In October 2021, the Union Minister for Finance & Corporate Affairs, Nirmala Sitharaman made a week-long official visit to the USA (United States of America) to attend the Annual Meetings of International Monetary Fund (IMF) and WorldBank, G20 Finance Ministers and Central Bank Governors (FMCBG) meetings, India-US Economic and Financial Dialogue, and other associated investment meetings.
-FM Participated in 4th G20 FMCBG Meeting
On 13th October 2021, the Finance Minister (FM) Nirmala Sitharaman participated in the 4th G20 FMCBG Meeting, which was held in Washington D.C under the Italian Presidency.
a.In Order to preserve financial stability and long-term fiscal sustainability, and safeguarding against downside risks and negative spillovers, the G20 FMCBG agreed to avoid any premature withdrawal of support measures.
b.Tax Deal:
For addressing the tax challenges that are arising from the digitalisation of the economy, the G20 FMCBGs endorsed the final agreement, that was set out in the Statement on a two-pillar solution and the Detailed Implementation Plan released by the OECD (Organisation for Economic Co-operation and Development)/G20 Inclusive Framework on BEPS (Base Erosion and Profit Shifting).
About Two-pillar solution:
i.136 jurisdictions (out of the 140 members of the OECD/G20 Inclusive Framework on BEPS) joined the Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy.
- The two-pillar solution was supported by all OECD and G20 countries (including India) whereas Kenya, Nigeria, Pakistan and Sri Lanka (4 countries) have not yet joined the agreement.
ii.Pillar one:
- It was framed to ensure a fairer distribution of profits and taxing rights among countries with respect to the largest and most profitable multinational enterprises (MNEs).
- Applicability: The taxing rights will be applicable to MNEs with global sales above EUR (euro) 20 billion and profitability above 10 percent.
- Those MNEs will need to reallocate 25 percent of profit above the 10 percent threshold from their home countries to the market countries where they have business activities and earn profits (regardless of whether the MNEs have a physical presence or not.
iii.Pillar Two:
- Under this pillar, a global minimum corporate tax rate of 15 percent was set.
- Applicability: The new minimum tax rate will be applicable to companies with revenue above EUR 750 million.
- Through this, additional global tax revenue of around USD 150 billion is expected to be generated annually.
- The OECD plans to develop model rules for bringing ‘Pillar Two’ into domestic legislation in 2022 and to be effective from 2023.
Note – OECD/G20 Inclusive Framework on BEPS was established in Kyoto, Japan in June 2016.
-Annual Meetings 2021 of the World Bank Group and IMF
The Annual Meetings 2021 of the World Bank Group and IMF held in Washington D.C from October 11 to 17, 2021. It includes the 44th Plenary Meeting of the International Monetary and Financial Committee (IMFC) of the Board of Governors of the IMF and Development Committee (DC) of World Bank Group-IMF.
a.DC of the World Bank-IMF: FM addressed the DC of the World Bank-IMF and highlighted the measures taken by the Indian government for the country’s sustained economic growth.
b.FM Attended Plenary Meeting of IMFC: On October 14, 2021, the FM Nirmala Sitharaman attended the 44th Plenary Meeting of the IMFC.
Key Points:
i.The meeting was Chaired by Magdalena Andersson, Minister for Finance of Sweden and attended by Governors/Alternate Governors representing 190-member countries of the IMF.
- Prior to the plenary meeting, the FM also participated in the Restricted Breakfast Meeting of the IMF.
iii.The meeting was held mainly based on the theme of the Managing Director’s Global Policy Agenda – ‘vaccinate, calibrate and accelerate’ and discussed the actions and measures taken by member countries to combat COVID-19.
About IMFC: The IMFC advises and reports to the IMF Board of Governors on the supervision and management of the international monetary and financial system. IMFC has 24 members, India is one of the current members.
About Annual Meetings of World Bank Group and IMF:
i.Annual Meeting: In general, the Annual Meetings of Boards of Governors of the World Bank Group and IMF will be held for 2 consecutive years at the IMF and World Bank headquarters in Washington, D.C. and every 3rd year in another member country.
ii.Other Meetings:
- In addition to the annual meeting, the IMFC committee and the joint DC of World Bank-IMF hold meetings each spring (April) to discuss progress on the work of the institutions.
- The plenary session of the IMFC committee and World Bank’s Board of Governors is scheduled in the autumn (October) (along with the Annual Meeting)
Note – Thus IMFC meets twice a year, once during the Fund-Bank Annual Meetings in October and once during the Spring Meetings in April.
Additional Info – On October 15, 2021, FM had a meeting with the World Bank President David Malpass in Washington DC, USA.
-FM Chaired the 8th Ministerial Meeting of the India-U.S.A. Economic and Financial Partnership
On October 15, 2021, the 8th ministerial meeting of the India-U.S.A. Economic and Financial Partnership Dialogue was held in Washington D.C. The meeting was chaired by Union FM Nirmala Sitharaman and the Secretary of the Treasury of the United States Dr Janet Yellen.
Key Points:
i.Discussions were held on a range of subjects, including the macroeconomic outlook and recovery from the pandemic, technical collaboration, climate finance, and Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT).
ii.India and the US reaffirmed their commitment to raising $100 billion annually from public and private sector sources to help the two countries’ efforts to tackle climate change.
iii.India and the US have agreed to step up cooperation on a host of economic issues, including climate change, infrastructure finance, and financial regulation.
Note – India-US Economic and Financial Partnership was launched in 2010 as a framework to bind the economic bonds between the two nations.
-Finance Minister Meets CEOs in New York, USA
Union FM Nirmala Sitharaman met Mastercard Executive Chairman Ajay Banga and Mastercard CEO Michael Miebach in New York, USA and discussed India’s recent launch of Rs 100-lakh-crore National Infrastructure Master Plan – ‘Gati Shakti’, digitisation and the ‘Make in India’ initiative.
- She also met IBM (International Business Machines) Chairman and CEO Arvind Krishna and Citigroup CEO Jane Fraser.
She addressed global business leaders at a roundtable organised by FICCI (Federation of Indian Chambers of Commerce & Industry) and the US-India Strategic Partnership Forum and mentioned several reforms undertaken to ease foreign investment in infrastructure.
Recent Related News:
The International Monetary Fund (IMF) allocated a Special Drawing Rights (SDRs) 12.57 billion (equivalent to around USD 17.86 billion at the latest exchange rate) to India in August 2021.
The total SDR holdings of India now stands at SDR 13.66 billion (equivalent to around USD 19.41 billion at the latest exchange rate).
About World Bank:
Establishment – 1944 at the Bretton Woods Conference
President – David R. Malpass (13th President)
Headquarters– Washington DC, USA
About International Monetary Fund (IMF):
Establishment – 1944
Headquarters – Washington, D.C, United States (US)
Managing Director – Kristalina Georgieva
Members – 190 Countries (Including India)
