Joint action

It was natural that meeting in the context of the Eurozone debt crisis emanating from Greece and threatening to envelope larger economies, the G-20 summit in Mexico spent much of its attention on addressing the problem and containing it within limits. While resolving the crisis was the immediate concern of those countries who were directly affected by it, preventing the contagion from spreading was more important for others. While both are interrelated because of the growing integration of the world’s economies, prescriptions for solutions have differed according to their positions. But there was some meeting of minds on the strategies to be adopted because there is a realisation that collective efforts could have the best impact in the present circumstances. These efforts would involve the economically rising countries of the hitherto poor and the developing world too.

That was the logic and imperative behind India’s offer to contribute $10 billion to the IMF’s fund for bailing out Europe’s debt-ridden countries, which was part of a total pledge of $ 75 billion from the BRICS group. Till now these countries were recipients of aid but they are now in a position to intervene in crisis situations in the richer world. This is no act of charity either because their growth and welfare also depend on the health of the richer world. But the developing world is also entitled to expect returns and policy changes to suit their requirements. This found reflection in the agreement that the IMF quota reform should be speeded up from next year. The Indian proposal for quotas on the basis of GDP in terms of purchasing power parity would have to be seriously considered in future.

The emphasis in the summit declaration on economic growth as much as on the need for austerity measures in the debt-stricken countries also marks an acceptance of the emerging world’s needs. A blind adherence to the austerity principle could only harm growth prospects not only in stricken countries but elsewhere also. The inclusion of investment in infrastructure as a priority area in the declaration was a natural corollary of this. While the slow shift in attitudes and policies is a welcome sign, they will have to be translated into action. Safeguarding financial stability and preventing another global crisis, which the summit thought its main objective was, would depend on such action.