Look at the photographs of Prime Minister Manmohan Singh when he is at a G20 summit. Look at him sitting in Parliament. The pictures tell all. The world wants India to do well, Dr Singh once famously said, our problems are at home. It is a thought that must have crossed his mind as he flew back from Seoul on Friday night. At the G20, his ideas and proposals were the toast of the summit. India comfortably occupied its favourite place at such summits — the middle ground — lecturing China on “exchange rate flexibility” and the United States on the special responsibilities of reserve currency countries. The prime minister’s proposals for dealing with global imbalances by getting long-term funds into infrastructure development in the developing world was a smart idea well received. As Dr Singh put it, “recycling surplus savings into investment in developing countries will not only address the immediate demand imbalance, it will also help to address developmental imbalances”. Looking at global media response to these sensible Indian proposals, it appears not enough was done to sell India’s ideas at the summit to a wider global audience. The Seoul summit has proved the G20 sceptics wrong. Those who see the summit as a waste of time and effort should ask the question whether any of the problems discussed at the G20 summit by all participants can at all be solved by the old G7 or G8 on their own. Indeed, can even a G9 with just China on board any longer manage the world economy? Hardly. By getting the G20 to widen its focus from crisis management to long-term development, Dr Singh has increased the summit’s relevance and this is a good thing. However, the fact remains that for most participants at the G20 summit, their biggest economic challenges, and solutions to these, lie at home.
Most leaders would, therefore, have enjoyed their convivial pow-wow at Seoul and would now be back where the real problems are. Prime Minister Singh would have spent the weekend thinking less about global imbalances and more about local ones — from reducing corruption in high places to sustaining non-inflationary economic growth. His hands may be tied by coalitional compulsions as far as reshuffling his ministerial council is concerned, but there is much his government can still do to sustain growth. The importance of keeping this agenda in focus was stressed once again last week by the latest data on industrial production. While one should not be misled into thinking there is a major slowdown of economic activity, the numbers should make economic authorities sit up and take note of both supply- and demand-side constraints on higher growth. The lower industrial growth numbers for September 2010 must be seen against the background of the fact that in April-September 2010 industrial output actually rose by 10.2 per cent compared to 6.3 per cent for the same period last year. But the deceleration, especially in electricity output, is a wake-up call for a government that continues to be preoccupied more with day-to-day politics than long-term economics. While India worried at Seoul about tapping global surpluses for financing infrastructure investment, India’s real challenge is not really one of getting more money, but putting that to better use. Governance reform, especially in the infrastructure sector, is the key challenge. If the prime minister can re-energise his government, and the government can revitalise the economy and ensure fiscally sustainable growth, India can handle more effectively most external challenges.