Strengthening G20’s Effectiveness

• 15 May 2025

For Prelims: G20, European Union (EU), African Union (AU), IMF, World Bank, Financial Stability Board’s (FSB), Digital Economy, Special Drawing Rights (SDRs), Global Hunger and Poverty Alliance.     

For Mains: Role of G20 in global economic governance, Criticism of G20’s exclusivity and lack of representation, Reforms for multilateral global forums 

Source: DTE 

Why in News?

The G20, often hailed as the "premier forum for international economic cooperation," faces criticism for its lack of global representation. Its exclusive membership undermines its credibility and effectiveness in addressing global issues. 

• With South Africa chairing the G20 in 2025, there is growing support for reforms to make the forum more inclusive and globally representative. 

What is the Significance of G20? 

• About: The G20 was founded in 1999 after the Asian financial crisis as a forum for the Finance Ministers and Central Bank Governors to discuss global economic and financial issues. 
• Evolution: The G20 was elevated to the leaders’ level after the 2007–08 financial crisis and declared the top forum for global economic cooperation in 2009.  
  • While it began with a focus on macroeconomics, its agenda now covers trade, health, climate change, and more. 
• Membership: Its membership includes 19 national economies and the European Union (EU) and African Union (AU). India became a member of the G20 in the year 1999, when the group was established. 
  • Other countries can be invited as "special guests" on an ad hoc basis. 
• Structure and Governance: The G20 operates under a rotating presidency with annual summits and functions without a permanent secretariat. 
  • The troika system (current, past, and incoming presidents) manages the G20 work, with the 2025 troika consisting of South Africa (current), Brazil (past), and the US (incoming 2026 president). 
• Global Influence: Represents 67% of the global population, 85% of world GDP, and 75% of global trade. 
  • International organizations like the International Monetary Fund (IMF), World Bank, Organisation for Economic Co-operation and Development (OECD), and World Trade Organization (WTO), along with representatives from some UN entities, participate in G20 meetings. 
• Key Outcomes of G20 over the Years: 
  • Global Alliance Against Hunger and Poverty: Launched at the 2024 G20 Summit in Rio de Janeiro, Brazil, the initiative aims to reach 500 million people through cash transfer programs and to provide 150 million school meals to children by 2030. 
  • India-Middle East-Europe Economic Corridor (IMEC): The IMEC, launched during the G20 Summit in New Delhi, seeks to strengthen trade, economic relations, and regional integration between India, the Middle East, and Europe. 
  • Global Biofuels Alliance (GBA): It was launched at the G20 Summit in New Delhi, India, with the goal of promoting adoption of sustainable biofuels. 
  • Global Minimum Corporate Tax: In 2021, at the G20 Summit in Rome, G20 leaders formally endorsed a 15% global minimum corporate tax, aiming to curb tax avoidance by multinationals and foster a fairer global economy. 
  • Digital Economy Action Plan (2017): Enhanced cooperation on digital trade, cybersecurity, and data governance. 
  • Basel III Norms: At the 2010 Seoul Summit, G20 leaders adopted Basel III norms to tighten banking regulations. 
  • Framework for Strong Growth (2009): Coordinated fiscal stimulus and banking reforms post-crisis, stabilizing the financial system. 
    • Debt Service Suspension Initiative (2020) offered debt relief to poor countries during Covid-19, aiding recovery. 
  • Climate Change Action Plan (2010): Promoted low-carbon growth, influencing the 2015 Paris Agreement. 

What are the Limitations of the G20? 

• Lack of Representation: The G20 is a self-selected group comprising 19 countries, the EU, and the African Union, excluding over 90% of the world’s nations, which may participate only as occasional "special guests." 
  • It has no mandate to represent the entire international community (193 UN member states plus non-members). 
  • Non-member countries can only participate if invited as "special guests", making the forum exclusive and unrepresentative. 
• Exclusivity in Decision-Making: The G20’s informal structure and lack of permanent secretariat make it difficult to engage with non-member countries. Its decisions affect the entire world, yet most nations are not directly involved in the deliberations. 
  • Despite ensuring continuity, the troika system lacks enforcement power, making the G20 more of a discussion forum than an action-driven body. 
• Global Challenges Require Global Solutions: Issues such as climate change, pandemics, and economic inequality demand broad global cooperation.  
  • The G20’s narrow membership limits its capacity to form inclusive solutions that reflect the interests of all nations. 
  • Global cooperation is declining as rich nations cut official development assistance (ODA) and major economies favor exclusive G20 forums over inclusive UN platforms.   
  • Wealthy nations dominate the G20, sidelining poorer countries' concerns on aid and climate finance, deepening global inequality. 
• Divergent Priorities: Developed countries prioritize advanced technology, climate transitions, and geopolitical stability, while developing nations focus on poverty alleviation, access to resources, and economic growth.  
  • This disparity in priorities leads to disagreements on issues like climate financing, trade liberalization, and equitable resource allocation.  
• Geopolitical Rivalries: Political tensions between countries like the US and China, or conflicts involving Russia and Israel, create barriers to consensus-building, often shifting focus away from collaborative problem-solving. 

What Reforms can make the G20 more Inclusive and Representative? 

• Regional Consultative Groups: The governance model of the Financial Stability Board(FSB), established under the G20 in 2009, offers a solution for making the G20 more inclusive.  
  • Unlike the G20, the FSB includes Regional Consultative Groups (RCGs) for regions like the Americas, Asia, and Africa, allowing non-member countries to share their perspectives and contribute to decision-making. Each RCG is co-chaired by G20 and non-G20 members.  
  • Adopting this model for the G20 would allow the forum to maintain its core membership while establishing a formal consultation process with regional neighbors, empowering smaller nations and enhancing global representation and accountability. 
• Expand Participation: Grant Permanent Observer Status to non-G20 nations, especially from the Global South, and formalize engagement with regional bodies like Association of Southeast Asian Nations (ASEAN), and Caribbean Community and Common Market (CARICOM) for broader representation.  
  • Rotate Special Guest Invitations systematically to ensure diverse voices in discussions. 
• Improve Institutional Structure: Establish a Permanent Secretariat for continuity and accountability, create Working Groups on critical issues like climate finance, debt relief, and digital economy with mandatory progress reports.  
  • Strengthen the Troika System to monitor policy coherence beyond succession planning. 
• Address Key Global Challenges: Set binding climate funding targets for developed nations and establish a G20 Green Development Fund for vulnerable economies.  
  • Reform the global debt architecture to prevent crises in low-income countries and expand IMF Special Drawing Rights (SDRs) for developing nations. 
• Tackling Global Hunger: Promote Africa and the Global South's priorities like food security and climate adaptation, with initiatives like the Global Hunger and Poverty Alliance tackling food insecurity and sustainable agriculture.

Conclusion 

While the G20 plays a significant role in global economic cooperation, its lack of inclusivity, informal structure, and geopolitical tensions undermine its effectiveness. To strengthen its legitimacy, it must adopt inclusive participation models, establish permanent governance mechanisms, and prioritize actionable solutions for climate finance, debt relief, and food security—ensuring it truly becomes the "premier forum for international economic cooperation." 

Drishti Mains Question:

Q. Critically analyze the limitations of the G20 in addressing global economic challenges and suggest measures to strengthen its role in global governance.

UPSC Civil Services Examination Previous Year’s Questions (PYQs) 

Prelims

Q. With reference to the “G20 Common Framework”, consider the following statements (2022)

1. It is an initiative endorsed by the G20 together with the Paris Club.  
2. It is an initiative to support Low Income Countries with unsustainable debt.  

Which of the statements given above is/are correct?  

(a) 1 only  

(b) 2 only  

(c) Both 1 and 2  

(d) Neither 1 nor 2  

Ans: (c)

Q. In which one of the following groups are all the four countries members of G20? (2020)

(a) Argentina, Mexico, South Africa and Turkey 

(b) Australia, Canada, Malaysia and New Zealand 

(c) Brazil, Iran, Saudi Arabia and Vietnam 

(d) Indonesia, Japan, Singapore and South Korea 

Ans: (a)