The G20 remains the most powerful forum for global economic governance. Given its membership, its mandate, and its influence, it has been appropriately called the ‘economic steering committee of the world’. The G20’s agenda is spread mainly across the Finance Track and the Sherpa Track. The Finance Track, led by Central Bank governors and finance ministers has remained the most crucial pillar of the G20. It covers issues related to international finance, sustainable finance, and broader global macroeconomic priorities. The Sherpa Track, led by a government-appointed official, covers issues related to development, trade, education, healthcare, digital economy, and more. Each issue is supported by ministerial meetings, working groups, task forces, and engagement groups. Both the Finance and Sherpa Track have evolved significantly over the years. Nonetheless, the G20 remains a ‘leaders-led process’, with the heads of governments shaping the agenda of the forum.
G20 follows a rotational presidency every year, thus allowing each member country to shape the global economic governance during their presidency. In December 2021, as a run-up to its G20 presidency in 2023, India joined the G20 Troika of the rotational presidency with Italy and Indonesia. India is in the process of identifying areas of cooperation with other G20 members to shape its presidency. The India–UK partnership at the G20 is underpinned by strong bilateral diplomatic relations, shared values, and common interests. As India and UK co-chair the G20 Framework Working Group (FWG) since its inception; it is natural, indeed imperative, for the two countries to co-design and co-develop a global governance agenda that resonates with all the members of the G20.
In this context, the Observer Research Foundation in partnership with the Foreign, Commonwealth and Development Office (FCDO) of the UK government organised a delegation in March 2022 to London. The delegation aimed to discover shared interests to drive a collaborative approach towards global challenges and create meaningful engagement between India and the UK, structured around issues and platforms that give either country substantial leverage. The delegation’s visit aggregated the information, examined the issues, and provided necessary policy recommendations for developing and implementing the G20 agenda. By initiating discussions with UK-based research institutes such as the Overseas Development Institute, London School of Economics’ Grantham Research Institution on Climate Change and the Environment and the LSE Ideas—the visit enabled the development of a sustainable network between UK and India based think tanks to aid India–UK G20 collaboration.
II. Delegation Itinerary
A. Meeting with HM Treasury, UK
The Indian delegation met Ms. Veda Poon, Director, International Finance at HM Treasury, UK to strengthen the alignment between India and the UK on issues of the G20. The aim of the meeting was to enable a greater understanding of Indian and UK viewpoints on shared issues relevant to G20 such as sustainable finance, current macroeconomic developments, and the digital economy.
The meeting explored India’s probable G20 agenda. The Indian delegation highlighted the likelihood of India’s G20 Presidency delinking its climate track with the energy track to expand the discourse on loss and damage beyond the energy sector. Coal remains a mainstay for India’s power generation and is unlikely to substantially change in the next few decades. For emerging economies like India, it would be crucial to look at the coal sector transition from the lens of just transition. If India is expected to phase out coal, it is likely to lose a few hundred thousand jobs across different allied sectors, thus it is crucial for India to explore the role of international financial institutions and other countries in helping with the transition. The meeting also discussed India’s major policy push towards sustainable cities, bio-fuel, infrastructure finance, sustainable infrastructure for agriculture and R&D. From the UK point of view, the meeting highlighted the importance of carbon pricing and its macroeconomic impact, country platforms, climate-related financial disclosures, taxonomy and the role of the domestic private sector in lowering emissions.
From a digital economy perspective, the meeting highlighted the crucial role of digitalisation and financial inclusion in the finance track. It emphasised the added importance of cyber security, decentralised finance, coordinated response to cryptocurrency or central bank digital currencies and the need to enhance digital literacy for the Indian G20 Presidency. The meeting also discussed the potential challenges India might face during its G20 Presidency, including the possibility of discontinuity in the agenda-setting within the Troika due to the lack of a permanent secretariat at the G20.
B. Leveraging the global macro-economic environment for recovery and growth: Opportunities for the G20 under India’s Presidency in 2023
While economic activity is predicted to return to pre-pandemic levels in advanced economies, the global financial and monetary system is still vulnerable to external shocks, especially for the emerging markets and developing economies. There are key risks related to COVID-19, macroeconomic policies and other geopolitical crises that can cause major headwinds for the emerging market and low-income economies.
Due to the uncertainty induced by the pandemic, the global economy continues to witness high inflation and increasing public and private sector debt levels. The advanced economies have experienced a supply-demand mismatch, which has negatively affected the recovery trajectory. The renewal of mobility restrictions in some economies has weakened the service sector and caused continued supply disruptions. The labour market recovery has been highly uneven in most G20 economies. The adverse impact of the pandemic has been felt by the vulnerable section of the labour force—including older workers and women.
Amid rising inflation, geopolitical tensions, increasing interest rates and tapering asset purchases, G20’s agenda for global macro-economic stability remains crucial. In 2022, the Framework Working Group (FWG) discussed the economic risks and the best strategies to balance monetary and fiscal policies, especially in view of the limited fiscal space and high financial market volatility.
In consultation with the Government of the UK and Overseas Development Institute (ODI), ORF co-hosted an in-person roundtable on the G20 with policymakers, officials, experts, and civil society experts from UK, India and other G20 countries. The roundtable sought a greater understanding of global governance issues in both—the Sherpa and Finance Tracks—to serve as a necessary reference and source of ideas for policymakers in India and the UK for the G20. It initiated positive discussions between the two countries at the G20 for solving serious global governance issues and identifying potential areas of collaboration under India’s Presidency.
At the Overseas Development Institute, London; From L-R: Dirk Willem te Velde (ODI), Mihir Sharma (ORF), Shikha Bhasin (CEEW), Adam Taylor (FCDO UK), Prachi Agrawal (ODI), Lucy White (ODI), Siddharth Singh (IEA)
C. Themes for the G20 Finance Track during India’s 2023 G20 Presidency
In consultation with the UK Government, ORF organised a meeting with LSE Ideas to discuss the themes for the G20 Finance Track during India’s Presidency in 2023. The meeting was co-chaired by Mihir Sharma of ORF and Hugh Sandeman, Senior Fellow at London School of Economics.
The discussion explored how the G20 can work to ensure that the regulatory framework for cross-border capital flows enhances the amount of private sustainable finance to the developing world. It sought to discuss the framework of rules that lenders seek to impose and within which they operate. This included —terms, maturity, loan agreements, the structure of financing, risk appetite, pricing of loans, the ability to transfer loans or assets to new owners, and criteria for sustainable lending (i.e., environmental, social and governance conditions), prudential regulation by financial authorities of the lenders, capital adequacy rules imposed, requirements for reporting on sustainability (ESG) of loans, rules on the structure of liabilities for funding international loans, and credit ratings provided by rating agencies.
It also discussed the regulations adopted by receiving countries, including issues such as overall capital controls by borrowing countries; macro-prudential controls on categories of foreign borrowing (such as those imposed historically by the Reserve Bank of India on the amount and terms of overseas borrowing by sectors like real estate); taxes, dividends to foreign lenders, and the regulation of industrial sectors in borrowing countries into which foreign capital is flowing. It discussed the credit risk of borrowing countries—including the consistency of government policies on tax and capital controls, the ability to provide a stable legal environment with clear jurisdictional rules, including the ability to obtain arbitration under contractual agreements, without challenge by local courts.
Furthermore, it explored the development finance policies, including— the development of further co-lending with private sector sources by development finance institutions, and policies for offsetting the pro-cyclical nature of lending to higher-risk borrowers or countries.
D. The Next Frontier for Sustainable Finance in the G20: Thinking Ahead to India’s 2023 Presidency
The adoption of sustainable finance is a priority area for India at the G20. In the Third G20 Finance Ministers and Central Bank Governors Meeting in July 2021, India’s Finance Minister underlined the need for aligning recovery strategies with climate action and the importance of ‘timely fulfilment of international commitments on climate finance and technology transfer’.
In 2021, the Government of India along with the United Kingdom announced the Green Growth Equity Fund (GGEF)— investing GBP 120 million of seed capital each through India’s National Investment and Infrastructure Fund (NIIF). Thus, India-UK collaboration at the G20 will be key in furthering the shared commitment to the development of the environment and climate risk management in the financial sector, whilst mobilising mainstream finance towards the transition to a sustainable economy.
For this purpose, ORF and the Grantham Research Institute (GRI) engaged in a meaningful discussion on ways to strengthen India’s G20 Presidency for mobilising and unlocking global commercial and development capital toward serving sustainable objectives in emerging economies. The meeting was co-hosted by Mihir Sharma of ORF and Nick Robins, Professor, Sustainable Finance, Grantham Research Institute.
The Indian Delegation, Grantham Research Institute experts, and FCDO Officials at the London School of Economics campus
The discussion explored areas such as innovative financial mechanisms and instruments; the standardisation of global standards and frameworks; possible ways to align domestic and regional carbon pricing; and the impact of monetary & fiscal policies. It discussed the role of Multilateral Development Banks and the need to scale up their lending by a factor of 3 in the next 5-7 years. It also explored the scope of the Glasgow Financial Alliance for Net Zero, which aims to realign the private sector business models with net-zero ambitions and assess its implications on mainstream private finance and capital flows between international borders.
Furthermore, the meeting discussed the importance of improving domestic capacities in the form of building a bankable pipeline of shovel-ready projects. It emphasised the need to enhance the “country platform approach” in order to increase the private capital flows to developing and emerging economies. The meeting stressed the need to design appropriate green financial plumbing needs, including taxonomies, creating asset classes and addressing counterproductive regulations.
III. Members of the Delegation
The delegation comprised the following Indian dignitaries and thought leaders:
- Dr Ila Patnaik, Professor, The National Institute of Public Finance and Policy; Former Principal Economic Advisor to the Government of India
- Mr Akhilesh Tilotia, Principal, Strategic Initiatives and Policy Advisory, National Investment and Infrastructure Fund
- Ms Puja Mehra, independent policy analyst and author of ‘The Lost Decade (2009-18): How India’s Growth Story Devolved into Growth Without a Story’
- Ms Shikha Bhasin, Senior Programme Lead, The Council on Energy, Environment and Water
- Ms Neha Kumar, Programme Manager, Climate Bonds Initiative, India
- Dr Mansi Kedia, Fellow, Indian Council for Research on International Economic Relations
- Mr Siddharth Singh, Lead India Analyst and Coordinator, The International Energy Agency
- Mr Mihir Sharma, Director, Director Centre for the Economy and Growth, Observer Research Foundation
- Dr Renita D'Souza, Fellow, Observer Research Foundation
- Ms Mannat Jaspal, Associate Fellow, Observer Research Foundation
- Ms Shruti Jain, Junior Fellow, Observer Research Foundation
The delegation was a reflection of India’s diverse set of policy experts with significant variation in age, gender, experience and affiliations—and thus could offer different perspectives on India’s G20 priorities.
This event report has been written by Shruti Jain
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