In a noticeable change in its stance, the G-20, comprising the world’s biggest economies, at the recent meeting in Sydney decided to shift emphasis from championing austerity to promoting growth at a time when the financial crisis in seen to be receding. Towards that end, Finance Ministers and central bank governors of the G-20 agreed to target reforms aimed at adding more than $2 trillion to the global economy over five years. Political leaders from the bloc who will meet in November are expected to outline what reforms they expect to implement to achieve the target. Yet the tasks of identifying reforms and implementing them in a synchronised manner among countries are not easy. For one, the world’s biggest economies are not a homogenous lot. Even the traditional categorisation such as advanced and developing economies falls flat when individual countries in each sub-group exhibit diverse characteristics. Among advanced economies, the U.S. is ahead with recovery gathering steam. Countries of the EU, on the other hand, are still struggling to come out of the recession, although they have put their worst days behind them.
Another important development often highlighted by institutions such as the IMF is that while in the early post-recovery period, China and India along with a few other developing countries were spearheading global growth, the position is now reversed with the advanced economies led by the U.S. emerging in the forefront. All these explain why the joint G-20 communique cannot be anything but bland. It talks of ambitious but realistic policies to lift the collective GDP to 2 per cent above the trajectory implied by current policies, over the coming five years. The fixing of a numerical target for future growth is considered significant. In the past, the G-20 has shied away from fixing numbers in such areas as fiscal adjustments. India’s strong views on the deleterious consequences of the U.S. Federal Reserve’s ongoing taper process were accommodated in the final communique, which calls for a continuous calibration of monetary policy settings by individual countries and their communication to one another. Another of India’s key concerns — the reform of the IMF quota system to give developing economies a greater say — was also taken on board. The G-20, comprising the biggest industrialised and developing countries accounting for 85 per cent of the world economy, might have regained some relevance which it was fast losing as countries went their own ways, However, even its most notable success — persuading members to shift gears from austerity to growth — has met with scepticism from certain key members, who have termed the numerical targets aspirational rather than realistic.