G20 leaders to discuss issues like development and rebalancing

Negotiators are working hard on the eve of the summit to bring out a joint communique that will have on board concerns of countries like India, whose delegation is headed by Prime Minister Manmohan Singh, for a consensus on long term issues like development and a "Mutual Assessment Process (MAP)" in which the need is felt for coordination on policy for example in fiscal stimulus being undertaken in some countries.

Apart from Singh, US President Barack Obama, British Prime Minister David Cameron, Canandian Prime Minister Stephen Harper, French President Nicolas Sarkozy and German Chancellor Angela Merkel will attend the summit to be chaired by South Korean President Lee Myung-Bak. The leaders will meet at a welcome reception this evening and will participate in the plenary sessions tomorrow.

India attaches significance to the Seoul Summit, which is the first meeting of G-20 in a non-G-8 country and that too in Asia in a country that has recently emerged as an industrialised country. US President Barack Obama's letter to G-20 leaders to stand against economic protectionism and Federal Reserve's decision to pump in USD 600 billion into the US economy seeking higher yields is expected to push up the value of the dollar against Washington's own complaints against China of undervaluing Yuan.

These issues have already generated so much heat in the discussions going on the eve of the Summit that some feel that the host South Korea's focus on development agenda could be derailed.

With serious trouble in its backyard, the US is trying hard to shore up its economy saying growth there can be good for others.  But countries like Germany are critical of the US dollar policy while China has strongly resisted US push for right valuing the Yuan that gives China advantage in global exports.

The theme of the current summit of the G-20, fifth since the one in Washington in 2008 at the height of the global financial crisis and the second this year, is 'Shared Growth Beyond Crisis' in which the leaders are expected to review the global economic situation, the status of the world recover as well as the progress of implementation regarding the past G-20 summit decisions.

In the light of this, leaders are expected to address issues like Global Economy and Framework for Strong, Sustainable and Balanced Growth, reforms of the International Financial Institution, Financial regulatory reforms, trade and protectionism, climate change and Development, which is a new issue as mandated by the last Toronto Summit.
India's focus in the joint communique is on two areas -- the Mutual Assessment Process (MAP) and the Development agenda. In the Toronto summit in June this year, there was a feeling that with the serious global crisis not any more there, there should be focus on long term development issues. Hosts South Korean has been keen to put development on the G-20 Summit.

Planning Commission Deputy Chairman Montek Singh Ahluwalia, India's sherpa, the chief negotiator at the G-20 summit, says that MAP is a process in which individual countries will make projections and the International Monetary Fund will take a loot at it and make its recommendations.

On the recommendations of the IMF, it is for the countries to take it or leave it. The countries will be divided into "advanced surplus", "advanced deficit", "emerging surplus" and "emerging deficit", in which India figures. It is not not for IMF to make rules, he said, adding it will take a long time for the G-20 to take a view on it.

On the currency war, Ahluwalia said it remains to be seen whether the US is able to persuade China on appreciating its Yuan and whether there is an agreement on rate coordination. "We are now now in a position where life is tough. It is not not the same situation (that existed) two years ago. It is not not easy to coordinate policies. G-20 is involved in a completely difficult task," he said. He felt ultimately the market should determine the exchange rate.

He felt that IMF should do multilateral coordination. "For the first time in the joint communique there may be a referfence market-led consultative growth and a framework for strong, sustainable and balanced growth. It is new but certainly professionally a country should be able to make a judgement of it."

Ahluwalia said the problem of a cap of four per cent on Current Account Deficit (CAD), suggested by the US, is not not a problem for India whose CAD now now projected at three per cent.

"We should be able to handle excessive inflows of capital into the country," he said, adding there was no no question of ceding sovereignty in taking decisions on such issues.

Citing the recent RBI decision to hike the interest rates by 0.25 per cent, he said the Governor does not not have to consult the G-20 countries before taking decisions. Each country takes decisions in its own interest, he said. On Prime Minister Singh's suggestion that the developed world should invest in infrastructure in developing countries, Ahluwalia said capital inflows can be managed if there is a proper plan to absorb it.

The sum and substance of all this, he said, was that one cannot run an interdependent global economy and still refuse to involve oneself in discussions.