India recently participated virtually in the third edition of the G20 Finance Ministers and Central Bank Governors (FMCBG) meeting, which was chaired by Saudi Arabia. This meeting focused on the global economic outlook in the midst of the evolving Covid-19 pandemic, along with other finance-related priorities for 2020. The first meeting took place in Saudi Arabia’s capital, Riyadh, in February 2020.
Significance of G20 Action Plan
A key discussion point during the meeting was the importance and relevance of the G20 action plan. This plan, endorsed in response to Covid-19 in April 2020, consists of a list of collective commitments aimed at coordinating G20 efforts to combat the pandemic. These commitments fall under four primary pillars: Health Response, Economic Response, Strong and Sustainable Recovery, and International Financial Coordination.
India’s Stance and Responses
During the meeting, India highlighted the need to balance supply side and demand side measures in response to Covid-19. India also voiced concerns about the procyclicality of credit rating downgrades by rating agencies and its deterrent impact on policy options, particularly for Emerging Market Economies (EMEs). Procyclic ratings are more stringent in economic downturns than expansions, leading to overly pessimistic ratings during recessions. India stressed on the need for international coordination in addressing the spill-over effects of exit strategies related to covid-19 lockdowns.
G20 Finance Track Deliverables under the Saudi Arabian Presidency
The FMCBG meeting also discussed progress on G20 Finance Track deliverables under the Saudi Arabian Presidency. India discussed two such deliverables: firstly, enhancing access to opportunities for women, youth, and Small Market Economies (SMEs), and secondly, the International Taxation agenda and the intended deliverable of formulating a solution for addressing challenges related to digital taxation.
India’s View on Digital Taxation
India emphasised that the consensus-based solution for digital taxation should be straightforward, inclusive, and based upon a robust economic impact assessment. This view aligns with the recent decision by the United States Trade Representative (USTR) to initiate an investigation into taxes adopted or under consideration by ten nations, including India. These taxes are applied to revenues earned by American digital service companies like Netflix and Airbnb.
About the G20
The G20 is an informal group consisting of 19 countries and the European Union, along with representatives of the International Monetary Fund and the World Bank. Its members comprise a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, 80% of global investment, and over 75% of global trade.
Origin and Objectives of the G20
The G20 was born out of the Asian Financial Crisis of 1997-1999 as a forum for discussion between both developed and developing economies. The need for a new consensus-building platform at the highest political level became evident during the 2008 Financial Crisis. As a response, it was decided that G20 leaders would start meeting annually.
G20 Membership and Structure
The G20 members include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union. Every year, one nation holds the chair, known as the ‘G20 Presidency’. Saudi Arabia is holding this position in 2020, with Italy slated to take over in 2021.
