IMF shares New Delhi’s disappointment, urges US ratification
Voicing concern over the continuing delay in implementing the International Monetary Fund quota and governance reforms, agreed to in 2010, India has urged the multilateral financial body to ensure completion of this set of reforms by the end of this year.
Raising the issue at the annual meeting of the International Monetary and Financial Committee on Saturday, Reserve Bank of India Governor Raghuram Rajan regretted that the 2010 Quota and Governance Reform has not become effective despite the strong support of the global community.
“Governance reforms are required to ensure the Fund’s credibility, legitimacy and effectiveness. They are also imperative to maintain its relevance. The quota reforms, therefore, need to be completed by the year-end,” he said, urging all members, particularly those with the crucial voting power, to extend full cooperation to the long-pending action.
Rajan went on to say that if these reforms do not materialise by that date, the Fund should “explore every available option for completing the current round of quota reform process”.
The IMF’s high-power policy-setting committee shared India’s disappointment, and pointedly urged the United States to speedily ratify the reform proposals that have all been agreed to in 2010.
“We are deeply disappointed with the continued delay in progressing the IMF quota and governance reforms agreed to in 2010 and the 15th General Review of Quotas including a new quota formula,” the IMFC said in its communique, adding: “We reaffirm the importance of the IMF as a quota-based institution. The implementation of the 2010 reforms remains our highest priority and we strongly urge the United States to ratify these reforms at the earliest opportunity.”
“We are committed to maintaining a strong and adequately resourced IMF. If the 2010 reforms are not ratified by year-end, we will call on the IMF to build on its existing work and stand ready with options for next steps and we will schedule a discussion of these options,” it said.
The IMF, commenting on the global economy, spoke of an uneven recovery, with revival of activity in the US and Britain. But the recovery is “modest” in Japan and “tentative” in the Euro area as a whole. It expects moderate increase in growth in many emerging market economies, including India.
The communique calls for bold action to speed up global economic recovery and urged nations to carry out politically-tough reforms to labour markets and social security in order to free up money to invest in infrastructure to create jobs and lift growth. A key concern is to avert “the very real risk of a prolonged period of subpar growth”, said IMFC chairman and Singapore’s Finance Minister Tharman Shanmugaratnam.
Rajan, commenting on the Indian economic situation, said business and consumer confidence was fast improving since the Narendra Modi government took office in May this year. Structural constraints are being addressed expeditiously, he said, adding a large number of stalled projects have been cleared and investment activity is expected to pick up soon. The RBI expects the growth rate to improve from 4.7 per cent in 2013-14 to 5.5 per cent in 2014-15.
The RBI chief, however, conceded that even as the macroeconomic situation has improved, the Indian economy is still faced with the challenge of bringing down inflation to a more tolerable level. Another challenge, according to him, would be to revive investment activity in the short run and raise the long-term growth potential through structural reforms.