India has reason to be pleased with the outcome of the Seventh G20 Summit, which concluded here on Wednesday.
First, Prime Minister Manmohan Singh ticked the Europeans off for landing themselves and the world economy in such a big mess and then expecting handouts from even poor countries.
Second, the Prime Minister’s consistent stand, that growth and austerity have to be combined, has also finally found favour.
The 14-page Declaration strongly emphasises the need for growth because, by itself, austerity will not solve the debt problem of the Eurozone. Britain and Germany have been insisting on austerity first to set Eurozone in order.
Third, the Summit declaration included for the first time investment in infrastructure in the developing countries in the preamble. India has been pushing for this at the last three Summits.
Fourth, the Declaration has also called for ending what it calls mechanistic reliance on credit rating agencies, and encouraging transparency and competition amongst them.
Fifth, although no one is saying it openly, there is a distinct sense amongst the officials that the developing countries have improved their clout this time. This is evident from, amongst other things, agreement that IMF quota reform should be speeded up from 2013.
Overall, the non-European members of the G20 have succeeded in sending a strong message to Europe that enough is enough and that it has to end its nationalistic bickerings so that the Eurozone’s finances can be supervised by a triumvirate comprising the European Central Bank, the IMF and the EU.
Key to this is the acceptance by European countries to subordinate their financial institutions to an outside agency. The G20 has also explicitly recognized the progress made by China in market-determined exchanged rates, and the gradual appreciation of the Renminbi. The U.S. will now stop targeting China’s exchange rate policies.
The next G20 Summit is in 2013 with Russia as the new chair. Reacting to the Communique, the Prime Minister has said, ``Eurozone leaders… recognize the need to move beyond the present monetary union towards unified banking supervision and adoption of common and enforceable fiscal rules.’’