Context: G20 finance ministers and central bankers held talks on Saturday aimed at spurring global economic recovery from a coronavirus-triggered recession amid growing calls to widen debt relief for crisis-hit poor countries. The dignitaries pledged to “use all available policy tools to safeguard people’s lives, jobs and incomes” as the coronavirus pandemic continues to wreak havoc on the global economy. The grouping however failed to reach an agreement on the possibility of allocating fresh special drawing rights to member countries or reallocating SDRs from rich members to countries facing a liquidity crisis because of the covid-19 pandemic.
Key Points
G20 Action Plan:

• The importance and relevance of the G20 action plan was highlighted.
• It was endorsed in response to Covid-19 in April 2020.
• It has a list of collective commitments under the pillars of Health Response, Economic Response, Strong and Sustainable Recovery and International Financial Coordination, aimed at coordinating G20 efforts to fight the pandemic.

Significance of G20 Action Plan

• It covers the healthcare, economic and fiscal responses that G20 members have agreed to undertake.
• It includes measures to ensure a return to a strong and sustainable global economy, the provision of support to countries in need.
• It aims to protect lives, safeguard people's jobs and incomes, restore confidence, preserve financial stability, revive growth and recover stronger, minimize disruptions to global supply chains, provide help to all countries in need of assistance and coordinate on public health and financial measures.
• It has the utmost importance to provide bridges to households and businesses to ensure that COVID-19 do not cause long-term damage to domestic economies or global economy.
• It is also launched to provide, support to minimize the economic and social damage, restore global growth, maintain market stability and strengthen resilience by supporting jobs and household incomes.
• The G20 members will work closely together to promote and sustain a successful global economic recovery.

Implementation of G20 Action Plan

• Delivering a Comprehensive IMF Support Package and Using Available Tools From RFAs: Because of the outbreak for a temporary period, the access limit to the IMF emergency facilities is doubled and this measure is aimed to provide financial support to the countries on urgent balance-of-payments needs.
• Implementing Swiftly the Support Proposed by the World Bank and Regional Development Banks: Measures taken by the Multilateral Development Banks encouraged in the Communiqué and more than USD 200 billion dedicated to financing the emerging and low-income countries.
• Providing Debt Service Suspension for the Poorest Countries: G20 countries will support the time-bound suspension of debt service payments for the poorest countries that request forbearance.
• Ensuring Efficiency and Operational Coordination to Optimize the Use of Resources: All national and international organizations (IMF, World Bank and Regional Development Banks etc.) will report regularly regarding the fate of the funds.

India's Response:

• India emphasised the need to balance supply side and demand side measures in response to Covid-19.
• It also spoke about the procyclicality of credit rating downgrades by the rating agencies and its deterrent impact on policy options, particularly for Emerging Market Economy (EMEs).
• Procyclic ratings are stricter during an economic downturn than an expansion. As a result, firms receive overly pessimistic ratings in a recession, relative to during an expansion.
• International coordination required in addressing the spill-over effects of exit strategies related to covid-19 lockdowns.
• Spillover effect refers to the impact of unrelated events in one nation on the economies of other nations.
• G20 Finance Track deliverables: FMCBG discussed the developments on G20 Finance Track deliverables under the Saudi Arabian Presidency. India discussed two such deliverables:
• First, Enhancing access to opportunities for Women, Youth and Small Market Economies (SMEs) and a menu of policy options on access to opportunity.
• Second, International Taxation agenda and the intended deliverable of formulating a solution for addressing challenges related to digital taxation.
• India said that the consensus based solution should be simple, inclusive and based on a robust economic impact assessment.
• It is in line with the recent decision of the United States Trade Representative (USTR) to initiate an investigation into taxes adopted or under consideration by 10 nations, including India, on revenues of American digital service companies like Netflix, Airbnb etc.
• Digital taxation or Digital Services Taxes (DSTs) are the adopted taxes on revenues that certain companies generate from providing certain digital services. E.g. digital multinationals like Google, Amazon and Apple etc.
• In response to it the central government has stated that it will not extend the deadline for payment of equalisation levy by non-resident e-commerce players, even though a majority of them are yet to deposit the first installment of the tax.
• The equalization levy is aimed at taxing foreign companies which have a significant local client base in India but are billing them through their offshore units, effectively escaping the country’s tax system.

About G-20

• The G20 is an informal group of 19 countries and the European Union, with representatives of the International Monetary Fund and the World Bank.
• The G20 membership comprises a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, 80% of global investment and over 75% of global trade.
• Headquarter: The G20 operates as a forum and not as an organisation. Therefore, it does not have any permanent secretariat.

Origin

• 1997-1999 Asian Financial Crisis: This was a ministerial-level forum which emerged after G7 invited both developed and developing economies. The finance ministers and central bank governors began meeting in 1999.
• Amid the 2008 Financial Crisis the world saw the need for a new consensus-building at the highest political level. It was decided that the G20 leaders would begin meeting once annually.

Members

• The members of the G20 are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.
• One nation holds the chair every year, known as the 'G20 Presidency'. Saudia Arabia is holding the 2020 chair.
• The 2021 summit will be held in Italy.