India, China take centre stage at G20

17 Nov 2008, 0252 hrs IST, TK Arun, ET Bureau





WASHINGTON: The G20 summit on financial markets and the global economy concluded on Saturday with the usual melange of anaemic consensus, homilies,
and calls to action and resolve to meet again, characteristic of multilateral summits.

However, the final declaration of the summit expresses a clear resolve on the part of the global community to broad base the decision-making structures of international finance to include the major emerging markets like India and China.

It also called for co-coordinated fiscal stimulation among the member countries that account for 80% of the world output, warned against protection and underlined the need for common accounting and regulatory standards that would bring transparency and regulation to those segments of the derivatives market that are today outside the scope of any kind of prudential oversight.

G20 summit meets India’s objectives

In all this, the outcome of the meet fully meets the objectives set for it by New Delhi and articulated by Prime Minister Manmohan Singh.

The first global body to incorporate major developing countries is likely to be the Financial Stability Forum, a grouping of monetary and market regulators from 12 rich countries and a handful of international agencies dominated by the rich nations of the world.

Does this amount to Brettonwoods II, as many claim/demand? Commenting on the outcome of the summit he had convened, outgoing US president George Bush answered this question thus: "Brettonwoods I, which was set up by the International Monetary Fund (IMF) and the World Bank, took two years to negotiate, while the current meet has had barely three weeks of preparation. However, this meet has shown definite commitment to adapt the financial architecture to fit today’s reality, rather than the concentration of economic clout of 1944 that IMF still reflects."

Addressing the media after the summit, Mr Bush expressed satisfaction that the summit endorsed free-market principles. At the same time, Prime Minister Manmohan Singh can take comfort that the summit, more or less, fully endorsed his call at the summit for governments to step in when markets fail, whether in providing a stimulus to growth, maintaining the flow of credit, preventing the world from lapsing into beggar-my-neighbour policies of protectionism or transparent, prudential regulation.

Mr Bush said that the Obama transition team has been kept fully in the loop and hoped that his successor would succeed in bringing about financial stability and economic growth.

In his speech at the summit, Mr Singh had called for fiscal stimulus, particularly in building infrastructure, to sustain the growth momentum deflated by recession in the developed countries. He had also laid great stress on reforming the governing structures of IMF and other global financial agencies.

The summit identified immediate and medium-term action plans in strengthening transparency and accountability, enhancing sound regulation, prudential oversight, risk management, promoting integrity in financial markets, reinforcing international co-operation and reforming international financial institutions.



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