India's alternative plan necessitated by `the volatility of the market exchange rates'
The Union Finance Minister, Mr P. Chidambaram, on Sunday unveiled a plan for the reform of International Monetary Fund, even as the institution flagged off voting by its members on a package that New Delhi had objected to. India, Brazil, Argentina and Egypt had issued a joint statement on Saturday calling upon the IMF to shelve its own reform package for now.
The IMF's controversial plan, aspects of which have spurred many members to express `reservations', was sent to the Fund's Board of Governors by its Managing Director, Mr Rodrigo de Rato.
Mr Chidambaram suggested that any IMF reform plan "should have GDP (Gross Domestic Product) on PPP (purchasing power parity) basis as the dominant variable". He told the International Monetary and Financial Committee (IMFC), which met as part of the ongoing annual meetings of the Fund and the World Bank here, that India's alternative plan was necessitated by "the volatility of the market exchange rates" and the need to "enhance the acceptability, ownership and effectiveness of IMF's programmes and policies".
He pointed out that the GDP-on-PPP-basis formula was not a startling counter-offensive from India and its associates. This measure was even now in vogue within the IMF circles for its analyses and documentation.
Under Mr de Rato's proposal, China, South Korea, Turkey and Mexico would be given additional IMF quotas, which would help raise their weighted voting rights in the institution. India is excluded from this `first stage' of reform.
Being the first `comprehensive' reform of the institution in the six decades since its formation, Mr de Rato's initiative is said to be designed to boost the voice of emerging economies and low-income countries in a step-by-step process.
The 184 members of IMF began voting on the official reform package. The voting will conclude on Monday and, after that, the IMF Board would take steps to implement the plan, in consultation with all members, including the dissenting states, over a period of two years.
Commenting on the IMF's calendar of reform, Mr de Rato said at a press conference in Singapore that "we would try to reach the maximum consensus possible" on the entire spectrum of proposed reforms.
In a thinly veiled reference to India's campaign against his plan, Mr de Rato said, "In any democratic institution, you have more votes or less votes. It depends. It is just a fact of reality." The comment has been seized upon by observers in the IMF circles as an indication that India has lost the battle of the ballot even as it began.
IMF sources said the United States `strongly supports' Mr de Rato's reform plan. About the likely new status of China within the IMF, Mr de Rato emphasised that there was no question of Beijing being `subject to more pressure' from the international community as a result of these changes now under way. But, "China, as any member-country of the IMF, is subject to surveillance of the national economy."