India, G-24 lambast IMF over voting rights issue
The plan for greater voice in IMF's decision-making will bring down India?s quota share, writes S Rajagopalan.
India and the Group of 24 (G-24) developing countries have come down hard on the International Monetary Fund’s (IMF’s) proposed two-stage plan for ad hoc increases in voting power for a few emerging economies instead of a comprehensive reallocation of quotas.
Curiously enough, the plan for greater voice in IMF’s decision-making will actually bring down India’s quota share. The proposal envisages ad hoc increases in IMF quota for a handful of under-represented nations like China, South Korea, Mexico and Turkey in the first stage.
Voicing India’s strong criticism of this approach, Reserve Bank of India Governor Y.V. Reddy told IMF’s International Monetary and Financial Committee on Saturday: “A two-stage process with an ad hoc increase is not consistent with the need for a comprehensive review and reallocation of quotas.” “By definition, a comprehensive reallocation of quotas to reinforce legitimacy (of IMF’s governance structure) cannot be achieved by a short-term ad hoc approach,” he said as the IMF-World Bank spring meetings got under way.
Reddy pointed to the proposal’s anomaly in that while the international community was lauding India for its contribution to global growth and stability, the IMF proposal sought to scale down India’s quota.
“I doubt that the legitimacy of the IMF will be enhanced if three out of the four much-acclaimed BRIC (Brazil, Russia, India and China) countries get their quota reduced, even if it is for a brief period,” he said. Reddy stressed that political consensus must be evolved before launching a technical exercise to move forward on the quota issue by assigning due weights and importance to different countries that have significantly changed the dynamics of the global economy in recent years.
The G-24 grouping, including India, issued a separate communique, seeking a comprehensive package of changes in IMF’s voting structures to better reflect the rising power of developing countries in the world economy. They wanted all major issues to be dealt with in a timely fashion, and called for concrete progress by the next IMF meeting in Singapore in September.
The IMF hopes to reach an accord on the revision of quotas by September, when the Fund-Bank autumn meetings are held in Singapore. A statement issued after Saturday’s meeting called upon IMF’s Managing Director Rodrigo de Rato to come up with “concrete proposals” to facilitate an agreement.
In his address, Reddy also focused on some other important issues outlined in IMF Managing Director’s medium-term strategy. While there is paradigm shift in global economic/financial environment with the increasing adoption of liberalisation, he stressed that there could not be a straitjacket approach towards reforms because of the divergent realities and speeds of adjustment in different countries.
The RBI Governor broadly agreed with IMF’s assessment that the global growth scenario was becoming more diversified. However, he voiced concern at the continuing volatility of oil prices and the widening global imbalances, pointing out that the burdens were borne disproportionately by developing countries dependent on oil imports.