The Pittsburgh Summit has clearly pronounced that “Today, we designated the G-20 as the

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premier forum for our international economic cooperation.” This should no­rmally imply the demise of G8, which has so far been the premier informal forum for global governance. It seems, however, that G8 will continue to function, albeit economic issues may be formally off its agenda, which could hen­ceforth be more focused on geo-strategic and political issues. This will result in a two-track global governance architecture, which, in my view, does not really work.

With a smaller number of richer and more powerful me­mbers, G8 will continue to be seen as the real power centre or the ‘high table of global go­vernance’. One cannot see any hosting country being ab­le to prevent another G8 me­mber fr­om bringing up a bu­rning ec­onomic or financial problem during a G8 Summit. Therefore, the ‘Us and Them’ divide between advanced and dynamic emerging economies on the one hand and advan­ced econ­omies on the other, will persist and this will not make for real and effective coordination.

The US seems quite prepared to replace G8 with G20. The real resistance, I am told, comes from relatively smaller powers such as the UK, Canada and Japan, who visualise a dilution of their global stature as a consequence. Perhaps, it will take time before the re­cognition sets in that a larger forum for global governance is more reflective of the present multi-polar world and will be more effective in preventing any unilateral behaviour in future.

The second major annou­ncement concerns the role and management of the International Monetary Fund (IMF). The context for this changed role is to be provided by the ‘Framework for Strong, Sustainable and Balanced Gr­owth’, which was launched at Pittsburgh and which visuali­ses putting in place “…a pr­ocess whereby we set out our objectives, put forward polici­es to achieve these objectives, and together assess our pro­gress.” This is indeed revolutionary, because it implies th­at the biggest and most advanced economies will be required to ensure that their ma­croeconomic policies don’t simply serve their national go­als but are designed to take into account the externalities that these generate for the gl­obal economy.

The IMF has been asked to undertake a “… candid, even-handed, and balanced analysis of our policies,” and develop a “… forward looking ana­lysis of whether policies pursued by individual G20 countries are collectively consiste­nt with more sustainable and balanced trajectories for the global economy.” The IMF will need to build on the existing surveillance mechanism and be truly neutral, unbiased and, most importantly, sufficiently competent technically to be able to analyse the risks inherent in national policies and assess their overall impact on other economies operating in an increasingly integrated global economy.

The Fund’s past record in this regard has been somewh­at weak. It has on various occasions either been unable to see a looming crisis (as in its Article IV consultations quite often presenting an outcome, which has been quite at odds from unfolding realities subsequently) or has pulled its punches to avoid ruffling fea­thers in national capitals. Pa­rtly though, this has been a consequence of hypersensiti­vity on the part of member co­untries to any critical evaluation of their policies. This is especially true of both the advanced and larger em­erging economies.

The marked bias in the selection of staff in favour of a pa­rticular kind of economic and quantitative skills has also tended to sustain dogmas and succumb to ‘one size fits all’ approaches. All G20 members will have to accept some surrender of economic and financial sovereignty to the IMF and the newly broadened and more empowered Financial Stability Board if the Fu­nd has to effectively discharge its additional responsibilities.

One of the decisions from the summit is to shift at least 5 per cent of quota share in the IMF to more dynamic em­erging markets and developing countries from over-represented countries “using the current quota formula as the basis to work from.” Given th­at the present quota formula principally relies on the co­untry’s share in global output and trade, it is not clear how this shift will be brought abo­ut except for China and a co­uple of advanced economies.

One of the suggestions at the pre-Pittsburgh Washington meeting was to also incl­ude population as one of the criteria for quota reallocation to facilitate this shift. The su­mmit has also called upon “… our Finance Ministers and Central Bank Governors to la­unch the new Framework by November by initiating a cooperative process of mutual assessments of our policy fr­ameworks and the implicati­ons …for the pattern and sustainability of global growth.”

India and other large em­erging economies will have to develop the capacity for participating in this mutual assessment of national policies and global trends so as to be ab­le to analyse their impact on their own economic pros­pects. In our case, this may be best achieved by setting up a joint working group of the mi­nistry of finance and the Reserve Bank of India that can undertake, with needed inputs from outside experts, an assessment of evolving global economic conditions and the­ir impact on the economy. Cr­eating such a capacity should be seen as the necessary condition for effective future participation in the G20 process and for possibly hosting the summit in 2012 after Canada, Korea and France, which ha­ve already been identified as the next three hosts.

The writer is director and chief executive, Icrier