance ministry, the foreign ministry and the special appointee such as G20 Sherpa, which together act as the secretariat to the G20 Presidency all under a clear-sighted central leadership. Whether India is able to deliver finally, is still a subject of speculation because its domestic scenario is in turmoil.
Populism and Eroding of Democratic Institutions: Back home, India needs to protect its fast eroding democratic institutions. Polarization happening at the societal level as a result of populist rhetoric is not a healthy sign for the future health of the secular ethos of India. India must put its own house in order because it’s the people where any nation draws its real fuel from.
Favorable International Alignment: Amidst tensions along the LAC, Pakistan factor and brewing tensions in Afghanistan; India has to continue pushing for cooperation in ‘Free and Open Indo Pacific’, pushing for formalizing the QUAD and bilaterally building up with favorable countries all over the world and all of this while not getting consumed in the US-China rivalry.
