The Hindu Business Line : G-8 beckons

THE MOVE BY the Group of Eight nations to include India and China as members underscores the coming of age of the Asian giants. More significant is the virtual acknowledgment by G-8 of the importance of the world's most populous and influential, albeit not rich, nations if it is to continue calling the shots in international economic and political life. As the Italian Prime Minister, Mr Silvio Berlusconi, said at the recent G-8 summit at Sea Island, Georgia, "It does not make sense for us to talk about the economy of the future without two countries that are protagonists on the world stage... "

Of course, this does not mean anything for India and China, yet. For one, the rich countries' club has not yet reached a consensus on the subject. Two, even if there is agreement on closer association of the Group with India and China, the precise framework governing the involvement will have to be worked out. This is perhaps why there is no formal word yet from G-8 to either New Delhi or Beijing about the proposal. Not surprising, considering that Russia became a full member only in 2002 after being an observer since 1997. The simmering dissatisfaction among the no-changers within the Group — they even called for Moscow's expulsion — is a clear enough indication that the backers of the Asian economies will have to work very hard to attain their objective.

From the economic point of view, India and China have better claim to G-8 membership than Russia. For, the latest World Bank statistics place China and India second and fourth in the list of economies in terms of their gross domestic product measured by purchasing power parity. ahead of all G-8 economies barring the US and Japan; Russia is placed tenth spot. In fact, by this parameter, Brazil should also not be excluded as it is ninth in the GDP list and the fifth most populous country. In any case, Brazil's candidature (already proposed by France, among others) should be seriously considered along with the two Asian economies because, apart from purely economic parameters, the WTO negotiations in the run-up to Cancun showed that it can provide effective leadership to the world's poor in the campaign against unfair trade pressures by the industrialised world.

While there is no doubt that G-8 will be more representative of the world's economic elite if India and China were to join it, perhaps the more important issue is if the club will be able better to influence movements such as international interest rates and capital flows in crisis situations. G-8's coordination in these areas has played an important part since 1975 when the first summit of the group was held (it then excluded Canada). With the progressive decline of the clout of the rich economies, the question can even be asked whether G-8 has outlived its utility? Perhaps, the group itself should be disbanded, or rather expanded to, say, G-20, which would include both the rich, and the influential among the poor. In case a formal offer is made by G-8, New Delhi would do well to keep this aspect in mind while framing its response.