India is approaching the G20 Summit of heads of government in this French Riviera town with trepidation, if not full-blown anxiety, against the backdrop of a rapidly deteriorating Europe and its possible adverse impact on the global economy, one which may eventually drag non-EU countries into making huge sacrifices.
A new crisis seems to be unfolding in the Continent with nation states making up the European Union increasingly staring at the prospect of sovereign defaults and large European banks that have lent to them going under. The focus of Friday’s summit is expected to centre exclusively on bailing out Europe, coming as it does in the wake of the Greek government’s surprise decision to opt for a referendum on the austerity being imposed upon it by the EU as part of a bailout deal. A rejection of the plan is expected to force bigger regional economies — Italy, Spain, and even France — into the pit. In this debate on what to do next about Europe’s future, there seems little room for dialogue with India, though plenty of headroom is reportedly being created for private tête-a-têtes with the Chinese leadership.
Flaunting India’s new-found economic confidence or muscle-flexing vis-a-vis China is not on New Delhi’s agenda here. To the extent that much of the present problem is very local in nature, impacting the lives of only about 500 million citizens, India’s role in problem-solving is expected to be minimal. On the face of it, there can only be enough room for exchanging pleasantries. To that end, the Indian delegation, led by PM Manmohan Singh, should be content to jot down notes to take back home for future policy references. However, India’s worries lie elsewhere: the potential havoc that a severely mauled Europe can unleash on the world’s seven billion people, among them a billion Indians. The significance of that is not lost on India’s policymakers.
India is attending the Cannes Summit with three major concerns. One, if last week’s proposed bailout of Greece fails, eventually sinking Europe, it’s adverse economic consequences will visit India sooner than later. Two, if the European Central Bank is forced to pump-prime the economy, boosting consumption demand from its forced push out of depression, excess liquidity could drive up commodity prices further, making inflation uncontrollable for a long time to come, what with the last booster shots following the 2008 meltdown creating high global inflationary pressures, a situation from which India is still to extricate itself. Three, if funding dries up for Europe and the IMF is forced to finance much of the eventual bailout, most developing economies would be pre-empted from accessing much of the IMF’s cash.