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How the G20 Summit impacts the world economy

India is hosting the latest, 18th G20 summit in New Delhi this year. The summit will see leaders of the world’s richest and most powerful countries meet to discuss a wide range of global issues.

g20 summit 2023

What is the G20 and why is it so important?

The G20, also known as the Group of Twenty, is currently a crucial player in the world’s economic and political landscape. Comprising 19 of the world’s largest economies and the European Union (EU), the G20 has become one of the biggest platforms for addressing international economic challenges and helping shape larger global economic policy.

Its members include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom, the United States and the European Union.

g20 summit 2023

The 19 countries that comprise the G20 command 85% of the global GDP, 75% of international trade, and three-fifths of the world population. According to the IMF, the five fastest-growing economies in 2022 are going to be Saudi Arabia, India, Indonesia, Argentina, and Turkey. Of these, Saudi Arabia and India lead by huge margins.

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Economic prowess of member nations

The collective economic clout of the member nations of the G20 makes their cooperation important on a global podium. Decisions made in the G20 significantly impact financial markets, trade, investment, and monetary policy on an international scale.

The G20’s most notable impact on financial markets came during the global financial crisis of 2008-2009. The G20 in November 2008, spearheaded a global response, helping prevent a deep and prolonged recession as a result of global market crashes.

Leaders in the G20 agreed on a series of measures, including fiscal stimulus packages worth $5 trillion and banking sector reforms, to stabilise the financial system and revive economic growth.

Discussions and key decisions

The G20 was formed in 1999, in the wake of the Asian financial crisis, to unite finance ministers and central bankers from twenty of the world’s largest established and emerging economies.

A decade later, at the height of the global economic crisis, the G20 was elevated to include heads of state and government. 

While it initially focused largely on broad macroeconomic policy, the forum had previously expanded its ambit of influence in Hangzhou, China, when U.S. President Barack Obama and Chinese President Xi Jinping formally announced their countries’ accession to the Paris Agreement.

Today, economic and financial coordination is still the most important part of each summit’s agenda. However, at the same time, issues such as the future of work, climate change, and global health have been gaining some steam as well. Ever since the financial crisis, these agendas have become more common.

The G20 has now pivoted to understanding and addressing acute economic issues that transcend crisis management.

The sidelines of G20 summits

The G20 is considered more flexible than other multilateral organisations since it has the potential to shake up rigid geopolitical ties and break the ice between countries with seemingly unaddressable issues. When heads of state meet, hence, issues that aren’t on the formal agenda also get discussed.

For instance in Hamburg, Germany, President Trump met President Putin for the first time and held multiple meetings that lasted several hours each. The following year, another bilateral meeting on the sidelines of the summit between Trump and Chinese President Xi Jinping made headlines.

The 2022 summit in Bali hosted the first in-person meeting between President Biden and Xi since the former was elected in 2020. Even though nothing tangible in the form of agreements came out of the meeting, it helped keep diplomatic communication lines open.

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How does the G20 compare to other multilateral organisations?

When compared to other international organisations, the G20 would seem to be the weakest. It has no formal mandate like the United Nations. It has no permanent staff or dedicated buildings like the World Bank.

The G20 doesn’t have a fund of its own like the International Monetary Fund either. It has no mandate to make countries comply with its decisions. 

So how has it become one of the most powerful collections of countries in the world?

The members of the G20 are very rich. With theoretically only 19 countries and the EU, but technically 43 countries in total – the G20 is a formidable force when it has to be. It has the power to single-handedly influence economic decisions and transform the global landscape one summit at a time.

Bodies like the IMF and the Organisation for Economic Cooperation and Development have close ties with the organisation and are well-integrated into the negotiation and deliberation process.

Partnerships with such deep-pocketed and influential organisations at the global scale is what makes the G20 so effective.

The 2023 Summit in New Delhi

The agenda this year

As President of the G20 in 2023, it is India’s turn to host the forum’s annual meeting this year. It’s scheduled to be held over two days – 9th and 10th of September. The agenda for the G20 this year is primarily focused on sustainable development.

Other focussed issues also include green development, women-led development, accelerated progress on the SDGs, climate finance, and digital public infrastructure among others. India’s slogan for the 2023 Summit is “One Earth, One Family, One Future”, inspired by the Sanskrit phrase “Vasudhaiva Kutumbakam”.

India wants to discuss measures to spread economic development between all countries, low-income or high. It will also try to steer the summit away from devolving into a shouting match about the Russo-Ukrainian War like it did last year in Indonesia.

Presidents Putin and Jinping will not be attending the summit. Prime Minister Modi, who will be representing India, would like the event to promote India as a major global power, especially as general elections in the country are fast approaching.

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The cost of the presidency

According to the budget for 2023-24, the Indian government has allocated almost ₹1000 cr for the G20 presidency. The government believes that this high figure will give India the financial resources to conduct a successful summit and give the country an opportunity to strengthen its role in the global economic order. 

While this figure is only one that’s specifically allocated to expenses in the summit itself, a lot more money has also been spent on preparing New Delhi for the guests’ arrival. Over ₹4,000 cr has also been spent in the lead up to the summit.

According to sources, this money has been borne by both the central and state governments collectively. Investments were made to upgrade general infrastructure around the city, including footpaths, roads, the airport, lighting, and security.

The G20 has always been a costly affair for all host countries. Canada, for instance, during its presidency in 2010, spent more than CAD 700 million on developments and the summit in Toronto.

Conclusion

With countries like the United States (with more than $21 trillion in GDP) and China (with more than $16 trillion in GDP) part of the G20, the organisation can certainly leverage large decisions that change the world paradigm for the better.

The G20, unlike the United Nations, is a purely economic organisation focused on sustainable development and growth.

With a healthy mix of both developed and developing countries at the table, the G20 can bypass political nuances and focus on what matters – economic stability.

While its importance is not apparent to the common man every single day, the larger decisions it takes in setting the global economy in the right course affect every single person on this planet directly or indirectly.

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Devansh Sinhal

I am passionate about stock investing and have a knack for simplifying complex market concepts. Providing readers with valuable insights and empowering them to make informed investment decisions is my jam.

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