India would play a key role in the International Monetary Fund (IMF), further improving its policy tools to evolve with changes in the economic environment to support its global mandate and the member country's needs, says a book by senior IAS officer V Srinivas.
The book, titled 'India's Relations with the International Monetary Fund 25 Years in Perspective 1991-2016', provides insights into India's role as a founding member of the IMF and the rise of China in the international monetary system among other major developments at the Fund.
India's macroeconomic performance stands out over the past 25 years. After the 1991 crisis and stand-by arrangement program with the IMF, wherein significant structural reforms were witnessed, India experienced high growth surpassed only by China and East Asian countries, the book said.
"India became the world's fastest growing major economy. India's rise from a debtor country to a creditor country at the IMF with significant increases in its voting right reflected in higher quotas, represents a remarkable success story," it said.
India has supported the IMF's strictly limited gold sales in 2009-10. In the first phase of the IMF's exclusively off-market transactions to interested central banks and other official holders, at market prices, the Fund sold 200 metric tons of gold to Reserve Bank of India, the book said.
India's influence is also seen in the Fund's flexible view in the liberalisation and management of capital flows taking into account the specific country circumstances, it said.
Mentioning the rise of China as an economic super power, the book says China's influence in international institutions is at an all-time high.
"It has strategically positioned itself to set-up new international institutions where it wields considerable influence," it said.
China's unprecedented financial clout is visible in the International Monetary System, the book said.
"The journey traversed is remarkable From merely supporting the lMF's various policy measures, China's positions have become far more strident following the lMF's Quota and Governance Reform," it said.
The book said China wields considerable policy influence in the IMF post the IMF quota and governance reforms implemented in 2015.
"China's influence on the IMF Executive Board has grown significantly and no important decision on the Executive Board can be taken without an indication of China's consent. China issues gray statements on almost all topics coming before the Executive Board," it said.
Talking about the even-handedness of the Fund surveillance, the book cited examples as to how the two top developed economies -- the US and China -- chose to ignore IMF's advice on trade tensions involving the two countries.
The United States published a list of USD 50 billion worth products from China that would be hit with 25 per cent tariffs. China retaliated with USD 50 billion list of US goods for tariff hikes spiralling a trade dispute with the United States.
The United States responded with tariffs of 10 per cent on USD 200 billion of Chinese goods following the retaliatory action by China.
"Trade hostilities continue to escalate as the United States seeks to address its trade imbalance with China which currently stands at USD 372.5 billion. The Fund has remained a bystander in the trade dispute which threatens to undermine the international trading system developed after decades of consensus building," it said.
To conclude it is important to note that there is strong momentum behind the global expansion despite the trade risks and financial markets volatility presenting the downside risks, wrote the author.
"To sustain the upswing countries have to adopt open and rules-based multilateral trade systems that work for all and to durably reduce the global imbalances. India would play a key role in the IMF further improving its policy tools to evolve with changes in the economic environment to support its global mandate and the member country's needs," Srinivas said.
The book is the first comprehensive study on the subject that offers deep insights into an institutions that has influenced the global economy in a significant way.
Srinivas is at present Additional Secretary to government of India working in Ministry of Personnel, Public Grievances and Pensions. He was the Adviser to Executive Director (India) in the IMF from 2003 to 2006.
Srinivas was a member of India's delegations to the Fund-Bank Annual Meetings from 2002 to 2006.
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