India ready to embrace its moment

As India steps into its first-ever G20 presidency later this year, its voice and leadership could leave a mark on the world for years to come

Seventy-five years after Independence, India is a proud member of the league of leading nations. Its rapidly-growing and technologically-advancing economy is raising living standards and creating opportunities for hundreds of millions of people. In 2021, India contributed 10 per cent of global growth on purchasing power parity basis. What happens here affects not just its 1.4 billion citizens, but the region and the rest of the world.

As India steps into its first-ever G20 presidency later this year during particularly challenging times, its voice and leadership will resonate across the globe and could leave a mark for years to come.

The immediate challenge facing countries around the world is to cope with darkening economic prospects. Two years of the pandemic and multiple shocks, exacerbated by economic and geopolitical fragmentation, are weighing heavily on economies—and on people. People are being squeezed by high inflation, especially by rising food and energy prices. Policymakers are facing tight budget constraints and increasing costs of debt just as the need to support vulnerable people is growing. In many low- and middle-income countries, the combination of supply disruptions, climate shocks and soaring prices is seriously undermining food security, presenting a grave threat to the well-being of people and the survival of those hardest hit. The World Food Programme estimates that 345 million people worldwide are now in or at high risk of acute food insecurity.

Just as our common challenges — such as climate change and the digital revolution — demand more global collaboration, fragmentation is getting the upper hand. In this critical moment, India can help bridge differences and strengthen the global rules-based system that has come under strain in recent years.

Illustration: Binay Sinha

India and the world have benefited tremendously from the multilateral system. Over the past three decades, the forces of integration — the flow of capital, goods, services, and technology across borders — have transformed our economies. They have spread new ideas, boosted productivity, tripled the size of the global economy, and lifted 1.3 billion people out of extreme poverty.

India’s leadership to preserve and extend these gains will be critical. We have seen the country in action during our collective fight against the Covid-19 pandemic. India not only administered more than two billion doses domestically, it also served as the vaccine manufacturing hub of the world.

Leadership of this kind will be vital as the world’s economy strives to overcome inflation, economic slowdown, and the risk of debt distress in a growing number of countries. India has taken an active role in helping its less fortunate neighbours, especially Sri Lanka. It has also actively contributed to the ongoing negotiations to restructure Chad’s, Ethiopia’s, and Zambia’s debt under the G20 Common Framework. During its G20 presidency it can advance the much-needed debt resolution efforts to benefit more countries in or near debt distress.

And, as one of the countries most severely affected, it can help humanity confront the existential threat of climate change. The devastating effects—from heatwaves and drying rivers, to rising sea levels and deadly floods—are being felt across the globe. The impact on the most vulnerable countries is especially severe, given that many lack the resources to adapt. And with sectors most vulnerable to climate change—agriculture, forestry, and fishing—we can expect disrupted weather patterns to cause further food insecurity and drive millions of people out of their homes.

To address the climate crisis, we must reduce carbon emissions, especially by accelerating the energy transition away from fossil fuels. India is showing terrific leadership on renewables, the fastest growing source of domestic primary energy production in the country. And it has been a vocal proponent of more financing and technology transfer from advanced economies to the developing world. Mobilising private finance for mitigation is crucially important — but it requires the economic incentive that a robust and predictable carbon price can provide, and concerted efforts to reduce real and perceived risks for private investments in emerging markets and developing economies. Global cooperation is essential to advance these efforts, and the forthcoming G20 presidency places India in the driver’s seat to do so.  

Another essential ingredient of a modern and resilient global economy is digital technology. This is an area in which India has developed extraordinary capacity and, again, where the world can benefit from India’s leadership. Underpinned by India Stack — a unique model of digital identity, payment, and data governance system — India is revolutionising access to finance, catalysing its entrepreneurial spirit, and creating a bustling start-up culture that is becoming an inspiration for others.

Importantly, digitalisation is also strengthening India’s welfare system, with the most vulnerable people receiving payments directly into their bank accounts rather than going through a myriad of intermediaries. This system has the potential to transform India’s economy over the next decade by expanding financial and social inclusion, and by building a more inclusive economy from the bottom up. In a world where many countries’ public coffers are running low after two-plus years of the pandemic and then war, and governments need to find ways to do more to support the vulnerable with less fiscal space, the global community can benefit greatly from India’s experiences and expertise with targeted digital payment mechanisms.

Last but not least, the rapid development of public and private digital money—central bank digital currencies and cryptocurrency—demand cooperation and proper regulation to protect financial stability and the ability of countries to carry out monetary policy. India has shown resolve domestically and is among the leading voices for global cooperation in this area. 

I am excited about my visit to India—it is a chance to witness a country on the move, as well as to learn about the government’s domestic and international priorities. I will bring back what I learn, so my colleagues can provide meaningful support to India’s crucial role, for a bright future of its people and for a better world. 

The writer is the managing director of the International Monetary Fund