Relevance: GS-2: Important International Institutions, agencies and fora - their Structure, Mandate.
Key Phrases: Cornwall Consensus, 48th meeting, Russia-Ukraine War, G6, G8; minimum Corporate tax Rate, Build Back Better for the world project;
Context
- The 48th G7 Summit is scheduled is being held in Germany (Schloss Elmau, Bavaria) from 26-28 June.
- Although not part of the G7, India has been an invitee to the past few
summits.
- Invitees for this meeting are:
- India
- Senegal
- Indonesia
- Argentina
- South Africa
- Ukraine
- Invitees for this meeting are:
Key Highlights
What are G-7 countries?
- G-7 is an intergovernmental organisation that consists of 7 major
industrialised economies.
- US
- UK
- France
- Germany
- Canada
- Italy
- Japan
- EU is a non-enumerated member.
- Its members are the world's largest IMF advanced economies and wealthiest liberal democracies.
- It was formed in 1975 as G6 with France, West Germany, the US, Japan and Italy
- In 1976, Canada joined the grouping.
- In 1998, Russia was invited to join as a core member of the group. With this, G-7 became G-8.
- In 2014, Crimea was annexed by Russia. As a repercussion, the West decided to expel Russia from the grouping. The G8 again became G7.
What is the G-7 meeting?
- Once every year, the leaders of the G-7 countries meet to deliberate on common issues like the economy, security, governance and energy security with a special focus on economic issues.
- The annual G-7 summit is attended by each member's head of government.
- The member country holding the G-7 presidency is responsible for organizing and hosting the year's summit.
- Generally, every country hosts the summit once every seven years.
Importance of G-7 meetings
- Represents view of the major economies
- As of 2020, the collective group
- accounts for over 50% of global net wealth.
- 32% to 46% of global GDP.
- 10% of the world's population.
- As of 2020, the collective group
- Has started some important initiatives to strengthen Global
Governance and Global Economy
- Cornwall Consensus demands government intervention to address acute and chronic issues for improving global economic conditions.
- Minimum Corporate tax Rate was decided to be 15%.
- Build Back Better for the world project for sustainable infrastructure financing.
- Pledge to reach the net-zero emission target by 2050.
What is Cornwall Consensus?
- It reflects the views of G-7 Countries discussed at Cornwall Summit in England in June 2021.
- The “Cornwall Consensus” advocates for public-private partnerships, public investment, proactive state-led governance in domestic markets, and intergovernmental cooperation among the leading democracies of the G-7 and their friends and allies.
What is Global Minimum Corporate Tax?
- A global corporate minimum tax is a standard minimum rate of tax on corporate income adopted by individual jurisdictions pursuant to an international agreement. Proponents are keen to see it adopted as it would serve to discourage MNCs from making foreign investment decisions on the basis of low tax rates and from shifting profits from high-tax to lower-tax jurisdictions regardless of where the profits are earned.
What is Build Back Better World (B3W)
- It is an intended economic initiative by the USA and was part of the Group of Seven (G7)Summit in June 2021.
- Its design aims to provide an alternative to China's Belt and Road Initiative (BRI) for the infrastructure development of low- and middle-income countries.
- Led by the United States, the initiative seeks address the $40 trillion worth of infrastructure needed by developing countries by 2035. The initiative aims to catalyze funding for quality infrastructure from the private sector and will encourage private-sector investments that support "climate, health and health security, digital technology, and gender equity and equality"
Challenges
- Russia-Ukraine War
- India hasn’t fully cooperated with the West in condemning Russia.
- In this meeting, the west will try to change India’s stance against Russia.
- The relationship between State and non-state actors has become clear
- Unilateral Sanctions against Russia by the west were a part of geostrategic equations.
- But, a similar boycott by private companies has shown that there is no difference between state and non-state actors.
- Non-state actors usually obey the diktats of the state.
- Usage of global institutions/initiatives to secure ideological
superiority
- Institutions like SWIFT are used by the west to sanction the nations who chose to be ideologically different from the west in the name of human rights protection.
- Using invitation to G-7 meetings as a diplomatic leverage
- It is speculated that India will have to change its stance against Russia due to a diplomatic push from the west.
- The grouping will demand a larger security footprint from India. They will profit from this by selling arms, aircraft, and technologies. This would be as compensation for increased oil imports from Russia.
Way Forward
- India should diversify its dependence on equipment from the west and strive for achieving Self-reliance.
- India should work along with BRICS to develop alternatives to the
SWIFT system so that it is better prepared to handle contingencies in
case of future sanctions.
- BRICS’ Contingent Reserve System is an alternative to IMF.
- BRICS’ New Development Bank is an alternative to WB.
- India’s soft power and decisive support for rules-based order are in
agreement with the philosophy of the west. This should be reiterated from
time to time through sustained actions.
- And hence, the west sees India as an ally against Chinese hegemony.
- Increased G2G (government-to-government) engagements, C2C (company-to-company) deals and P2P (people to people) conversations have ensured that India remains important to all the stakeholders from the G7 countries.
Conclusion
- India must engage with G-7 for changing its orientation of the ‘with-us-or-against-us’ and offer a mature alternative. India will be representing the voice of non-white, non-west Asians. This will bolster India's candidacy as a permanent member of the UNSC.
Source: ORF
Mains Question:
Q. What is Cornwall Consensus? Mention some contributions of G7 in strengthening global governance. What challenges does India face vis-a-vis the G7 meeting? Suggest a suitable way forward.
