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THE IMPACT OF G20 ON THE INDIAN ECONOMY

Aamna Raza
Roll Number: 22BA088
Intermediate Macroeconomics- I
B.A. (Hons.) Economics, Semester-3, Section-A
Shri Ram College of Commerce, University of Delhi
November 2023

ABSTRACT

The purpose of this research paper is to find whether active engagement in the G20 has
positively influenced the Indian economy, particularly in the realm of international trade, leading
to enhanced trade relations, economic growth, and improved global market positioning.

The G20, as a forum for international economic cooperation, plays a significant role in shaping
the trajectory of the Indian economy, particularly in the realm of international trade. We
hypothesize that the engagement of India in the G20 framework has both direct and indirect
effects on its economic performance, trade policies, and global market positioning. Specifically,
we anticipate that active participation in G20 initiatives and policy dialogues positively
influences India's trade relations, fosters economic growth, and enhances the country's resilience
in the face of global economic challenges.

Additionally, we posit that the G20 platform serves as a crucial arena for India to advocate its
economic interests, negotiate trade agreements, and contribute to the formulation of international
economic policies, thereby exerting a tangible impact on the overall economic landscape of the
nation.

KEYWORDS: G20 | International trade | Economy | Global | Market position | Cooperation

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Table of Contents

Serial Number Topic Page Number

1 Introduction 2

2 Methodology 3

3 Background 3

4 Findings 6

5 Result 8

6 Analysis 10

7 Conclusion 15

8 Bibliography 16

Introduction

The Group of Twenty (G20) is the premier forum for international economic cooperation. It
plays an important role in shaping and strengthening global architecture and governance on all
major international economic issues.

G20 comprises 19 countries (Argentina, Australia, Brazil, Canada, China, France, Germany,
India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa,
Türkiye, United Kingdom and the United States) and two regional bodies: the European Union
and the African Union (as of 2023). The G20 members represent around 85% of the global GDP,
over 75% of the global trade, and about two-thirds of the world population.

The G20 was founded in 1999 after the Asian financial crisis as a forum for Finance Ministers
and Central Bank Governors to discuss global economic and financial issues.

The G20 was upgraded to the level of Heads of State/Government in the wake of the global
economic and financial crisis of 2007, and, in 2009, was designated the “premier forum for
international economic cooperation”.
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The G20 Summit is held annually, under the leadership of a rotating Presidency. The G20
initially focused largely on broad macroeconomic issues, but it has since expanded its agenda to
include inter-alia trade, sustainable development, health, agriculture, energy, environment,
climate change, and anti-corruption.

The G20 Presidency is responsible for bringing together the G20 agenda in consultation with
other members and in response to developments in the global economy. India holds the
Presidency of the G20 from 1 December 2022 to 30 November 2023.

In addition to the regular International Organisations (UN, IMF, WB, WHO, WTO, ILO, FSB
and OECD) and Chairs of Regional Organisations (AU, AUDA-NEPAD and ASEAN), India, as
G20 Presidency, invited ISA, CDRI and ADB as Guest IOs.

Methodology

This study employed a qualitative content analysis methodology focusing on news reports,
encompassing a wide spectrum of reputable sources spanning five years. The selection criteria
prioritized articles, analyses, and editorials from established international and Indian media
outlets, governmental publications, and economic forums discussing the G20 and India's trade
dynamics. Thematic analysis was conducted to discern patterns, trends, and shifts in India's
economic policies, trade negotiations, and market positioning within the G20 framework. By
scrutinizing these sources, the research aimed to extract nuanced insights into the impact of G20
deliberations on the Indian economy, particularly concerning international trade dynamics, policy
alignments, and strategic implications.

Background

How G20 Works

The G20 Presidency steers the G20 agenda for one year and hosts the Summit. The G20 consists
of two parallel tracks: the Finance Track and the Sherpa Track. Finance Ministers and Central
Bank Governors lead the Finance Track while Sherpas lead the Sherpa Track after Finance
Track.

The G20 process from the Sherpa side is coordinated by the Sherpas of member countries, who
are personal emissaries of the Leaders. Finance Track is led by Finance Ministers and Central
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Bank Governors of the member countries. Within the two tracks, there are thematically oriented
working groups in which representatives from the relevant ministries of the members as well as
from invited/guest countries and various international organisations participate.

The Finance Track is mainly led by the Ministry of Finance. These working groups meet
regularly throughout the term of each Presidency. The Sherpas oversee negotiations over the
course of the year, discussing agenda items for the Summit and coordinating the substantive
work of the G20.

In addition, there are Engagement Groups which bring together civil societies, parliamentarians,
think tanks, women, youth, labour, businesses and researchers of the G20 countries.
The Group does not have a permanent secretariat. The Presidency is supported by the Troika –
previous, current and incoming Presidency. During India’s Presidency, the troika will comprise
Indonesia, India and Brazil, respectively.

G20 Summit, New Delhi

The 18th G20 Summit was successfully conducted at Bharat Mandapam in New Delhi during
9-10 September 2023. It was a culmination of all the G20 processes and meetings held
throughout the year among ministers, senior officials, and civil societies. The G20 Leaders’
Declaration was adopted at the G20 New Delhi Leaders’ Summit, stating their commitment
towards the priorities discussed and agreed upon, during the respective ministerial and working
group meetings.

India's G20 Priorities

1) Green Development, Climate Finance & LiFE

The opportunity to lead G20 comes at a time of compounding existential threat, with the
COVID-19 pandemic having exposed the fragilities of our systems under the cascading
impacts of climate change. In this regard, climate change is a key priority for India’s
presidential Presidency, with a particular focus towards not only climate finance and
technology, but also ensuring just energy transitions for developing nations across the
world.

Understanding that the issue of climate change cuts across industry, society, and sectors,
India offers the world LiFE (Lifestyle for Environment), a behaviour-based movement
that draws from our nation's rich, ancient sustainable traditions to nudge consumers, and
in-turn markets, to adopt environmentally-conscious practices. This ties closely with
India’s G20 theme: 'Vasudhaiva Kutumbakam' or 'One Earth. One Family. One Future.
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2) Accelerated, Inclusive & Resilient Growth

Accelerated, resilient and inclusive growth is a cornerstone for sustainable development.

During its G20 Presidency, India aims to focus on areas that have the potential to bring
structural transformation. This includes an ambition to accelerate the integration of
MSMEs in global trade, bring in the spirit of trade for growth, promote labour rights and
secure labour welfare, address the global skills gap, and build inclusive agricultural value
chains and food systems etc.

3) Accelerating progress on SDGs

India's G20 Presidency collides with the crucial midpoint of the 2030 Agenda. As such,
India acknowledges the detrimental impact of COVID-19, which changed the current
decade of action into a decade of recovery. In line with this perspective, India wants to
focus on recommitting G20's efforts to achieving the targets laid out in the 2030 Agenda
for Sustainable Development.

4) Technological Transformation & Digital Public Infrastructure

As G20 Presidency, India can foreground its belief in a human-centric approach to

technology, and facilitate greater knowledge-sharing in priority areas like digital public
infrastructure, financial inclusion, and tech-enabled development in sectors ranging from
agriculture to education

5) Multilateral Institutions for the 21st Century

India's G20 priority will be to continue pressing for reformed multilateralism that creates
a more accountable, inclusive just, equitable and representative multipolar international
system that is fit for addressing the challenges in the 21st century.

6) Women-led development

India hopes to use the G20 forum to highlight inclusive growth and development, with
women empowerment and representation being at the core of India's G20 deliberations.
This includes a focus on bringing women to the fore, and in leading positions, in order to
boost socio-economic development and achievement of SDGs.
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Findings

The G20 summit hosted in New Delhi witnessed the unveiling of a transformative multinational
rail and shipping project, designed to interlink India with the Middle East and Europe. Positioned
as a strategic challenge to China's economic influence in the region, this corridor envisions
collaboration among India, Saudi Arabia, the United Arab Emirates, Jordan, Israel, and the
European Union. Beyond enhancing trade, the project aims to facilitate the delivery of energy
resources and advance digital connectivity.

The announcement of this corridor during the G20 summit reflects a geopolitical manoeuvre,
with the United States, led by President Joe Biden, actively endorsing the initiative. Biden,
emphasizing the project's significance, envisions it as a pivotal move towards stabilizing,
enriching, and integrating the Middle East. Jake Sullivan, Biden's national security adviser,
asserts that the project aligns with a broader vision of comprehensive investments, rooted in
effective American leadership and a collaborative approach with partner nations.

Context and Motivation

The proposed infrastructure upgrade aims to catalyze economic growth, foster regional cohesion
in the Middle East, and transform the region into an economic hub, moving away from its
historical associations with challenges, conflicts, and crises. The strategic intent becomes
apparent as the United States, led by Biden, seeks to counter China's expansive Belt and Road
infrastructure initiative. This paradigm shift positions Washington as an alternative partner and
investor for developing countries within the G20 consortium.

Significance and Impact

President Biden emphasizes the magnitude of this initiative, describing it as a substantial

advancement with far-reaching implications. The pact, according to Biden, unlocks opportunities
spanning clean energy, electricity, and community connectivity. Prime Minister of India,
Narendra Modi, underscores the endeavour's significance, characterizing it as an investment in
connectivity that not only amplifies mutual trade but also cultivates mutual trust among
participating nations.

International Response and Implications

Officials heralded the deal as a "game-changer" and a historic economic corridor bridging India,
the Middle East, and Europe. The absence of China during the announcement underscores the
initiative's deliberate positioning as a counterweight to China's Belt and Road infrastructure
initiative, signalling a geopolitical recalibration.
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Regional Vision and Collaborative Commitments

Crown Prince Mohammed bin Salman of Saudi Arabia, a key participant in this initiative,
underscored the project's comprehensive nature. He outlined its components, which include
pipelines for electricity, hydrogen, and railways, emphasizing its contribution to international
energy security. This articulation aligns with a broader commitment to regional development and
collaborative ventures among the participating nations.

The unveiling of this multinational rail and shipping project during the G20 summit in New
Delhi signifies a strategic shift in global economic dynamics. Positioned as a challenge to
China's Belt and Road initiative, the project not only underscores the evolving geopolitical
landscape but also highlights the collaborative approach within the G20 framework. As nations
strive to establish alternative economic corridors and reshape regional connectivity, the
implications of this initiative extend beyond mere infrastructure development, becoming a
crucial geopolitical and economic benchmark in the evolving dynamics of international relations.

The deal will benefit low- and middle-income countries in the region, and enable a critical role
for the Middle East in global commerce, Jon Finer, the US deputy national security adviser, told
reporters at the bloc’s annual summit in New Delhi.

It aims to link Middle Eastern countries by railway and connect them to India by port, helping
the flow of energy and trade from the Gulf to Europe, US officials have said, by cutting shipping
times, costs and fuel use.

A memorandum of understanding for the deal was set to be signed by the European Union, India,
Saudi Arabia, the United Arab Emirates, the US and other G20 partners.

According to Radha Kumar, an independent analyst, this is a “wonderful initiative” that will
offer an alternative to China’s Belt and Road Initiative.

“China’s powers are increasing so rapidly that many countries feel the need to have alternatives,”
she told Al Jazeera from New Delhi.

But she added that the new project would not necessarily undermine China’s global
infrastructure project, which has its own independent existence.
“India was not part of the Belt and Road Initiative, so this initiative gives connectivity to India.”

The move came amid US efforts for a broader diplomatic deal in the Middle East that would
have Saudi Arabia recognise Israel.
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Result

U.S., SAUDI, INDIA JOIN HANDS FOR TRANSPORT CORRIDOR

Leaders of the United States, India and Saudi Arabia among others announced plans to set up rail
and port links between the Middle East and South Asia and eventually to Europe.

The Biden administration is seeking to counter China's Belt and Road push on global
infrastructure by pitching Washington as an alternative partner and investor for developing
countries at the G20 grouping.

However, there were no details about financing or a time frame for the project that involved
laying down railway lines in the Middle East and then connecting them to India by port.

INCREMENTAL PROGRESS ON CLIMATE CHANGE

The G20 leaders agreed to pursue tripling renewable energy capacity globally by 2030 and
accepted the need to phase down unabated coal power, but stopped short of setting major climate
goals.

The group did not provide any plan to amend existing policies and targets in order to achieve the
target of ramping up renewables. It also said $4 trillion a year would be needed to pay for a green
energy transition but did not lay out any pathway to it.

The deliberations of the G20 were being closely watched ahead of the COP28 U.N climate
summit in the United Arab Emirates later this year.

MODI BOOSTS STANDING AS INDIA'S BIG MOMENT ARRIVES

For Modi, the leadership of the G20 has been a year-long opportunity to showcase India as an
influential diplomatic and economic power, and drive investment and trade flows into the world's
most populous country.

It has also provided him a platform to boost his standing at home as he seeks a third term in
office in elections in the next several months. Modi's image has been on G20 billboards across
the capital and in the vast and swanky new conference venue. To his supporters, the successful
outcome of the summit showed India's big moment had arrived.

In an interview with CNBC-TV18, Karanraj Chaudri, Strategic Initiatives Advisor at UNDP;

Rahul Chhabra, former Secretary in the Ministry of External Affairs of the Government of India;
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and Nilaya Varma, Co-Founder & CEO of Primus Partners, deliberated on the achievements and
results stemming from India's G20 Presidency.

In an exclusive interview with CNBC-TV18, Karanraj Chaudri, Strategic Initiatives Advisor at

the United Nations Development Programme (UNDP); Rahul Chhabra, former Secretary in the
Ministry of External Affairs of the Government of India; and Nilaya Varma, Co-Founder & CEO
of Primus Partners, engaged in a comprehensive discussion on the outcomes and impact of
India's G20 Presidency.

Karanraj Chaudri initiated the conversation by highlighting that the world has reached the
midpoint of the Sustainable Development Goals (SDGs). Central to this concept is the transition
from an economy reliant on fossil fuels to one that embraces sustainable energy alternatives,
such as biofuels and hydrogen.

Delving into the groundbreaking infrastructure corridor agreement announced by Modi on

September 9th, Rahul Chhabra emphasised its potential to serve as a blueprint for similar
corridors if proven successful. This corridor, formally named the India-Middle East-Europe
Economic Corridor (IMEC), represents an unprecedented collaboration between India and the
United States, encompassing India, the UAE, Saudi Arabia, the European Union, France, Italy,
Germany, and the United States. It promises not only geopolitical significance but also economic
opportunities for India.

Nilaya Varma expanded on the significance of this agreement, underlining India's pivotal role in
its development and its potential to demonstrate a sustainable path forward to the world.
The G20 Summit, an annual gathering guided by a rotating Presidency, sees India in the role of
the presiding nation this year. Modi suggested organizing a virtual session in November to assess
the progress made on the discussed issues during the two-day summit, as India continues to
shoulder the responsibilities of the G20 Presidency until November 2023.
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Analysis

India will account for nearly 5% of G20 GDP in 2027, as it becomes the third largest and a $ 5
trillion economy. Its share had doubled to 3.9% in 2022 from the inception of G20 in 1999. The
share in G20 trade is also expected to rise and the country will account for over a third of the
G20 working population aged 15-49.

India still has a long way to go to have a significant share in the G20 economy, but its clout is
certainly growing. India will account for nearly 5% of G20 GDP in 2027, as it becomes the third
largest and a $ 5 trillion economy. Its share had doubled to 3.9% in 2022 from the inception of
G20 in 1999. The share in G20 trade is also expected to rise and the country will account for
over a third of the G20 working population aged 15-49.

India's pivotal presidency within the G20 framework signifies an unprecedented opportunity to
fortify trade alliances and attract investments from member nations. Projections indicating an
increased GDP share and amplified trade influence by 2027 emphasize India's burgeoning
economic significance within the G20 paradigm.

Presiding over the G20 provides India with a global stage to showcase achievements and
magnetize investments, particularly emphasizing infrastructure development. Prioritising free
trade agreements, modern infrastructure, and skilled manpower stands as a strategic manoeuvre
for India to leverage its trade potential to the fullest extent.

India's presidency in the G20 is seen as an opportunity for the country to strengthen trade ties
and attract investments from member nations, particularly in sectors like infrastructure. Experts
believe that the G20 plays a strategic role in global economic growth and prosperity, as its
members represent a significant portion of global GDP, trade, and population.

The G20 Presidency with India is helping New Delhi to strengthen trade ties with member
nations and provides an opportunity to attract investments from those countries in sectors like
infrastructure, experts say.

They said that the G20 holds a strategic role in securing future global economic growth and
prosperity, as its members represent about 85 per cent of the global GDP (Gross Domestic
Product), 75 per cent of global trade and two-thirds of the world's population.

Presiding over this multilateral forum is an opportunity for India as it can showcase its strength
and achievements for attracting investment and deepen its trade relations with these large
economies, the experts added.
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Fast-tracking negotiations for free trade agreements, ease of doing business, development of
modern infrastructure, skilled manpower, large population with growing income are some of the
positives which help India to enhance trade realisations with these member countries.

Trade experts suggested the government fast-track ongoing negotiations for a free trade
agreement (FTA) with countries like the UK and EU as it would help India in better market
access to these countries as well as facilitate investment.

However, they also asked not to use trade platforms to achieve climate aspirations as that could
harm progress in both trade and climate discussions.

The largest trade block of G20, the EU, will set in motion the carbon border adjustment
mechanism from October 1 this year, making exports expensive from countries like India.

"In the first eight months of 2023, the EU introduced five regulations on climate change and
trade. The G20 nations should not ignore this elephant in the room and discuss it before
individual countries rush to the World Trade Organisation (WTO). This may soon unravel world
trade," think tank Global Trade Research Initiative (GTRI) Co-Founder Ajay Srivastava said.

Shardul S Shroff, Executive Chairman, Shardul Amarchand Mangaldas & Co, said that India
should find common ground with G20 countries to emerge as a global norm setter for the digital
economy and use that global stature to boost IT and IT-enabled services exports.

India should position itself as the global norm-setter for various aspects of the digital economy,
such as data protection, international contracting, digital assets, and international taxation, as it
would help expand India's footprint in the global services exports market, Shroff said.

Gaurav Dani, Founding Partner, INDUSLAW, said that India has the largest growing
middle-income population offering a last consumer base for both goods and services and due to
this global firms will continue to invest in India.

Sharing similar views, Rumki Majumdar, Economist, Deloitte India, said that many
multinational firms are looking for alternate destinations for investment and diversifying supply
chains, and the G20 Presidency will help India attract many such companies.

Massive improvement in infrastructure, ease of doing business, skilled labour force and growing
market with a large middle-class consumer base are some of the key indicators that make India
one of the most attractive places to invest and import quality goods, Hi-Tech Group Chairman
Deep Kapuria said.
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Mumbai-based exporter and Chairman of Technocraft Industries Sharad Kumar Saraf said India's
trade with G20 countries will grow at an accelerated rate because of the comfort and confidence
created in the members due to the multiple events organised by India in different cities.

Among the G20 members, India holds the ninth position in terms of total trade (USD 1,662
billion) in goods and services in 2022. The EU (17,151 billion), China (USD 7,183 billion) and
USA (6,933 billion) hold the top three spots.

The share of G20 nations in India's merchandise export in 2022 stood at 64 per cent and in
imports at 52.4 per cent.

India's leading export destinations among G20 nations are the USA (USD 91 billion), the EU
(USD 87 billion), China (USD 17.5 billion), the UK (USD 14.4 billion), Turkey (USD 10.7
billion) and Saudi Arabia (USD 10 billion).

The country's suppliers include China (USD 118.5 billion), EU (USD 59.1 billion), Saudi Arabia
(USD 43.3 billion), USA (USD 38.4 billion), Russia (USD 34 billion), Australia (USD 19.2
billion), Korea (USD 18.9 billion), and Japan (USD 13.9 billion) during the last year.

Sector-wise, India's top exports to these member countries in 2022 included electronics and
machinery (USD 41.3 billion), petroleum products (USD 30 billion), cut and polished diamonds
and gold jewellery (USD 25.9 billion), organic chemicals (USD 20.5 billion), medicines (USD
16.4 billion), automobiles parts (USD 11.8 billion).

The main import items included electronics (USD 46.6 billion), machinery (USD 42.5 billion),
petroleum products (USD 40.6 billion), organic chemicals, APIs (USD 18.9 billion), rough
diamonds and gold (USD 17.6 billion), plastics raw materials (USD 13.0 billion), and iron and
steel (USD 12.8 billion).

In terms of foreign direct investments (FDI), the US is the biggest investor with USD 61.3 billion
or nine per cent share in India's FDI during April 2000-June 2023, when it was aggregated at
USD 645.4 billion.

It was followed by Japan with USD 40 billion or 6 per cent contribution; UK (USD 34.3 billion)
or 5 per cent share; Germany (USD 14.25 billion) or 2 per cent share, and France (USD 10.62
billion) or 1.64 per cent.

Modi believes that the financial viability of many countries is being threatened by unsustainable
debt. According to him, policymakers of the G20 leading economies should focus on helping the
world’s most vulnerable people.
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As countries deal with a slew of challenges in the aftermath of the pandemic, including
unsustainable debt, conflict, inflation and eroding trust in international financial institutions,
Modi urges fellow nations “to focus on the most vulnerable people in the world.”

The meetings touched on a wide range of issues including digital currencies and payments,
reform of institutions like the World Bank, climate change and financial inclusion. At the G20
meeting, Modi added his voice to calls for the reform of global lenders such as the World Bank
to boost lending and widen its remit beyond tackling poverty, although this has raised concerns
that it could lose its top-notch credit rating.

India’s presidency comes as neighbouring South Asian countries – Sri Lanka, Bangladesh and
Pakistan – have been seeking bailouts from the International Monetary Fund (IMF) due to an
economic slowdown caused by the COVID-19 pandemic and the Ukraine conflict.

Last week, United Nations Secretary-General Antonio Guterres called on G20 countries to agree
on a $500bn annual stimulus for its sustainable development agenda that could “cushion the
impacts of current global crises on the Global South”.

The IMF said ahead of the meeting that about 15 per cent of low-income countries are in debt
distress and an additional 45 per cent are at high risk.
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CONCLUSION

The G20 summit held in New Delhi marked a significant milestone in India's pursuit of
economic prowess on the global stage. Through the unveiling of an ambitious connectivity
project linking India, the Middle East, and Europe, India showcased its intent to solidify its
position in international trade and infrastructure development. This initiative, positioned as a
challenge to China's Belt and Road Initiative, reflects India's strategic manoeuvring to enhance
trade, energy resources, and digital connectivity among participating nations.

India's presidency within the G20 framework provided a platform to exhibit its achievements and
attract investments, particularly in infrastructure development. The projections indicating an
increased GDP share and trade influence by 2027 underscore India's rising economic
significance within the G20 landscape.

Despite geopolitical complexities and varied perspectives among member nations, the G20
serves as a crucial avenue for India to fortify its economic foothold, expand trade alliances, and
leverage its economic potential. This analysis underscores India's active engagement in the G20,
emphasizing the significance of infrastructure, connectivity initiatives, and the cultivation of
robust trade relationships.

As India's economic clout grows within the G20, the nation stands poised to navigate global
economic dynamics, enhancing its role as a key player in international trade and fostering a more
integrated, prosperous global economy.
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BIBLIOGRAPHY

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What to expect as India assumes G20 presidency for 2023 | News | Al Jazeera

India’s Modi asks G20 finance heads to focus on ‘most vulnerable’ | Narendra Modi News | Al
Jazeera

G20 summit: Transport project to link India to Middle East, Europe unveiled | News | Al Jazeera

Key takeaways from the 2023 G20 summit in New Delhi | Reuters

G20 summit: G20 Presidency helping India deepen trade ties with member nations: Experts -
The Economic Times (indiatimes.com)

G20 Summit | Experts analyse outcomes and impact of India's G20 Presidency (cnbctv18.com)

India’s growing clout in G20, in three charts - The Economic Times (indiatimes.com)

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