3rd G20 FMCBG Meeting | 20 Jul 2020
Why in News
Recently India has virtually participated in the 3rd G20 Finance Ministers and Central Bank Governors (FMCBG) meeting under the Presidency of Saudi Arabia.
- It discussed the global economic outlook amid evolving Covid-19 pandemic crisis along with other G20 finance track priorities for the year 2020.
- The First meeting was held in February 2020 at Riyadh, Saudi Arabia.
Key Points
- G20 Action Plan: The importance and relevance of the G20 action plan was highlighted.
- It was endorsed in response to Covid-19 in April 2020.
- It has a list of collective commitments under the pillars of Health Response, Economic Response, Strong and Sustainable Recovery and International Financial Coordination, aimed at coordinating G20 efforts to fight the pandemic.
- India's Response:
- India emphasised the need to balance supply side and demand side measures in response to Covid-19.
- It also spoke about the procyclicality of credit rating downgrades by the rating agencies and its deterrent impact on policy options, particularly for Emerging Market Economy (EMEs).
- Procyclic ratings are stricter during an economic downturn than an expansion. As a result, firms receive overly pessimistic ratings in a recession, relative to during an expansion.
- International coordination required in addressing the spill-over effects of exit strategies related to covid-19 lockdowns.
- Spillover effect refers to the impact of unrelated events in one nation on the economies of other nations.
- G20 Finance Track deliverables: FMCBG discussed the developments on G20 Finance Track deliverables under the Saudi Arabian Presidency. India discussed two such deliverables:
- First, Enhancing access to opportunities for Women, Youth and Small Market Economies (SMEs) and a menu of policy options on access to opportunity.
- Second, International Taxation agenda and the intended deliverable of formulating a solution for addressing challenges related to digital taxation.
- India said that the consensus based solution should be simple, inclusive and based on a robust economic impact assessment.
- It is in line with the recent decision of the United States Trade Representative (USTR) to initiate an investigation into taxes adopted or under consideration by 10 nations, including India, on revenues of American digital service companies like Netflix, Airbnb etc.
- Digital taxation or Digital Services Taxes (DSTs) are the adopted taxes on revenues that certain companies generate from providing certain digital services. E.g. digital multinationals like Google, Amazon and Apple etc.
- In response to it the central government has stated that it will not extend the deadline for payment of equalisation levy by non-resident e-commerce players, even though a majority of them are yet to deposit the first installment of the tax.
- The equalization levy is aimed at taxing foreign companies which have a significant local client base in India but are billing them through their offshore units, effectively escaping the country’s tax system.
G-20
- The G20 is an informal group of 19 countries and the European Union, with representatives of the International Monetary Fund and the World Bank.
- The G20 membership comprises a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, 80% of global investment and over 75% of global trade.
- Headquarter: The G20 operates as a forum and not as an organisation. Therefore, it does not have any permanent secretariat.
- Origin
- 1997-1999 Asian Financial Crisis: This was a ministerial-level forum which emerged after G7 invited both developed and developing economies. The finance ministers and central bank governors began meeting in 1999.
- Amid the 2008 Financial Crisis the world saw the need for a new consensus-building at the highest political level. It was decided that the G20 leaders would begin meeting once annually.
- Members
- The members of the G20 are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.
- One nation holds the chair every year, known as the 'G20 Presidency'. Saudia Arabia is holding the 2020 chair.
- The 2021 summit will be held in Italy.