Ahead of the meeting of G20 finance ministers and central bank governors in Bengaluru, the International Monetary Fund (IMF) reiterated that India’s strong performance remains a “bright spot” in an uncertain global economy, said that the country will contribute 15% to global growth, and added that it is “uniquely positioned to bring countries together”.
In a policy blog titled “Policy Priorities for G20: One Earth, One Family, One Future”, taking up from India’s theme for its presidency, IMF managing director Kristalina Georgieva noted that, in Bengaluru, the World Bank, IMF and India’s G20 presidency are convening a new Global Sovereign Debt Roundtable for its first in-person meeting. Describing India as a “global growth engine”, she hailed the country’s unified payment interface as an excellent example of “technology boosting financial inclusion”, and said India’s assessment of central bank digital currencies (CBDCs) can inform studies elsewhere.
She noted that while 2023 will be a challenging year, it could be a turning point with inflation declining and growth bottoming out. Alluding to IMF’s latest projections which suggest that global growth will slow to 2.9% this year and then rebound to 3.1% in 2024, she noted, “Look behind the headline numbers and we see emerging market and developing economies providing much of the momentum. We expect them to account for about four-fifths of global growth this year, with India alone expected to contribute more than 15%.”
According to IMF’s latest update, the Indian economy will expand at 6.1% in 2023-24 and 6.8% in 2024-25, the fastest for a major economy. The Indian government expects baseline growth in 2023-24 at 6.5%.
In a world facing multiple challenges and critical geopolitical tensions, Georgieva said that India’s leadership was “critical” and was captured in the G20 theme. She then outlined her vision of the three specific sub themes.
One family
Interpreting the theme of one family as solidarity and protection for the vulnerable, Georgieva wrote that growth is still subpar, price pressures are too high, and after three years of shocks, many economies and people are still hurting. “Notwithstanding some easing in food prices, a record 349 million people in 79 countries face acute food insecurity.”
She argued that fiscal measures must be temporary and “laser-focused on protecting those who are most in need”, bringing inflation back to target remains an “imperative”, and policymakers need to stay the course on monetary tightening. At the same time, Georgieva cautioned, “While the global tightening cycle is necessary to ensure price stability, policymakers must be mindful of adverse spillovers to emerging and developing economies – including through a stronger US dollar and capital outflows.”
On the debt crisis, Georgieva said that 15% of low-income countries were in debt distress, an additional 45% were at high risk of debt distress, and among emerging economies, about 25% were at high risk and facing “default-like” borrowing spreads. Suggesting that the G20 common framework’s ground rules needed to be clarified and processes made more efficient and effective, she announced the convening of the Global Sovereign Debt Roundtable. “This week in Bengaluru, we will meet in-person for the first time — and pave the way for creditors, both public and private, and debtor countries to work together, assess the existing shortcomings and best ways to tackle them.”
One earth
Interpreting one earth as “protecting our planet, our home”, the IMF MD noted the urgency of the climate crisis, the steps being taken to tackle it but also warned against protectionism – a theme that has become urgent as western economies race to provide subsidies to domestic industry to boost the green economy sectors.
While acknowledging that there had been progress as major economies realign their fiscal frameworks to accelerate the green transition, Georgieva warned that policies should stay focused on the transition rather than providing a “competitive advantage” to domestic firms.
“Green subsidies for early-stage technologies can be helpful…They must, however, be carefully designed to avoid wasteful spending or trade tensions, and to make sure that technology is shared with the developing world. In other words, we must not slide into protectionism. This would make it even more difficult for poorer countries to access new technologies and support the green transition.”
One future
Interpreting the one future sub-theme as prosperity for all, the Georgieva noted that how policymakers managed the potential of digital progress will be central to a fair and inclusive future. “Think of the revenue and compliance gains from digital tax administration; greater transparency through online procurement that helps fight corruption; and the accountability of digital public financial management systems that can strengthen the social contract.”
It was in this backdrop that she hailed India’s UPI, pointing out that, just last month, it had processed eight billion transactions and the system allowed 400 million people in rural areas to participate with legacy push-button phones. As member countries were actively evaluating the idea of CBDCs, she again turned to India’s “in-depth assessment” of CBDCs as having the potential to inform studies elsewhere.
India has ruled out currency status for private cryptocurrencies, but said it is open to discussing their status as an asset class, and endorsed the use of block chain technology (which is behind cryptocurrencies) . On Tuesday, India’s UPI and Singapore’s PayNow, announced that using the two systems, residents in the two countries can instantly transfer money to each other.
Georgieva also warned of the risks that came with financial technology, pointing to the recent collapse of some crypto exchanges. “That is why we need the right policies – for example, to strengthen financial regulation and develop global standards that can apply evenly across borders.”
But to achieve all of this, the IMF warned that countries needed to find common ground even as geopolitical tensions were rising and avoid zero sum policies.
