Formation of G20

Why in news?

G20 Heads of State and Government Summit is to be held in New Delhi.

What is G20?

The G20 countries together account for 85% of the global GDP, over 75% of global trade, and about 2/3^rd of the world population.

• It is an international forum that brings together the world's leading industrialised and emerging economies.
• Launch- The G20 was established in 1999 after the Asian financial crisis as a regular forum for Finance Ministers and Central Bank Governors.
• Aim- To study, review, and promote high level discussion of policy issues pertaining to the promotion of international financial stability
• Member- It comprises of 19 countries (Canada, France, Germany, Italy, Japan, UK, US, Russia, Australia, Canada, Saudi Arabia, India, South Africa, Turkey, Argentina, Brazil, Mexico, China and Indonesia) and European Union.

• Division-The members are divided into 5 groups, consisting of a maximum of four states for choosing the President.
  • Group 1: Australia, Canada, United States, Saudi Arabia.
  • Group 2: India, Russia, South Africa, Turkey.
  • Group 3: Argentina, Brazil, Mexico.
  • Group 4: France, Germany, Italy, United Kingdom.
  • Group 5: China, Indonesia, Japan, South Korea.
• The group does not have permanent secretariat.
• Every year, the host country chooses other guests.
• Presidency- The President is chosen by a rotation system amongst the member countries.
• The Presidency is responsible for bringing together the G20 agenda, organising its workings and hosting summits.
• India holds the Presidency of the G20 from 1 December 2022 to 30 November 2023.
• Troika- It comprises of the past, present, and future presidents.
• Troika 2023 includes Indonesia, India, and Brazil.
• Permanent guest- Spain always participates in the G20 summits.

How did G20 evolve?

• G7 group- It was set up in 1975, aftermath the twin exchange rate and oil crises of the early 1970s.
• Finance Ministers and Central Bank Governors of the G7 meet annually to discuss important economic issues and challenges.
• Asian financial crisis- In 1997, the Asian financial crisis ripped through some of the fastest-growing economies in East Asia.
• It soon spread to Latin America, another hub of rapidly developing Global South nations.
• G22 group- It was set up in 1998 as a G20’s earliest iteration due to Asian financial crisis. It was initially conceived as a one-time crisis-response meeting.
• G33 group- In early 1999, two more meetings were convened including 33 members (G33) to discuss reforms of the global economy and the international financial system.
• Ad-hoc nature of the groups- The dissatisfaction with the ad hoc nature of the G22 and G33 processes, led to the eventual formation of the G20 in late 1999.
• G20 group communique- It was issued by finance ministers of the G8 (Russia was added in 1997 and removed in 2014) on 1999.
• Informal dialogue- It proposes to establish a new mechanism for informal dialogue among systemically significant economies in Berlin.
• Creation of G20 leaders’ summit- In 2008, the world saw perhaps the greatest economic crisis to hit since the Great Depression (1929-39).
• France, which held the EU presidency at the time, backed by the UK, argued for an emergency summit meeting to address the crisis.
• First summit- The ‘Summit on Financial Markets and the World Economy’ was convened in Washington DC in 2008.
• Annual summits have been held ever since.

How does the G20 function?

• Working channels- There are 2working channels of G20.
  • Finance Track - It covers meetings between finance ministers and central bank presidents.
  • Sherpa Track – It covers non-financial issues, such as political commitment, the fight against corruption, development, gender equality, trade and energy. (Sherpas are personal emissaries of the Leaders.)
• Affinity group- Civil societies participate in the G20 through affinity groups to enrich submit.
• Summit- The G20 heads of government or heads of state have annually met at summits.
• The group also hosts separate meetings of finance ministers and central bank governors.
• Global Governance Group (3G)- It was formed by Singapore, an informal grouping of 28 non-G20 countries.
• It includes several microstates and many third world countries to collectively channel their views into the G20 process.

What is the need for G20?

• New geopolitical order- The emergence of the G20 in the international order arose from a combination of chance and necessity.
• It is partly the product of improvisation, which is a logical consequence of the socioeconomic evolution of the world.
• Voice of Global South- Communism become a thing of the past in 1990s and vibrant economies emerged in the Global South.
• There was a need for reform in world institutions that had hitherto been dominated by nations from the Global North.
• Lack of world institutions- UN and the International Monetary Fund (IMF) had not managed to overcome the North-South divide in their mode of deliberation.
• Initial response- From the standpoint of the world order, for large countries that were both rich and poor, such as China, India and Brazil, the North-South divide was no longer as clear. Hence, G20 offered an initial response to the need for reform.
• Recognition of G7- It emerged in the context of a growing recognition among Global North nations that emerging economies in the Global South were not adequately represented in global economic discussion and governance.

The 18^th G20 Summit in New Delhi will be a culmination of all the G20 processes and meetings held throughout the year. A G20 Leaders’ Declaration will be adopted at the conclusion of the G20 Summit.

References

1. Indian Express- How was G20 created
2. G20- About G20 theme