P. Chidambaram

SINGAPORE: India said on Tuesday it would carry forward its "proactive" campaign for "a new and more equitable formula" to reform the power structure of the International Monetary Fund (IMF). And, New Delhi's game plan is to continue working with its partners and to re-engage the Group of Seven (G-7) industrialised countries.

The move was outlined by Finance Minister P. Chidambaram in an interview to The Hindu here. This follows the Fund's balloted decision on Monday to implement the first stage of a two-year-long reform process. Prior to that voting, India mobilised political dissent, in association with Brazil and Argentina as also Egypt, to try and halt the implementation of what they saw as a "flawed" reform agenda.

Even as the IMF Board met in Singapore on Tuesday, Mr. Chidambaram said he was now "looking forward to all countries, including the G-7, agree[ing] to construct a [new] formula based on relevant criteria and reflecting the economic strength of countries in the 21st Century."

The G-7, notably the U.S. and Germany, had "assured" India that they would exert their "influence and authority" across the IMF spectrum to help evolve such a formula. "So, let us see what they do over the next two years," he said. Emphasising that the Bretton Woods Order of the 1940s did not reflect today's economic realities on the global scene, he outlined a scenario in which "the G-7 would have to show considerable leadership and imagination." This entailed the possibility of having to ensure that the European countries, with an aggregate of 34.4 per cent of the IMF's "total voting power," would not block the amendment of its articles.

Under the IMF-approved first stage of reforms, China, South Korea, Mexico, and Turkey have been given varying measures of ad hoc increases in their "voting powers." Because of these increases, amounting in all to just 1.8 per cent of the IMF's "total voting power," the United States, India, and several other countries have suffered weighted reductions in their voting rights.

Mr. Chidambaram said China had, during the run-up to the IMF's balloting, emphasised that the real issue was the "principle" of greater say for the emerging economies. China indeed recognised that India, Brazil, and others in this category "are also entitled to increases [in voting rights] in due course."

On the dynamics of the effort by India and its partners to think out of the Bretton Woods box, Mr. Chidambaram identified three credentials that the IMF members would require to show in their favour for gaining additional voting rights. Citing these as "the gross domestic product on a purchasing power parity basis (PPP), [foreign exchanged] reserves, and growth rate," he said, "we do not want to lay all our cards on the table now" itself.

New Delhi's punchline in this regard: "Based on market exchange rate, India stands at either 10 or 11 [among all IMF members]. Based on PPP,

India's rank is four. How can this be ignored? Why should it be ignored? As long we continue to grow at eight per cent, be a major economy of the world, have high reserves, ability to contribute to the IMF, why should we be ignored? That point has been driven home." He said: "It is because we are growing at 8.3 [per cent] that we are walking here with our head held high."

On the recent strains in India's interactions with the World Bank, Mr. Chidambaram said: "There were two loan programmes [of the Bank] which were put under temporary suspension. In both cases, we stood firm. ... Our argument prevailed, and the World Bank lifted the suspension. ... Let bygones be bygones. We are willing to put in place any corrective measure to ensure that loans received from the World Bank are spent strictly in accordance with the conditionalities of that loan and without the taint of corruption or any misfeasance."

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