New Delhi, Nov 13: Manmohan Singh the Indian Prime Minister on Thursday, Nov 13 leaves for Washington to address world leaders at the G-20 Summit amid the hope that he will be able to provide the global community insights and solutions into the ongoing global financial crisis since the Great Depression, given his proclivity and skills for economics and wide experience in shaping the destiny of India.
The focus of his strategy at the Summit would be on creating a global credible and stable financial institutional mechanism as a solution provider to a crisis, which has shattered economies all over the world and failed leading economists. It will also provide the first ever economist Prime Minister of India a golden opportunity to convince the world and his domestic constituency of his ability to catapult India into the status of a developed country and ensure that the process of infrastructure development, the key to future economic growth, is not hampered.
He and his close confidants have been working round the clock to address the problems relating to the global meltdown and their possible impact on India.
The Prime Minister is accompanied to the landmark event by Finance Minister P Chidambaram and Planning Commission Deputy Chairman Montek Singh Ahluwalia.
The theme of the Summmit is 'Financial Markets and World Economy'.
The G-20 is an informal forum that promotes discussions between industrial and emerging-market countries on issues relating to global economic stability. It aims to strengthen international financial architecture and provides opportunities for dialogue on national policies, international co-operation and global financial institutions. It, thus, aims to support growth and development across the world.
The G-20 was created as a response both to the financial crisis of the late 1990s and to a growing recognition that key emrerging-market countries were not adequately included in the core of global economic discussion.
The Group of 20 comprises 19 of the world's largest countries plus the European Union. Apart from India, the countries which are member of this Group are Argentina, Australia, Brazil, Canada, China, France, Germany, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States.
There is a strong feeling that the community of developing countries is suffering because of structural failure of the industrialised world. The developing countries, thus, are likely to express their concern about backtracking by Multinational Corporations, including Foreign Institutional Investors(FIIs), from their commitments to the less industrialised countries and demand a mechanism that could ensure that their developmental effort is not sabotaged by the actions of MNCs.
Given the very nature of the problem, it is unlikely that the industrialised world has a solution to it.
India, which has already launched itself on a multi- billion dollar programme relating to infrastructure development using the Public-Private Partnership model, will make out a case that the meltdown process will take its developmental effort back by many years with fears that developmental activity may come to a halt.
This stand of India is likely to find support among other
developing countries and these countries may ask for the opening up
of a new international window, which will fund infrastructure and
social sector projects.
Indications are that they may ask for the creation of a Regional Investment Bank which can facilitate development of lead sectors. As a pro-active step, the World Bank Group yesterday announced a substantial step-up in its lending operations to developing countries with additional commitments by the IBRD up to 100 billion dollars in the next three years as well as four new facilities for the crisis-hit private sector.
Another issue that is likely to crop up at the Summit is the vulnerability of developing countries to FII money and the threat they pose to the health of an economy.
The unprecedented economic crisis has compelled the world to call a meeting of the forum, where developing countries will be equal partners.
The global character of the industrialised countries has landed the United States and its allies, especially in Europe, in a financial mess. It has also made industrialised countries aware that any solution by developing countries to find answers which are purely domestically driven and shuts them off from the global economy can have a catastrophic impact on them.
In a sense, the G-20 meeting may witness a paradoxical situation where the strategy of the Corporate World, especially the FIIs and MNcs, would be contradictory to the position of the pioneers and spokesmen for the industrialised countries with regard to developing countries. The developed world would like to co-opt the developing world in an expansionary manner into the global economic system.
Stiff competition, clubbed with carrying out operations on thin profit margins, led to a spate of corporate failures and the present economic turmoil.
As a result, voices favouring a global regulatory mechanism which would provide guildelines for functioning of FIIs, thus ensuring that undue risks are not taken to propel growth and profitability are likely to be heard at the Summit.
Some economists favour a super regulatory type of body and a fund which can rescue corporates and economies in the event of such pitfalls.
The developed world is also likely to make suggestions for strengthening financial institutions in weaker countries, measures aimed at discouraging setting up of small banks, weak insurance companies and mutual funds.
In the Indian context, this would mean mega mergers in the banking industry as well as encouraging corporate mergers and buyouts.
The Indian delegation will, thus, have to do a difficult balancing act in the lead-up to the General Elections.
Given the receding popularity of the UPA government at home and the need to regain the confidence of the vote bank and the Congress, it is imperative for the Prime Minister to take the lead role in resolving the global crisis and minimising its fallout on the Indian economy.
The economic managers of the country are fully aware of the fact that this is a rare opportunity and they have to bring back the popularity of their party and restore national confidence, which has received a battering with a long spell of inflation, faltering industrial production and fears of a lower GDP growth then targeted.
Sources say they will spring up innovative but practical solutions to resolve the global downturn and enhance India's image of an emerging and forceful knowledge- based economy and society.