G 20 Finance Track and Public Goods

G 20 Finance Track and Public Goods

Subject: Economy

Section: External Sector

Context:

Finance minister Nirmala Sitharaman on Friday impressed upon the World Trade Organisation (WTO) to permit India to ship out grains from its official granaries to help nations that are facing a food crisis.

Details:

• At a seminar on ‘Strengthening global collaboration for tackling food insecurity’ on the sidelines of the third meeting of G20 finance ministers and central bank governors in Bali, she also stressed that food, fuel and fertiliser are “global public goods” and ensuring access of these products to developing countries is critical.
  • The world is going to celebrate 2023 as the international year of millets and given that India is a major millet-producing country, it can make valuable contributions to global food security.
• Ministers also exchanged thoughts on important issues like–G20 Finance track and global economic outlook.

Concept:

G 20 Finance Track:

• 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 work of G20 is divided into two tracks:
  • The Sherpa track focuses on broader issues such as political engagement, anti-corruption, development, energy, etc.
  • The finance track comprises all meetings with G20 finance ministers and central bank governors and their deputies.
    • The focus of the issues discussed in this stream is economics and finance, such as: fiscal, monetary and real policies, infrastructure investment, financial regulation, financial inclusion, and international taxation.
    • G20 decisions may not be legally binding, but they do have a strong political influence and can provide impetus for reforms on the national and multinational level.
    • The Finance Track is structured into six separate working groups, dedicated to sustainable and inclusive growth, international financial architecture, infrastructure, sustainable finance, financial inclusion and Africa.

• The Framework Working Group (FWG) monitors the evolution of the global economic outlook, while coordinating policies
• The International Financial Architecture (IFA) Working Group works to enhance stability and cohesion of the international financial system.
• The Infrastructure Working Group (IWG) advises on policies to improve preparation, financing and management of quality infrastructure investments.
• Global Partnership for Financial Inclusion was created to advance financial inclusion globally as a means of increasing well-being and achieving sustainable and inclusive growth.
• Sustainable Finance Working Group aims to mobilize sustainable finance as a way of ensuring global growth and stability and promoting the transitions towards greener, more resilient and inclusive societies and economies
• The Africa Advisory Group (AAG) is responsible, since 2017, for leading the G20 Compact with Africa, with the aim of improving the environment for private investment in African countries and fostering growth and sustainable development.

Public goods:

• In every economy, some goods are provided by the government to the entire people. Such goods are called public goods. 
• Specifically, public good is the one that is provided to the society as a whole and consumption by one individual doesn’t reduce its availability or doesn’t exclude others from consuming it.
• Two important features for public goods-
  • non rivalry (doesn’t reduce availability for A if B consumes it) and
  • non-excludability (no one is excluded from consumption).
• Examples for public goods are national defense, public parks, street lights, and other basic societal goods.
• The expense for providing public goods are met by the government out of taxes. This means that an individual (with the ability to pay taxes) who avoids or evades taxes enjoys public goods and he becomes a ‘free rider’.
• Free rider problem says that a rational person will not contribute to the provision of public good because he does not need to contribute to the benefit of it.
• If a commodity is provided free to the public by the government then the opportunity cost is transferred from the consumers of the product to the tax-paying public.