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IMF quota reforms: Breathing space needed before next round, says Christine Lagarde

On Saturday, Modi had said the long pending quota revisions have finally come into effect but “even now, IMF quotas do not reflect the global economic realities.”

imf, imf quota reforms, imf christine lagarde, imf chief christine lagarde, business news, india news, advancing asia conference, International Monetary Fund Chief Christine Lagarde. (AP Photo/Rodrigo Abd, File)

A day after Prime Minister Narendra Modi pitched for more quota reforms in the International Monetary Fund (IMF), its managing director Christine Lagarde said a round of reforms was just completed and the institution needs some “breathing space” before going in for another round of reforms.

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“We just completed the quota reform. It was an in-depth series of changes which are not sufficient. The quota review is a continuous momentum. We will be at it over and over, because it has to mirror the state of the economy. We just completed one and we need to breathe for a few moments and then move on to the next one,” Lagarde said at the Advancing Asia conference.

On Saturday, Modi had said the long pending quota revisions have finally come into effect but “even now, IMF quotas do not reflect the global economic realities.”

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The 2010 Quota and Governance reforms were approved by the US Congress in 2015. After the reforms come into effect, India’s quota in the IMF would rise to 2.7 per cent from the existing 2.44 per cent along with an increase in voting share of India to 2.6 per cent from 2.34 per cent.

Lagarde appreciated the fiscal stance adopted by the government, terming it as “appropriate and very sensible”. She added that using the windfall from low energy cost to finance infrastructure projects is “the right stance that has been set under the given circumstances”.

“We also highly value the investments being made into major infrastructure projects because we believe it is the right way to stimulate short-term growth as well as to improve medium to longer term productivity in the country, which also means trying to eliminate as many bottlenecks as possible in order to reap the benefits of agriculture, manufacturing that is taking place in various parts of this very large and beautiful country,” Lagarde said.

The IMF head said that despite the obstacles, the Indian economy has the potential to grow and with a growing population, it is on the road of growth.

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“I don’t see the obstacles to that growth at the moment. My message to you is that there is the potential for growth, there is a growing population, there is scale of markets. There’s is a determination to reform, there are technological breakthroughs and there is creativity at play in an economy that’s clearly on a road to growth,” she said.

When asked on India’s new series for calculation of GDP, which has been mired in controversy ever since it was introduced last year, Lagarde said they have conducted the work and analysis of the series and it is “in line with international standards”.

Minister of State for Finance Jayant Sinha also highlighted India’s growth potential, saying it is India’s turn now as the country will become the key driver for global economy owing to its demographic dividend and policies to sustain high growth. India, however, needs to be watchful of the spillover effects of unconventional policies being followed by other countries, Sinha said, adding that coordinated fiscal expansion is needed.

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On the issue of wilful defaulters, Sinha said the full force of the law is being applied for defaulters that have genuinely engaged in illegal activity to ensure that they are brought to justice. He added that Centre is looking into loan defaults by some corporate groups which have happened due to slowdown in global economy or because of policy failure of the previous government.

‘RBI taking right approach in tackling NPAs’

IMF MD Christine Lagarde said, the move by RBI to address the problem of non-performing assets of public sector banks is “absolutely right” and the reorganisation of bad debt will help the banks to become more agile.

“The fact that the central bank governor is addressing the issue of bank balance sheets head on is absolutely right. I think the approach is right. He is accessing the weakness of the bank balance sheets… and health of those accounts that are extensively borrowed from the banks,” Lagarde said. She further added: “Equally relevant are various mechanisms and instruments that are being worked out with bad loans and distressed assets that are sitting on banks’ balance sheets and are clearly clogging their balance sheets”. ENS

First published on: 14-03-2016 at 12:49:05 am
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