Prime Minister Manmohan Singh walks into the summit meeting of the world’s 20 most powerful economies in the Baltic port city of St. Petersburg on Thursday nursing a severely debilitated economy and a soiled reputation at home, hoping to join leaders of other emerging economies now in intensive care, in the hope of resuscitation.
But the word going around ahead of talks in this historic city and hometown of Russian strongman Vladimir Putin, is that the summit will only end up nursing bruised egos of the world’s two most powerful leaders in a historic clash of civilisations. Russia, desperate to resurrect its faded superpower glory, is pitted in dangerous muscle-flexing against the world’s sole superpower, the United States, now riding a miraculous recovery after five years of crippling slowdown.
US President Barack Obama has already nixed a one-on-one with Mr Putin ahead of Thursday’s pow-wow of the big and not-so-big chieftains of the global order, over Russia’s asylum to US spy contractor Edward Snowden, and its support for the Syrian regime. The US leader rejecting an exclusive meeting with the head of the host nation is tantamount to a major diplomatic snub.
To that end, observers believe the G-20 summit may well end up as a G-2 showdown, leaving the remaining 18 members to contemplate the world’s future from the sidelines.
For the record, the last G-20 summit at Cannes, France, at the height of the Eurozone crisis almost two years ago, ended up as a show of one. China hogged the limelight as European leaders bent over backwards to humour then Chinese strongman Hu Jintao in the hope of a giant financial bailout. But that was then. Two years ago, China, with its immense foreign exchange reserves powered by a dynamic growth engine, was seen as the last hope in a sinking world order. It’s a different story today.
The US, powered by a massive revival of its energy resources, is back on its feet, even as Russia’s gas-fuelled economic growth faces a downturn, and a possible collapse due to uncompetitive pricing of fuel. China, the world’s second biggest economy, has been slowing down too since May after years of logic-defying growth. Its new leader, Xi Jinping, arrives in St. Petersburg riding the curiosity factor.
In this seesaw of swinging global fortunes, India, much like other emerging giants, hopes to raise the voice of reason amid the cold war vibes of two recalcitrant leaders, Mr Putin and Mr Obama, with diametrically opposite views on how to manage the world.
For now, it doesn’t look like Dr Singh, who recently said in the Rajya Sabha that G-20 leaders are all ears to his advice, may have much of a chance of being heard. That’s because the emphasis in the Indian camp is still on blaming the West for its economic misfortunes, even when critics at home, including outgoing RBI governor D. Subbarao, have bamed policy paralysis in the government and supply side bottlenecks for bringing the economy to its knees.
In his customary pre-summit statement released before leaving New Delhi, Dr Singh called for an orderly retreat from the “unconventional monetary policy” that would result in collateral damage to developing economies.
What this essentially means, hinted India’s economic affairs secretary Arvind Mayaram, on board the PM’s aircraft, is that the US and Japan must calibrate their pump priming plans to save precious dollars from fleeing emerging markets.
Why India never raised the issue of “unconventional monetary policies” at previous summits, when the US Fed’s three successive pump-priming programmes pushed hot money into emerging markets, including India, remains an enigma.
The reason it is saying so now is because the rupee has depreciated over 20 per cent since May, after the Fed first signalled that it would taper its $85 billion-a-month third quantitative easing (QE3) plan, and Japan hinted it would inflate its economy while pumping in fresh cash.
This is good enough reason for India, and other major emerging economies like Brazil, Russia, China and South Africa (that together constitute Brics), to meet informally for a separate brainstorming ahead of the formal summit inaugural. Having been equally mauled by the flight of dollars, they all plan to discuss a common bailout strategy. How much common sense will prevail at the discussion is anybody’s guess.
At the 2011 Cannes summit, China stood alone from the rest of the gang to bask in the European sunshine. Earlier this year, at the Brics summit in Durban, China pushed hard to woo South Africa with huge investment sops, while leaving “BRI” out in the cold. Since then, while questions have been raised about the China growth story, India has been increasingly giving the sinking feeling to investors, no matter what assurances emanate from the finance ministry in New Delhi, and despite the basket of measures announced by new RBI governor Raghuram Rajan in Mumbai even as Dr Singh landed here.
The World Economic Forum has pushed India below Brazil and South Africa in competitiveness ranking, and global rating agency Standard & Porr has seriously warned of a downgrade to junk status.
No wonder then, India seems eager to commit the gang of five (Brics) into the $100 billion currency swap arrangement they have been talking for some time now. Planning Commission boss Montek Singh Ahluwalia, the PM’s “sherpa” at G-20, explains that a currency swap doesn’t amount to rupee trade. He said it goes somewhat like this: “Basically, different countries agree to make a certain amount of money available. When they make that money available, then each country can draw on that pool. And if a country needs to draw, then the other countries, in effect, make the money available in the proportion that they have committed to the pool.”
In common parlance, that’s as good as a chit fund among nations. Whether there’s scope for a scam in it — is anybody’s guess!