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IMF quota should be based on PPP: India
By agencies
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Monday, 26 September 2005, 19:30 IST
WASHINGTON: India has asked the World Bank and the IMF to consider Purchasing Power Parity (PPP) as the defacto standard to determine the economic weight of a country to be able to correct the "democratic deficit" in their governance.
"The set of determinants presently used in computing the economic strength of the countries is not a true reflection of the global economic realities and it has tilted the Fund's and Bank's governance structure towards the developed countries," Finance Minsiter P Chidambaram told the joint IMF-World Bank Development Committee, pushing for greater representation for an emerging country like itself in the IMF and the World Bank.
Chidambaram asked the World Bank and the International Monetary Fund to set right "incongruities" by modifying the main determinants of IMF Quota and Bank's Capital shares in GNI (Gross National Income) on PPP basis.
"The issue of democratic deficit in the governance of Bretton Woods Institutions (World Bank and IMF) needs to be addressed in right earnest to enhance legitimacy, transparency, accountability and ownership of the decision-making process in these institutions," Chidambaram said.
"We feel that a fresh look at the quota formulae will necessarily have to focus on an adequate weightage to GDP (Gross Domestic Product), far beyond what the present formulae envisage.
"It would be preferable to compute GDP on the basis of Purchasing Power Parity, given that this is arguably the best basis for comparison of GDP across a wide cross-section of countries, he said.