India, underlying its growing economic importance, has sought an increase in its quota share in the International Monetary Fund (IMF), but is ready to contribute about $10 billion to boost the Fund's resources in proportion to its current share.
India, underlying its growing economic importance, has sought an increase in its quota share in the International Monetary Fund (IMF), but is ready to contribute about $10 billion to boost the Fund's resources in proportion to its current share.
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But New Delhi would prefer to make the contribution by buying securities that the IMF could issue, Planning Commission Deputy Chairman Montek Singh Ahluwalia, who represented India at the G20 meeting, told reporters on Sunday.
"Our concern here is that this contribution should take the form of investment in IMF securities by the Reserve Bank of India (RBI)," he said, as a direct contribution from the government becomes part of fiscal deficit.
The IMF, Ahluwalia suggested, should issue securities, which can become eligible for the countries to invest their reserves in so that no fiscal position is affected. A redeployment of funds also does not require any government permission.
The RBI, for instance, will shift some of its money currently held US treasury bills or other US government bonds to proposed IMF securities, which are obviously backed by the same government, he said. But the modalities are still being worked out.
In India's view resources being given to IMF should be viewed as an interim measure through its New Arrangements to Borrow, or NAB, Ahluwalia said adding, "In the longer term the way to fund the IMF is to increase the quota."
When they increase the quota the share of the developing countries should reflect their economic importance, he said. "Clearly our view is that India's share should be increased."
"Our view is that our importance in world economy is more than two percent," Ahluwalia said. The IMF uses a complex formula for determining quotas, but if Purchasing Power Parity (PPP) is used as a measure, India's quota will be four per cent.
But since a quota review will happen only in January 2011, "for the present, we are willing to contribute in proportion to our existing quota" of two per cent making for a contribution of $10 billion in an NAB of $500 billion agreed to at the G-20 summit.
Asked why was India not willing to invest more, he said: "Frankly quota reflects the amount of weight and vote. I don't see why we should contribute more than our vote share."
"If they increase our quota, we would be willing to contribute more in proportion. Otherwise this becomes a funding leaving the quota unchanged. We are not in favour of that."
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