India wants more power on IMF board

NEW DELHI: The India story has really come a long way. Fifteen years after India had to take a $2.6-bn debt from the International Monetary Fund to tide over a balance of payments crisis, this week it told the institution that it wanted more powers on its board.

Finance minister P Chidambaram told the multilateral institution this week that there was a need to evolve a new and simple quota or voting rights for countries. He said the current quotas, based on a flawed formula, do not reflect the relative economic strength of countries and instead suggested that the formula should include GDP on purchasing power parity basis as the dominant variable.

While the IMF as of now has only gone in for an ad hoc rise in the quotas of four countries, China, South Korea, Mexico and Turkey, India has objected to such a rise. Mr Chidambaram said, “We are, however, not convinced by the proposed two-stage or multi-stage approach, including an ad hoc increases in the first stage, to progress towards the objective.”

Explaining the rationale for his suggestion to include GDP on PPP basis as the means to redraw the voting rights, the minister said, “We believe that the starting point of reforms is a new quota formula as a central ingredient, realigning country quotas consistent with the formula, and an increase in basic votes.”

The assertion by India comes at a time, when its GDP even on conventional measure has shot up to over $750bn and is clocking an 8% growth rate for four years, over a 6% in the last decade. On the PPP scale, it is now the fourth largest economy in the world.

Reflecting these changes, managing director of the IMF, Rodrigo de Rato acknowledged the criticism made by Mr Chidambaram at the joint annual discussion. He also said the Fund will implement an agreed package over the next two years to reform the entire voting process.