India hopes to increase share in quotas of development banks By V S Chandrasekar

London, Apr 4 (PTI) India hopes to increase its share in
the quotas of multilateral development banks like the
International Monetary Fund (IMF) and Asian Development Bank
(ADB) after major stakeholders in them bring forward the issue
of quota review and expanding in accordance with current
realities that will give proper representation to the emerging
economies.

Indian sources are upbeat about such a development in the
context of the just-concluded summit here of the 20
industrialised and emerging economies which have agreed to
expand the resources of the IMF and ADB and to also bring
forward the quota review in the IMF.

The Indian side is also conscious of the fact that such a
review was not going to happen overnight but was sure that it
cannot be postponed for long.

Indian Prime Minister Manmohan Singh himself indicated as
much when he said at the end of the Thursday summit that India
can consider increasing the contribution to IMF in proportion
to its quota though it has not visualised approaching the
institution for borrowing in the near future.

India is also not unduly worried about, what some
analysts say, is the "growing weightage" for China in
institutions like the IMF as it feels that China is definitely
a stronger and bigger economy than India but both have their
"own strengths and weaknesses".

The official communique issued at the end of the summit
recognised the importance of the issue when it said that
alongside the significant increase in resources agreed, the
G-20 countries were determined to reform and modernise the
international financial institutions to ensure they can assist
members and shareholders effectively in the new challenges
they face.

"We will reform their mandates, scope and governance to
reflect the changes in the world economy and the new
challenges of globalisation, and that emerging and developing
economies, including the poorest, must have greater voice and
representation," it said.

Towards this end, the leaders pledged to implement the
package of IMF quota and voice reforms to complete the next
review of quotas in the IMF by 2011.

Delegates said the present governing structure in these
Multilateral Development Banks (MDBs) was not in favour of
countries like India and the contents of the communique have
come as a "silver lining" for emerging economies.

As a beginning, the G-20 has admitted countries like
India and Brazil forming the BRIC grouping into the Financial
Stability Board, replacing the existing financial stability
forum to strengthen the financial system. India has also got
entry into the Basle Committee on banking norms.

Sources said that once the review of the quota is
completed India's share in the IMF may double from the present
two per cent which may correspond to about USD 60 billion.

In the ADB, India, which is the largest borrower, will
consider accessing it for more loans once the quota issue is
reviewed which may be finalised next year.

"It is premature to talk about it now," they said.

As for questions regarding China's contribution of
USD 40 billion in the G-20 decision to place USD 250 billion
from the IMF money to poor countries for the economic stimulus
and why India did not do a corresponding act, the sources said
that was an ad hoc on the spot decision of the summit and
India did not want to make a "grand statement".

New Delhi is keen on husbanding its resources estimated
at USD 250 billion in foreign exchange. Japan contributed USD
100 billion, EU 100 billion and a few others contributed a sum
of USD 10 billion.

On the outcome of the summit, Indian sources said apart
from the need to reform the financial system, New Delhi is
satisfied that there was realisation that it should help
global economy recover and become normal and that the
multilateral banks should help poor countries with balance of
payments crisis to overcome their difficulty.

On protectionism, the sources said the attempt at the
summit was to see that there should not be a "sudden and
high wave" of barriers in view of the current difficulties
though there was realisation that countries would raise walls
"within some norms" or within WTO guidelines to protect their
interests.

On the issue of tax havens, which the G-20 has threatened
to "name and shame", the summit decided to crack down on
non-cooperative jurisdictions and asserted that the countries
should cooperate.

Indian sources noted that admission of the country into
fora like FSF and Basle Committee could expose officials to a
lot of technical expertise which would automatically come.

To questions whether India was getting ready for a
super-regulator with the G-20 agreeing on tough regulations
relating to the banking system to avoid a systemic collapse
like it happened last year, they said it was not possible
today.

But it would result in standard accounting norms in
financial institutions that work across the borders because of
the demand for compliance from local governments, they said.
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