India and China have emerged as clear winners at this week’s G20 summit in Pittsburgh, after the White House announced the larger grouping would replace the G8 as the main decision-making body on monetary matters. Analysts say the move represents a shift in policy in Washington to recognise the important role played by emerging economies on the world stage.

Listen to an interview with Rajeev Kumar

Multipolar world
Rajeev Kumar, Director of the Indian Council for Research on International Economic Relations (ICRIER) told Radio Netherlands the US is moving to a more ‘multipolar’ world.

“It implies that the body that will coordinate on taking the world out of the crisis and coordinate its recovery will be a much larger grouping which will include the dynamic and larger emerging economies. This reflects the changing financial architecture in the world and I think it’s most appropriate.”

No direct benefit
China and India will not directly benefit from the decision, according to Mr Kumar, but he said they will have to bear responsibility for economic recovery and coordinate actions with other major economic powers, which will shift the balance of power.
 
The G20 was formally established in 1999 and is made up of finance ministers and bank governors from 19 countries; the European Union – represented by the European Central Bank – is the final member. Together they control around 85 percent of the world’s total GDP. In contrast, the G8 only includes the world’s wealthiest economies.

Main forum
The decision to replace the G8 with the larger grouping as the main forum for economic matters is particularly significant for India and China, two of the world’s fastest growing economies.

Dr Linda Yueh, fellow in economics at Oxford university, said: “Any time you have a global financial crisis or a global economic recession, if you don’t have the right countries at the table then any solution will necessarily be incomplete.

“Before when the G8 was handling issues like global imbalances and the role of currencies, without China at the table, there was nothing constructive which could have been discussed or resolved on that front and this will certainly change when the forum is the G20.”