11 Oct 2019: The Hindu Editorial Analysis
1) On IMF’s slowdown warning: Going down together
- The IMF - International Monetary Fund has some words of advice for global leaders on how to resuscitate the faltering global economy.
- On Tuesday, its new managing director Kristalina Georgieva singled out India, along with Brazil, as witnessing a “pronounced” growth slowdown as global growth experiences a “synchronised” downswing.
- The IMF expects growth to slow down in nearly 90% of the world this year, in contrast to two years ago when nearly 75% of the world witnessed accelerated growth. In fact, global growth is expected to hit its lowest rate since the beginning of the current decade.
- In July, the IMF cut its FY 2020 growth forecast for the Indian economy by 30 basis points to 7%. It would not be a surprise if, given the further deterioration in growth since then, the IMF cuts its India forecast once again.
- Ms. Georgieva’s maiden speech had the usual elements where slowing growth was blamed on various factors including the trade war between the United States and China, which is expected to shave off 0.8% from global GDP by 2020.
- She made the right noises about how “everyone loses” in a trade war and how synchronised global policy action can help everyone, the world must heed from the warning.
- What the IMF chief did not get into during her speech, however, was the failure of even the prolonged period of extremely loose monetary policy to sustain global growth.
- The global economy has been helped by a whole decade of historically low interest rates, yet the recovery that ensued after the global financial crisis was the slowest in history and seems to be in trouble already.
- Even worse, this time around, as the global economy slows, interest rates are near or below zero in much of the developed world and corporations and governments are burdened with unsustainable amounts of debt.
- While she did warn about the risks posed by the sudden reversal of capital flows and high global debt, she still did not refrain from calling for more monetary and fiscal policy actions.
- From an Indian point of view, what is worth noting is the IMF chief’s emphasis on the need for structural reforms to boost growth, particularly in the emerging market economies.
- She cited the forthcoming “World Economic Outlook” report which estimates that the right structural reforms can double the speed at which emerging market economies such as India can catch up with the living standards of people in advanced countries by raising their productivity.
- The government at the centre, which came to power on the promise of delivering big-bang structural economic reforms, will do well to heed such advice.
2) On Modi-Xi second summit: A Chennai setting
- A unique relationship requires unique and imaginative ways to manage differences. It is for this reason that India and China, with a 3,380 km common boundary, thousands of years of a shared history, and half-a-century of boundary disputes and tensions has always needed unique mechanisms.
- The second “informal summit” between Prime Minister Narendra Modi and China’s President Xi Jinping that begins on Friday is one such way for the two countries to deal with the ebb and flow in ties.
- The leaders last held an informal summit in Wuhan, in the wake of the Doklam crisis, when the time they spent visibly improved the atmospherics around the relationship.
- In the months prior to and following the Wuhan summit, the two nations brought down tensions along the boundary, initiated a new dialogue on trade, which led to more market access and a small indent in the $53-billion trade deficit between them, and saw more international coordination including at the WTO, and on climate change and terrorism.
- Earlier this year, China joined UNSC members in a statement condemning the Pulwama attack and then in May reversed its decade-old position by allowing the UNSC listing of the Jaish e Mohammad chief, Masood Azhar.
- Since the August 5 decision by the government on Article 370 and the bifurcation of Jammu and Kashmir, and Ladakh, and the strong reaction from China, these positive steps seemed to have been stalled.
- If Beijing’s decision to raise the Indian government’s move at the UNSC was a clear break from the “Wuhan Spirit”, its subsequent statements including at the UN General Assembly have alienated New Delhi further.
- Optics closer to the summit have been more troublesome, and Mr. Xi’s invitation to the Pakistan Prime Minister Imran Khan to visit Beijing in the same week that Mr. Xi meets Mr. Modi is clearly a negative signal ahead of the Chennai summit.
- India’s decision to hold mountain combat exercises in Arunachal Pradesh just prior to the summit is another in the series of red flags raised, which had even cast a doubt over whether the summit would go ahead.
- As a result, Mr. Modi and Mr. Xi have their task cut out for them: in restoring some of the bonhomie from last year, while charting a course for ties ahead.
- In the immediate future, it is hoped that Mr. Xi will assuage India’s concerns on trade issues with a view to meeting the deadline for the ASEAN-led RCEP free trade agreement in November, and possibly direct special representatives on the boundary issue to speed up their talks.
- For the larger picture, it is important that they end the downslide in bilateral ties and set up more robust communication in order to address each other’s concerns in a timely manner.
- If the Wuhan summit focused on a reset between India and China, the Chennai summit will be successful if it ensures that there is no rollback in the relationship, a goal that will no doubt be aided by the Mamallapuram setting, which will remind the leaders of the ancient and traditional ties between the two countries based on trade, travel, and faith.