This op-ed was first published in The Times – 29 August 2023
India hosts the G20 summit in Delhi on September 9 and 10. Rishi Sunak and President Biden will be among the world leaders attending.
There are so many global gatherings, it is sometimes easy to lose track of them, but this summit has the potential to stand out, notably because India is the host and it is occurring at an important juncture in global economic and political terms. From Britain’s perspective, it is another opportunity to strengthen bilateral ties ahead of a future trade deal.
Two conditions need to be in place for such summits to deliver immediate action: national priorities need to be aligned with global goals; and there needs to be a reason to act. This does not mean that such forums fail if they do not deliver instant results. They can be critical in moving the debate and policy agenda forward and can lead to subsequent action. Delhi could do the latter in terms of the green agenda, as the theme of India’s G20 presidency is One Earth, One Family, One Future.
Summits should be judged in the context of a shift in the balance of power. In economic terms, this is to the IndoPacific, stretching from India in the west to the United States and the Pacific Rim in the east. The scale of this shift is dramatic. Within 25 years India’s economy will be larger than that of the entire European Union.
In addition, there has been a geo-political shift in the wake of the Ukraine War to a G3 world compassing three groups: America and its allies; China and its partners; and a new group of non-aligned countries, with India as one of its lead members. This third group may grow in economic importance as there is a watering down of globalisation in favour of fragmentation. Companies are relocating to safer countries, with “on-shoring” and “friends-shoring”.
China is building its global network and India is keen to play a lead role. There is no better opportunity, then, for India to push for some positive outcomes.
In 2021 President Xi proposed a Global Development Initiative to widen China’s reach. Beijing hosts the next Belt Road summit this October. Critics see the Belt Road as financial colonialism as China extends loans and credit. Yet it retains strong support.
At last week’s Brics summit in South Africa, there was talk of creating a new common currency to challenge the dollar. This did not make it into that summit’s communiqué — and just as well, as it is a non-starter, not least because of the economic disparities between the various members. The dollar dominates globally. This is creating headwinds across the emerging world as higher US interest rates contribute to tighter global liquidity. China’s slowdown and weaker global trade are adding to difficulties.
When it comes to the green agenda, a key impediment is cost. In particular, many low and middle-income countries lack the money to act. In recent years western economies have felt unable to help fully. Can Delhi move us in the right direction to fill this financing gap?
As a counterweight to China, the US wants to strengthen the role of the International Monetary Fund and the World Bank, boosting the latter’s lending power. The dilemma is that it may need China’s support in achieving this.
America has highlighted the clean energy transition. One solution is for the G20 summit to push to increase the power of multilateral development banks, like the World Bank. They could then help to close the energy and financing gap faced by low and medium-income countries. Multilateral development banks are effective in raising public finance globally and allocating it to countries where private finance is lacking.
Another focus should be on deeper bilateral ties between India and Britain. India is set to be the fastest-growing big economy this year. However, while its likely 6.5 per cent growth sounds good, when you take into account its population growth it is effectively a growth recession: growing without living standards really rising.
India has displaced the UK as the world’s fifth largest economy, but its income per head is low, at 139th. Thirty years ago it had the same per capita income as China, which has now far surpassed it. While China’s population is ageing, India’s is still young and its growth potential huge. Often India has been let down by poor infrastructure and by protectionism, failing to open up its economy. That has to change if it is to prosper.
India needs to generate enough jobs. It initiated “Make in India” nine years ago for manufacturing jobs. Last year the IMF’s assessment said it had “a world-class public digital infrastructure” that was facilitating innovation, productivity and access to services.
There are many areas where Britain and India can deepen ties to the mutual benefit of each other. The UK can’t make many inroads in manufacturing, but it can in life sciences, services and finance. While Britain may wish to capitalise on the potential from India’s growing market, it needs to be cognisant of India’s desire to be a strategic business partner. It also can be open to even more inward investment from India than is the case now.
One area is education. The UK is a world leader in tertiary education and now we have more students here from India than any other country. Another is the financial sector. A central aspect of India delivering its potential growth will be to deepen and broaden its capital markets and thus remove barriers to international investment and competition. This creates a huge opportunity for the UK, given its expertise in insurance, business and financial services, and should be one of the areas we push in a future bilateral trade deal. There are many more.
The Delhi summit will be the latest sign of how the world economy is shifting and of how the UK needs to reposition itself in this changing environment.