India has voiced its disappointment with the continuing failure to implement the long-pending International Monetary Fund governance and quota reforms that were agreed upon after great deliberation nearly five years ago.
"We are greatly disappointed that the 2010 Quota and Governance Reforms have not become effective in spite of the strong support of the global community for the reform," Finance Minister Arun Jaitley said in his address to IMF's high-power International Monetary and Financial Committee here.
"We are also concerned that we have not made any headway in the forward looking elements of the 15th Review, including the review of the quota formula and the initiation of the discussions on the review," he said, stressing governance reforms are required to ensure the Fund's credibility, legitimacy and effectiveness.
In what was projected as "a historical reform of the IMF", the multilateral body had in November 2010 finally agreed upon wide-ranging measures to accord greater voice and representation to the emerging market and developing countries, including India, China, Russia and Brazil.
The United States, owing to the stout opposition within the Congress, has been blamed for the reform process coming to a standstill. Significantly, a communiqué at the end of the IMF meeting said: "We continue to urge the United States to ratify the 2010 reforms as soon as possible." Jaitley, without naming any country in his speech, said: "We urge the members who have not yet ratified the 2010 Quota and Governance Reforms to do so at the earliest."
In its communiqué, the IMF panel asked the Executive Board to pursue an interim solution that will meaningfully converge quota shares to the extent possible to the levels agreed upon, stressing: "We reaffirm our commitment to maintaining a strong, well-resourced, and quota-based IMF." In his observations on this aspect, Jaitley said the Executive Board should speedily complete its work to make meaningful progress in the key areas covered by the 2010 reforms pending their full implementation.
Welcoming the "delinking option", he said it would be the nearest in form and substance to the 2010 package. He also called for commencement of work in earnest on the next stage (the 15th Review) so that it can be completed by December 15, 2015 as mandated under the Articles of Agreement. Commenting on the global economic situation, Jaitley said while the recovery continues to be weak and the overall scenario presents some major challenges of dipping growth and increased global financial security risks because of prolonged low interest rates.
The Indian economy, however, is on a recovery path, with growth rising to 7.4 per cent in the first three quarters of 2014-15 as compared with 7.0 per cent the corresponding period of previous year. With the recent policy initiatives to unlock coal and other mining activity, liberalization of foreign direct investment limits and a renewed thrust on public investment in infrastructure, Jaitley said the medium-term growth prospects have improved, adding:
"We are committed to maintain overall macroeconomic conditions on a sustained basis so that the Indian economy is able to achieve and sustain growth of 8 per cent and above." Jaitley expressed satisfaction with the moderation of inflation and the ongoing fiscal consolidation. With improved domestic macro-economic situation, India has lately received larger portfolio flows, enabling the Reserve Bank of India to build up its foreign exchange reserves, which now stand at $343 billion. In the light of these healthy developments, Jaitley believes that India "is now better prepared to deal with global financial market volatility that could arise in the context of US monetary policy normalisation".