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31 Jul 2019
GS Paper 2
Polity & Governance
Discuss the role that global forums like G-20 can play in tackling the global economic downturn that has been caused by events like Trade war, America first policy etc. (250 words)
Approach
- Briefly explain the current status of the global economy.
- Explain the role of global forums and institutions in tackling the downturn.
- Give a way forward to overcome the situation and prevent any future crisis.
Introduction
Global economy has slowed to its lowest pace in three years. International trade and investment have been weaker than expected as per World Bank’s June 2019 Global Economic Prospects: Heightened Tensions, Subdued Investment reports. The world economy is expected to grow at 2.6% down by 0.3 ppt from January 2019.
Body
The global economy faces a number of complex challenges emerging from current events like rising protectionism, technological changes, and lower levels of trust in the core institutions threatening to fragment the international order that has governed the global economy.
There is a need to strengthen the role of global forums like the G20, and reform institutions such as the International Monetary Fund (IMF), the World Bank and the WTO.
Role of global forums in tackling global economic downturn:
- They provide a platform for bilateral and multilateral meetings to reduce tensions among the developed and developing countries and decide on a common pathway to limit the vulnerabilities.
- For Ex: JAI (Japan-America-India), RIC (Russia-India-China) meetings at the G20 Osaka Summit 2019, which tries to address conflicting interests of various groupings on one platform.
- They guide and drive international policy frameworks. For ex: India has made a strong case for adoption of the concept of ‘significant economic presence’ for taxing global digital companies at the 14th G20 summit held in Osaka, Japan.
- Events like WEF Davos Summit 2019 give an opportunity for multiple stakeholders like politicians, academicians, businessmen and other civil society groups to raise their concerns about events like Brexit or climate change.
- Forums like the G20 help in reshaping governance of global finance- as done by developing strict rules on the ‘too big to fail’ problem, increasing the lending capacity of the IMF and collecting richer information on the shadow banking system.
- Platforms like WTO provide voice to the lower income countries in the form of ‘consensus based voting’ and help address the structural problems of global economic governance. The platforms provide opportunity for greater economic cooperation and resolving issues like deflating export prices, stagnating industrial productivity and unemployment in the developing world.
Conclusion
Thus, there is a need for a ‘new multilateralism’, one that is dedicated to improving the lives of all the world’s citizens and ensures that the economic benefits of globalization and technology are shared much more broadly. This can prevent future crises by developing capabilities to respond effectively.
