G20 and its Significance – Explained, pointwise

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September 4th, 2023

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India is set to host the 18th G20 summit in September 2023 at the Bharat Mandapam
International Exhibition-Convention Centre (IECC) New Delhi. This is the first G20
summit to be held in India as well as in South Asia.

The 18th G20 Summit in New Delhi will be a culmination of all the G20 processes
and meetings held throughout the year among ministers, senior officials, and civil societies.
These meetings were held in different cities of India to showcase India’s cultural and
regional diversity at a global stage.

Read More- From Magna Carta to Ashtadhyayi: artefacts to grace G-20 corridor

What is G-20?
The G20 or Group of 20 is an intergovernmental forum comprising 19 countries and
the European Union (EU). It works to address major issues related to the global economy,
such as international financial stability, climate change mitigation and sustainable
development.

Members of G-20-The Group of G20 (G20) comprises Argentina, Australia, Brazil, Canada,
China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia,
Saudi Arabia, South Africa, Turkey, United Kingdom, the United States and the European
Union.

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Countries in light blue are represented through the membership of the EU.

In addition to these member countries, the G20 each year invites guest countries and
international organisations such as the United Nations, World Bank, IMF, OECD, ASEAN etc.
to participate in its meetings.

In addition to the regular International Organizations and Chairs of Regional Organisations

India has invited ISA, CDRI and ADB as guests.

Features of G-20-

These members account for around 85% of the world GDP, 75% of the total international
trade and two-thirds of the global population.

The G20 is composed of most of the world’s largest economies including both
industrialised and developing nations.

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 Historical Background

1999 Formation G-20 group was founded in 1999 after the Asian
financial crisis (1997) as a forum for the Finance
Ministers and Central Bank Governors to discuss
global economic and financial issues.

2008 Elevation to Leader’s After the 2008 global financial crisis G-20
Level was upgraded to the level of Heads of State or
Government from the Finance ministers and central
bank governor’s level.

2009 Declaration of G-20 as In 2009 G-20 was declared as the premier forum for
the “premier forum for forum for international economic cooperation.
international The G20 Leaders have met on a regular basis since
economic then and the G20 has emerged as the leading
cooperation” platform for global economic cooperation.

Structure of G-20
G-20 does not have a charter or secretariat-The G-20 presidency is supported by the
Troika, which includes the previous, current, and incoming presidencies. The G20
Presidency hosts the Summit and directs the agenda for a calendar year.

Troika of G-20

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 Structure of G-20-While the head of states meet once a year, G-20 agenda is pursued by
two parallel tracks which conduct regular meetings throughout the year.

Sherpa The Sherpas of member countries are the personal emissaries of the
Track Leaders. They oversee all the negotiations over the year, discuss the
agenda for the Summit and coordinate the substantive work of G20.

They focus on socio-economic issues such as agriculture, anti-corruption,

climate, digital economy, education, employment, energy, environment, health,
tourism, trade and investment.

Finance It is headed by the Finance Ministers and Central Bank Governors, who
Track generally meet four times a year with two meetings being held on the
sidelines of World Bank /International Monetary Fund meetings.
They focus on Fiscal and Monetary policy issues such as global economy,
infrastructure, financial regulation, financial inclusion, international financial
architecture, and international taxation.

Objectives of G-20- Following are the objectives of G-20:

(a) Policy coordination between its members in order to achieve global economic stability,
sustainable growth

(b) Promote financial regulations that reduce risks and prevent future financial crises

(c) Create a new international financial architecture.

(d) Develop common vision to tackle challenges like climate change, environment
sustainability, corruption and energy crisis.

India’s agenda for 18th G-20 summit-

· Green Development, Climate Finance & Lifestyle for Environment (LiFE)

· Accelerated, Inclusive & Resilient Growth

· Accelerating progress on Sustainable Development Goals (SDGs)

· Technological Transformation & Digital Public Infrastructure

· Multilateral Institutions for the 21st century

· Women-led development

What is the importance/significance of G-20?

Geopolitical Significance

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Greater representation to developing countries-It is a more representative grouping in
comparison to groupings like G7 which comprised only industrialized economies and
ignored the interests of the global south.

Global balance of power-G20 promotes a more equitable distribution of power among

developed and developing countries than the earlier formed blocs such as G-7 and P-5
(UNSC) which helps to maintain a balance of power at the global level.

Opportunity to undertake bilateral meetings-It offers an opportunity to undertake

bilateral or trilateral meetings with leaders of 20 countries on the sidelines of G20
summits. E.g., Indonesia G-20 provided meeting for India-China summit.

Bringing adversaries on a common platform- The importance of the G20 lies in its ability
to bring together countries with different ideologies, political systems, and economic
interests onto a common platform to discuss and address global economic issues. E.g.-
India & China, US & Russia.

Economic Significance

More economic heft as a grouping-While the share of G7 countries in the global

economy has been falling, G20’s share has been largely consistent. The group carries
more economic heft and hence it’s discussions on financial and macro-economic policies
influence the decisions of Bretton Woods institutions.

Source: Council on Foreign Relations

Tackling financial crises effecting global economy- G20 has played a critical role in
responding to economic crises such as the 2008 global financial crisis, the Eurozone debt
crisis, and the COVID-19 pandemic.

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Economic relief during recession induced due to COVID– G20 countries agreed to
suspend debt payments owed to them by some of the world’s poorest countries providing
billions of dollars in relief to countries during COVID-19.

Social Significance

Widening areas of cooperation: The agenda of the G20 has been expanding from a broad
macroeconomic policy to more socio-environment area of cooperation.

G20 summit in Convergence of the US and China on the Paris Agreement

Hangzhou (China) (Climate Change)
2016

G-20 summit in Focused on fair and sustainable development.

Argentina, 2018

G-20 summit in Issues regarding money laundering, international tax havens,

Germany, 2021 and corruption.

G20 summit in Bali Focused on financial stability, humanitarian crisis, poverty,

(Indonesia), 2022 aid,Food security (Black Sea Grains Initiative) and gender equality.

Addressing climate change: G20 has recognised the threat of climate change and has
taken some initiatives to address it in the field of energy efficiency and renewables;
adoption of advanced and clean technologies; resilient infrastructure; tackling
environmental challenges like biodiversity loss; adoption of the Circular Carbon
Economy etc.

Vaccination during COVID-19- G20 leaders pledged to help vaccinate 70% of the world’s
population by mid-2022.

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 Significance of G-20 presidency for India
India’s strategic importance: G20 presidency will provide a platform for India to engage
with other major powers including the United States, China, and Russia.

Becoming the voice of Global South: India has become the voice of the erstwhile
sidelined Global South by holding the meeting of the Global South countries along with
G20 meetings and pushing for inclusion of African Union (AU).

India’s growing economic influence: Itwill help India further strengthen its economic ties
with other G20 members as India is the fastest growing economy of the world.

India’s leadership on climate change – As the world grapples with the challenge of
climate change, India’s presidency can help set the tone for global cooperation on this
issue.E.g. India’s Mission LiFE.

India’s focus on inclusive growth: India’s presidency will focus on issues such as
infrastructure development, job creation, and women’s empowerment which will have
its spill over effect on Indian inclusive development.

What are the Challenges faced by G-20?

Structural Challenges
Informal structure of G20- G-20 has no permanent secretariat. The agenda changes every
year according to the priorities of the presiding nation. According to critics G20 basically is an
extension of the G7.

Limited membership-The G20 only includes 19 countries and the European Union which
means that other important economies like the African Union (AU) are not included.
Expanding the membership could help to ensure that the group is more representative of the
global economy.

Non-binding decisions – Member countries are not legally bound to implement the
decisions made at G20 meetings. For example, the G20 countries had agreed to a set of
guidelines for preventing the financing of terrorism but there is no mechanism to enforce
compliance with these guidelines. G20 declarations are not legally binding.

Geopolitical Challenges

Rising Geopolitical Rifts – The world economy is struggling with geopolitical rifts such as
the tensions between the US and China the two biggest economies in the world, the
decline in trade between the UK and the euro area in the wake of the Brexit decision and
sanctions on Russia.

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Russia-Ukraine Crisis – This is currently the biggest roadblock impairing functioning as
the U.S and its allies are not willing to sit on the same table with Russia and its allies. This
may cause a severe stalemate in the grouping’s functioning and impair its progress.

Influences decision-making of smaller countries- The smaller countries have

to implement the declarations and commitments agreed by G20 nations for their growth.
E.g., the G20 nations agreed to end international financing for coal power plants. So, a
small nation cannot get any finance from G20 nations for a new coal power plant and must
use its own limited financial resources or phase out coal and look for other alternatives.

Under representation of Africa- None of the African nations is a member of the G20 except
for South Africa.

Economic Challenges
Rising Protectionism: G-20 is facing a credibility crisis due to deglobalisation and rising
protectionism. Countries around the world are choosing to be ‘G-zero’ over the G7, G20,
BRICS, P5 (UNSC Permanent Members) and others.

Slowing down of Major Economies of G-20- China, one of the major engines for global
growth, is witnessing a sharp slowdown as it struggles with a real estate crisis. US and
UK are also facing recession.

Rising Inflation-In response to high inflation central banks across countries have raised
interest rates which in turn have dampened economic activity further.

Read More- Multilateral reforms as a priority in the G-20

What should be the way forward for G-20 group?

Formalization of G20 – The G20 must include objectives, vision and mission
statements, a permanent secretariat and staff to oversee commitments and ensure
continuity in the agenda.

Make it more representative – G20 must make itself more representative by expanding
membership. It must include African Union (AU).

Tax rate rationalisation to avoid protectionism-Rationalizing the direct-indirect tax

structure in member nations and ensuring a parity in credit requirements shall ensure a
more competitive market structure with easier entry and exit of firms

Bridging powers between the East and West-G-20 can act as bridging powers between
the East and West. The global economic disruption caused by Western economic sanctions
and the ongoing boycott of Russia in global economic forums need initiatives from the
countries like India, Indonesia and South Africa in G-20. This will bridge out the differences.

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Focus more on domestic commitments- G20 Nations should phase out domestic coal
consumption. This will create a significant impact as G20 nations represent more than
75% of the world’s greenhouse gas emissions

Global Financial Transaction Tax which was a consideration by the G20 in 2011 needs to
be revived which can be used to fund green technology projects in Least Developed
Countries.

Public health should be made a key agenda especially after the deadly impact of COVID-
19.

Read More- The G-20 can be the UN Security Council alternative

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