Making his presence felt at during a round of rapid-fire meetings here in Washington with the G-20, G-24 and Bretton Woods institutions, Finance Minister Pranab Mukherjee kept up the pressure on what he described as the “disappointing” pace of reform on quota and governance issues at the International Monetary Fund and also went to lengths to clarify India’s position on certain tax amendments in the 2012-13 budget.
Seeking to pin down the timeline for the next steps in the quota and governance reform Mr. Mukherjee said at the G-20 that India would continue to contribute towards a comprehensive review of the IMF quota formula by January 2013 and the completion of the next general review of quotas by January 2014.
Reflecting their growing heft in the outcome of reform negotiations the G20 nations in their final communiqué commented on their contributions towards the effort to boost the resources of the IMF.
“Together with the International Monetary and Financial Committee we have reached agreement to enhance IMF resources for crisis prevention and resolution,” the G20 noted, adding that there were now “firm commitments to increase resources made available to the IMF by over $430 billion in addition to the quota increase under the 2010 reform.”
Mr. Mukherjee bluntly said that India was “disappointed at the pace of the reform on quota and governance issues,” adding that a dynamic process of reform was necessary to ensure the legitimacy and effectiveness of the IMF and the best possible means to improve governance and legitimacy is by ensuring that there is no slippage on crucial reforms.
On the tax measures introduced in India’s latest budget the Finance Minister admitted that he was aware of a “sense of despondency among U.S. businessmen,” alluding specifically to “their misapprehensions about certain legislative amendments that we have proposed.”
The U.S. India Business Council and other industry organisations here have recently focused attention upon a tax amendment in the most recent Indian budget which, they allege, would retroactively tax business deals in which a non-resident transferred shares into a non-Indian company that derives its value “substantially” from Indian assets.
Commenting on this concern, which U.S. Treasury Secretary Tim Geithner was said to have brought up with Mr. Mukherjee, the Minister said, “Would the income tax cases be reopened from 1962? The answer is ‘no.’”
In comments made during a talk at the Peterson Institute for International Economics he added, “No case can be reopened which is more than six years old... [On the question of whether India's tax regime is stable or not] My answer is it is clear, it is stable.”