India takes the lead in resolving the debt crisis of developing countries

• As it chairs the G20 Finance Minister and Central Bank Chiefs meeting near Bengaluru, it takes important decisions to shape a new economic landscape.
• PM Modi’s One Earth, One Family, and One Future make headway

India has taken on a robust leadership role among the G20 countries after it assumed the G20 presidency in Bali last November from Indonesia.

India was strong in its commitment to devising a relief formula for developing economies and debt-ridden countries such as Sri Lanka and other countries in Asia and Africa in the global political and economic landscape.

Meeting under the theme of "One Earth, One Family, and One Future", India has set new dimensions as the President of the G20 nations of emerging economies. India aims to focus on tackling the global challenges of climate change, public health, and economic recovery. It will strive to promote an equitable, inclusive, and sustainable form of globalization. India also seeks to achieve a balance between economic growth and environmental protection.

The Union Finance Minister of India, Nirmala Sitharaman, said towards the end of 2022 that India's ongoing presidency of the G-20 grouping is a unique opportunity to strengthen the country's role in the world economic order when countries across the globe are facing various challenges.

Presenting the budget for fiscal years 2023–24 in the Lok Sabha, Ms. Sitharaman said India is steering an ambitious, people-centric agenda to address global challenges and facilitate sustainable economic development.

"In these times of global challenges, the G-20 presidency gives us a unique opportunity to strengthen India's role in the world economic order," she said.

"With the theme of Vasudhaiva Kutumbakam (the world is one family), we are steering an ambitious, people-centric agenda to address global challenges and facilitate sustainable economic development," Ms. Sitharaman said.

At the G20 Foreign Ministers meeting, India's foremost concern was to put the brakes on any attempt to discuss additional sanctions against Russia. India, in other words, made the Foreign Ministers Forum a comfort zone for Russia by not agreeing to discuss the Russia-Ukraine conflict as far as sanctions are concerned.

India has been a long-time ally of Russia, and there is a deep-rooted political and economic partnership between the two countries. India does not want to jeopardize that relationship by placing any additional sanctions on the table as far as Russia is concerned, and that is why it sought to prevent any discussion of the matter.

On the sidelines of a G20 gathering in India, financial leaders of the Group of Seven (G7) nations also met on Feb. 23, the eve of the first anniversary of the invasion, to discuss measures against Russia, Japan's finance minister told Reuters news agency.

Indian officials said that though they discussed the economic impact of the conflict, India was reluctant to consider additional measures against Russia.

"India is not keen to discuss or back any additional sanctions on Russia during the G20," said one of the officials. "The existing sanctions on Russia have had a negative impact on the world." He emphasized.

Another official said sanctions were not a G20 issue. "The G20 is an economic forum for discussing growth issues."

On the first day of meetings to draft the G20 communique, officials struggled to find an acceptable word to describe the Russia-Ukraine conflict, delegates of at least seven countries present at the meetings said.

India made an attempt to reach a consensus on the words by calling it a "crisis" or a "challenge" instead of a "war," the officials said, but the discussions concluded without a decision.

These discussions were rolled over to the next day when U.S. Treasury Secretary Janet Yellen became part of the meeting. This shows that India is taking a diplomatic approach to the issue, trying to find common ground that would be acceptable to all parties involved. The inclusion of the U.S. Treasury Secretary indicates that they are also keen to solicit support from the U.S. to resolve the issue.

In an earlier statement, Indian Foreign Minister S. Jaishankar said the effects of war have been overwhelming for poorer countries due to the increased price of food and fuel.

India's close neighbours, such as Sri Lanka, Pakistan, and Bangladesh, have all sought loans from the International Monetary Fund in recent months to overcome economic difficulties mainly brought about by the pandemic and the war.

 However, Washington and its allies were planning to enforce sanctions and export controls that would target Russia's purchase of dual-use goods like refrigerators and microwaves to secure semiconductors needed for its military.

 The sanctions would also seek to do more to stem the trans-shipment of oil and other restricted goods through bordering countries. Washington will impose strictures on companies, financial institutions, and individuals still doing business with Russia.

 Indian Prime Minister Narendra Modi's government has not openly criticised Moscow for the invasion of Ukraine by Russia but instead called for dialogue and diplomacy to end the war. India has also increased its oil purchases from Russia, its biggest supplier of defence hardware.

 India's strong relationship with Russia has been a significant source of military and economic support. India's policy towards Russia is designed to maintain this relationship, even as other countries have adopted a more critical stance. Meanwhile, Indian External Affairs Minister Jaishankar told ANI this week that India's relationship with Russia had been "extraordinarily steady and it has been steady through all the turbulence in global politics".

The Feb. 22–25 meeting at the Nandi Hills summer retreat near Bengaluru is the first major event of India's G20 presidency, and it was to be followed by a March 1-2 meeting of foreign ministers in New Delhi.

 As global borrowing costs rise, India, whose neighbors Sri Lanka, Pakistan, and Bangladesh have all sought International Monetary Fund support in recent months, wants to put debt relief at the forefront of discussions at the finance talks.

It is drafting a proposal for G20 countries to help debtor nations badly hit by the economic impact of the pandemic and the Ukraine war. This proposal asks big lenders, including China, to take a large haircut on loans, Reuters reported. The G20 countries hope that by writing off a portion of the debt owed by these nations, they can help them get back on their feet again and reduce the risk of a debt crisis. The proposal also calls for lenders to extend the length of the loans and reduce the interest rate, allowing the debtors to more easily make payments.

 The G20 Finance Ministers and Central Bank Chiefs had this to say as part of their findings from the meeting.

We recognize the urgency of addressing debt vulnerabilities in low- and middle-income countries. Strengthening multilateral coordination by official bilateral and private creditors is needed to address the deteriorating debt situation and facilitate coordinated debt treatment for debt-distressed countries.

We stand by all the commitments made in the ‘‘Common Framework for Debt Treatments Beyond the Debt Service Suspension Initiative (DSSI''). Implementation of the common framework in a predictable, timely, orderly, and coordinated manner. We welcome the conclusion of debt treatment for Chad and call for a swift conclusion of the work on debt treatment for Zambia and Ethiopia.

We also look forward to the rapid formation of the official creditor committee for Ghana to work on the requested debt treatment. Further, we look forward to a swift resolution to Sri Lanka’s debt situation. We task the International Financial Architecture Working Group to develop a G20 note on the global debt landscape in a fair and comprehensive manner.