From Austerity to Growth
- Now that the financial crisis is steadily declining, the G-20 nations are planning to shift focus from continuing with austerity measures to reduce expenditures, to promoting growth instead. They include the top economies of the world, and this plan was discussed in their meeting at Sydney.
- The governors of Central Bank and Finance ministers have decided to target growth, and their goal is to add more than $2 trillion to the global economy over the next 5 years. Their next meeting is scheduled for November, where the political leaders and members will have to outline what changes they will be implementing to achieve the target.
- It is not an easy task to identify the reforms, and implement them in a synchronized way across the countries. Categorizing of advanced economies along with developing economies will not give a proper measurement, because to the diversities of each sub group or countries. On the other hand, many of the EU nations are still struggling to come to terms with their financial climb-down.
- IMF has highlighted another important development. During the early stages post recovery, India and China and few other developing countries were the leaders of global growth, but now this position has reversed again, with the developed economies led by the U.S emerging at the first positions.
- New policies although realistic yet ambitious have been proposed by the joint G-20, in order to give a 2% boost to the collective GDP in the next 5years, above what is expected with the current policies. This is the first time that they are talking about numerical benchmarks and figures in terms of these fiscal adjustments and future growth, because they have always shied away from doing so in the past.
- India is very apprehensive about the currently depleting U.S. Federal reserve, and the consequences that it could lead to. If that factor is to be considered with the joint G20 plan, then the financial conditions of each country will also need to be calibrated continuously. Also India wants them to consider the IMF quota system reform, where more importance is to be given to the developing countries.
- G-20 had lost its relevancy when countries started operating on their own to handle the recession. Now with about 85% of the world economy joining it (both developing and industrial nations) it has started regaining its importance.
- IMF Reforms