Concerned over IMF's slow quota reforms: PM

Los Cabos: Voicing concern over the very slow progress in IMF’s quota reforms, Prime Minister Manmohan Singh has said that quotas must reflect economic weight in a manner that is “simple” and “transparent”.

In his second intervention at the plenary session of the Summit of the Group of 20 leading economies, Singh regretted that progress in quota reform is proceeding more slowly than raising resources.

Singh said it is also important that the quota review schedule for January 2013 is completed in time.[caption id=“attachment_351359” align=“alignleft” width=“380” caption=“Worried over slow IMF reforms. Image courtesy PIB”]  [/caption]

The prime minister’s remarks came a day after India announced a $10 billion contribution to the IMF’s additional firewall of $430 billion to help the world body in stabilising the euro zone.

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“Progress in quota reform is proceeding more slowly than raising resources. I recognise that there are practical reasons why the quota reform agreed in 2010 will not be completed by the end of 2012, but it must be done expeditiously thereafter,” he said.

“Quotas must reflect economic weights, in a manner that is simple and transparent,” the prime minister said on Tuesday, as G-20 leaders reviewed the progress in the International Monetary Fund (IMF) reforms agenda.

Once the quota reform is carried out, India’s share at IMF is set to rise to 2.75 percent from 2.44 percent, making it the eighth largest shareholder in the multilateral agency from its present eleventh position.

The implementation of the quota reforms has been delayed as countries such as the US have not yet ratified the proposal.

The prime minister also said that prudential rules adopted in banking regulation did not discriminate against lending to developing countries.

Welcoming the progress made in financial regulatory reform, he however said much remained to be done.

He said the G-20 leaders discussed the need to move towards a banking union in Europe to help strengthen financial stability.

Singh said the objectives of quota reforms can be best achieved by recognising the predominant role of GDP on Purchasing Power Parity (PPP) basis in the formula without going into other variables.

“This basic position should not be compromised in any way and we need to reiterate out position strongly,” he said.

According to recent IMF data, India has overtaken Japan to become the world’s third-largest economy in purchasing power terms.

The data showed that India’s Gross Domestic Product (GDP) in PPP terms stood at $4.46 trillion in 2011, marginally higher than Japan’s $4.44 trillion, making it the third-biggest economy after the US and China.

India’s share in world GDP in terms of PPP, a measure of relative consumer prices across countries, stood at 5.65 percent in 2011 against Japan’s 5.63 percent, with the gap expected to widen significantly by 2017.

In five years, the IMF estimates the share of India’s GDP in PPP terms would grow to 8.09 percent compared with 4.8 percent for Japan.

The PPP system allows GDP comparisons to be made by asking how much money would be needed to purchase the same goods and services in two countries and using that to calculate an implicit foreign exchange rate.

PTI