Group of Seven (G7)

Group of 7 (G7) is an informal group of 7 countries — USA, Canada, France, Germany, Italy, Japan and UK; the heads of which hold an annual summit with European Union and other invitees.
India, Australia, South Korea and South Africa were invited to the 47th G7 summit hosted by the UK
Together the G7 member countries represent 40% of the global GDP and 10% of the world’s population.
G7 has no legal existence, permanent secretariat or official members.
Leaders of G7 countries meet annually and discuss emerging global issues.
The presidency of G7 meetings is held by each of the 7 countries in turn, each year.
In all G7 countries, annual public sector expenditure exceeded revenue in 2021. Most G7 countries also had a high level of gross debt, especially Japan (263% of GDP), Italy (151%) and the US (133%).

At the 48th G7 summit was organised in Germany, India also attended the summit and invited the G7 countries for clean energy technologies.

G7 develops global Partnerships for Global Infrastructure and Investment (PGII) will collectively mobilise up to 600 billion US dollars in public and private investment over the next five years through its national and regional initiatives.
G7 fights hunger crisis with “Alliance for Global Food Security” will mobilise additional funds in the amount of 4.5 billion US dollars (Germany: new pledge of 476 million US dollars, or 450 million euros).

GLOBAL SHIELD FUND

The 27th Conference of the Parties (COP 27) entered its second week on Monday (14 November) in Egypt’s Sharm el-Sheikh, Group of Seven (G7) members announced an initiative to make funding available for low-income and vulnerable countries hit by climate disasters.
Dubbed ‘Global Shield’, is coordinated by G7 president Germany and aims to rapidly provide insurance and disaster protection funding in the event of floods, drought and other climate calamities in climate- vulnerable nations.
It is being developed in collaboration with the Vulnerable Twenty (V20) group of 58 climate-vulnerable economies.

WHO WILL PAY FOR THE FUND?

Germany has announced shelling out €170 million ($172 million) for the insurance plan.
France will pay $20 million initially and its total commitment would be $60 million over three years.
Canada and Denmark will stump up $7 million and $4.7 million, respectively.
Commitment of €10 million by Ireland’s and United States has also expressed support for the plan.

Which nations would benefit from the funding?

According to the statement released by Germany on Monday, Pakistan, Bangladesh, Costa Rica, Ghana, Fiji, the Philippines and Senegal will initially benefit from Global Shield packages – which would be developed in the coming months.

CHALLENGES FACED BY G7 GROUPING

Changing Economic Situation: When constituted the G7 countries accounted for close to two-thirds of global GDP.
They now account for less than a third of global GDP on a purchasing power parity (PPP) basis, and less than half on market exchange rates (MER) basis
Seven largest emerging economies (E7, or “Emerging 7”), comprising Brazil, China, India, Indonesia, Mexico, Russia and Turkey, account for over a third of global GDP on purchasing power parity (PPP) terms, and over a quarter on MER basis. India’s economy is already the third largest in the world in PPP terms.
It is projected that India’s GDP will increase to $17 trillion in 2030 and $42 trillion in 2050 in PPP terms, in 2nd place after China, just ahead of USA.

LIMITATIONS OF G7

It is a “First World Elite Club” that has not grown its membership to include emerging economies like India and China.
By cutting out Russia and China, the G-7 ensure the polarisation of the world into the two blocs, even as ties between Russia and China get stronger.
G-7 countries are also military partners means that the economic agenda of the grouping often takes a backseat over political issues
G7 failed to head off the economic downturn of 2007- 08, which led to the rise of the G20.
G7 has not raised concerns with respect to contemporary issues, such as the COVID-19 pandemic, climate change, the challenge of the Daesh, and the crisis of state collapse in West Asia.
It had announced its members would phase out all fossil fuels and subsidies but has not so far announced any plan of action to do so.
Unlike other institutions, G7 is not a formal institution with a charter and a secretariat.
Lacks representation – Russia, China and India which are influential global players with important role in global economy are not members of this group.
US president Donald trump had challenged the unity of G7 members stating that contending that U.S. allies took advantage of the United States.
There is a growing sense that China poses a “threefold threat” to G7 countries—economically, ideologically, and geopolitically.
TO counter BRI – G7 leaders announced at 2022 summit – Partnership for Global Infrastructure and Investment.

WHAT IT MEANS FOR INDIA?

India’s tightrope walk between the West and Russia- China has just become more difficult- the G7 statement indicates a point of no-return
The US-China rivalry is likely to step up in the Indo- Pacific with the new economic initiatives planned: from Indo-Pacific Economic Forum to the PGII to counter China’s Belt and Road Initiative- India joined the IPEF but India has not signed on to the PGII plan yet.
India’s partnerships with countries like Indonesia, Brazil. South Africa, ASEAN etc that are still seeking to balance ties with both blocs will get stronger.
India’s role as the balancing power in the room is evident: at the BRICS summit last week, India ensured that anti-West language did not enter the text, while at the G-7 outreach, it ensured that statements condemning Russia and China were not part of the documents that India signed.

WHY WE NEED A NEW INSTITUTION

A new mechanism is required to handle the emerging global challenges – Trade war, economic slowdown, Political turmoil in countries, counterterrorism & non- proliferation.
There is need for including in it the seven future leading economies, plus Germany, Japan, the U.K., France, Mexico, Turkey, South Korea, and Australia
Finding effective solutions to burning issues like Ukraine war, Global economic slowdown, Iran’s nuclear program, peace and stability in Afghanistan, Gulf and West Asia, reduction in tensions in Korean peninsula and South China Sea.

G20 AS AN ALTERNATIVE TO G7

Power and prestige of Group of Twenty (G20), a forum for finance ministers and central bank governors from nineteen of world’s largest countries and EU, has surpassed that of G7.
Emerging powers including Brazil, China, India, Mexico, and South Africa, whose absence from G7