G-20 Summit

G20 or the group of 20 is a group of countries that include 19 countries and the European Union. It was formed in 1999 with a point of view of including the major emerging economies along with the developed countries in the important discussions about the global economy as they were not a part earlier. The members of G20 are Argentina, Australia, Brazil, Canada, China, European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, Republic of Korea, Turkey, United Kingdom, and United States of America

G20 Summit 2011- Cannes

The 6^th G20 summit was held in 3-4 November, 2011 in Cannes. The main aim of this meet was to discuss the issue of the Euro zone downturn which was affecting the entire global economy along with some other issues.

Agenda

·         The meltdown of the European Union and the Global economic crisis.

·        Volatility in the commodity markets and their impact on the food prices. The rising food inflation in the developing economies.

·        Tax evasion and reforms on strengthening the role of International Monetary Fund (IMF).

·        Need for inclusive growth and infrastructure development as well as job creation in the developing economies.

·        Regulation of shadow banking.

Agreements made at the Summit

·        The G20 countries agreed that there is a need for creating jobs and ensuring financial stability and inclusion in the developing economies and decided to work on it.

·        It was decided to move towards market determined exchange rate systems to avoid exchange tare misalignments and competitive devaluation of currencies.

·        They committed to support the IMF in putting forward the new Precautionary and Liquidity Line (PLL) to provide on a case by case basis increased and more flexible short-term liquidity to countries with strong policies and fundamentals facing exogenous shocks.

·        Members decided to develop the oversight and regulation of shadow banking where India stressed that the sharing of Bank’s past data would help in the investigation of earlier cases of tax evasion.

·        Italian Prime Minister Silvio Berlusconi agreed to open Italy’s accounting books to the quarterly audit of the IMF staff to ensure that Italy is indeed fulfilling its promises to European partners and that his government is both serious about and capable of tackling its burgeoning debt levels.

·        The members decided to stick with their medium-term fiscal sustainability plans and strategies for financial markets regulatory reforms to provide more stable economic growth.

However, the Group of 20 failed to reach over a consensus on giving more power to the IMF to help distressed countries as Euro zone was the major concern. There was a lack of economic cooperation seen at Cannes despite such strong promises made. The individual members were lacking effort, and collective resolution was diluted.

Whether the Group of 20 will be able to implement the decisions made, properly, and will it be successful in reviving the global economy is yet to be seen.

By Aakriti Sharma

FDI IN RETAIL:THE HYPE AND THE TRUTH

As per the current regulatory regime in India, Foreign retail trading (except under single-brand product retailing — FDI up to 51 per cent) is prohibited in India. Simply put, products sold by a retailer to the general public should only be of a ‘single-brand’.

India, a place where even today 95% of the retail sector is unorganised and the remaining organised part is driven by few major Indian players like Reliance, Big Bazaar, More, Shoppers Stop, Subhiksha and Spencers who are still struggling to earn profits. So the government is trying to open the gates for foreign players in multi-brand retail so that the economic and social conditions of the country can be improved to some extent. But due to various uncertainties in the benefits claimed by the government, the billion dollar decision is facing much opposition from various people across India.

Now the big question arises: “Will small retailers go out of business?” This question partially got answered when big Indian players jumped into the market providing almost every eatable product under one roof. That time also small retailers protested a lot against the stores but no major impact was seen on their businesses as the growth rate of unorganised sector continued to hold itself at 15% per year and ironically on the other hand the growth rate of the organised retail sector went down from 27% to 15% during the time span of 2005 to 2009.

Now the next major concerns are for the farmers. But it is seen that retailers like Reliance Fresh have setup small pickup points near the villages enabling farmers to save their transportation cost of bringing the crops to the mandis. Farmers are being given tips and techniques for reducing the wastages which makes the process even more beneficial for both retailers and farmers.

Government argument is in favour stating that this will bring huge investments in the retail sector and employment opportunities in agro-processing, sorting, marketing, logistics management and front-end retail. Foreign retail majors will ensure supply chain efficiencies and less food wastages by creating cold storages.

There has been impressive growth in retail and wholesale trade after China approved 100% FDI in retail. Thailand has experienced tremendous growth in the agro-processing industry. In Indonesia, even after several years of emergence of supermarkets, 90% of fresh food and 70% of all food is still controlled by traditional retailers.

While the opposition says that FDI will bring few big giants like Wal-Mart, Seven-Eleven, Tesco, Kroger, Carrefour and they will ensure predatory pricing to create monopoly/oligopoly. This can result in essentials, including food supplies, being controlled by foreign organizations and loss of jobs as well.

Now, there are many questions that are still unanswered and also unpredictable. But this is for sure that if the whole system is regulated properly, FDI or NO FDI will reap good results for all as “knife in the hands of surgeon is good but in the hands of murderer is disastrous”!!

-By Akshay Jain

India and Bangladesh sign a pact to end their 40-year border demarcation dispute.

No country is an island. Every nation depends on another for support. India is no exception. And so is Bangladesh. India and Bangladesh even have close relationship because Bangladesh was once a part of India called East-Pakistan that got divided later into an independent nation in 1971.

Because of porous India-Bangladesh border and other reasons such as the absence of paper work, access to good markets, high duties in official channels, very less scope of lesser time to reach the destination for perishable goods, shortage of warehouse facilities etc. led to perpetual illegal and informal trading practices between India and Bangladesh. Issue of balance of payments also arose due to the illegal migrants remitting their earnings in a foreign land through informal channels. The magnanimity of informal trade coincides with formal trade. Formal trade accounts for country’s GDP but informal doesn’t.

Illegal goods included textiles, consumer goods (salt, sugar), drugs, intoxicants, narcotics, foreign and fake currencies, illegal arms, ammunition and a whole list of others including even cattle, women and children.

After 40 years, trying for almost 4 times to resolve the border demarcation issue, it finally got settled on 6 September 2011 during the visit of our Prime Minister to Bangladesh where the two, Dr. Manmohan Singh and Sheikh Hasina (Prime minister of Bangladesh) signed a Teesta treaty where the enclave people can either continue residing or move to a country of their choice. But this resulted in a 10,000 acres net loss of land for India. But for keeping up the bilateral relations intact, India took a step forward. As part of this treaty, India even announced 24 hour access to Bangladesh into Tin Bigha corridor.

There were many initiatives taken up as a result of the series of agreements made in this treaty. The most important of all being the signing of Coordinated Border Management Plan on July 30, 2011.

This decision has helped formulate cooperative border management practices in order to deal with the rampant illegal activities near the border effectively. The initiatives taken will help build the bilateral relationship further unless these initial steps are continued and kept in good spirits.

Trade and commerce will increase manifold and there will be a flow of goods and people across the countries on a large scale. In order to increase trade and commerce across the border, India and Bangladesh should co-operate to keep the border secure and in a way that enhances trade efficiency.

Informal trade is the major factor that is to be targeted with great precision. Also lack of effective management, political corruption among administrators and other leaders in the bordering districts are a major stumbling block which has to be seriously addressed.

This treaty is a very big step towards improving the economic conditions of both the nations. With an optimistic outlook, the leaders on both sides should try filling the loop holes in the trading practices so that there is a well-rounded growth of both the economies.

By Nanditha Chepuri