Take lead in global economy, IMF chief tells India

Strauss Kahn says time ripe to play rightful role

This was conveyed by IMF Managing Director Dominique Strauss Kahn during wide-ranging talks with Finance Minister Pranab Mukherjee here.

With India fast emerging as an economic power in the international arena it will have to share more responsibility for management of the global economy, he said.

Kahn stressed India as a fast growing balanced economy could play a major role in “smooth and orderly” development of the global economy, finance minnistry officials said.  

As the global economic architecture is undergoing rapid changes with growing influences of emerging economies like India, China and Brazil “the time has come for India to play its rightful role in global economic governance,” Kahn noted. This observation of Kahn assumes significance in the backdrop of a growing global consensus being reached for reform of the IMF by giving more voting rights to emerging market economies.

Global leaders had agreed to give more say in the IMF to emerging economies at the G-20 Summit in Seoul last month, so that it “better reflects changes in the world economy.”

Rules of game

India and other emerging market economies have been demanding reform of the IMF to give more powers to them, in line with their increasing share of total global trade. Significantly, Kahn told Mukherjee that the emergence of G20 has changed the rules of the game in international policy cooperation and   emerging markets like India would increasingly play important role in the G20.

Mukherjee on his part assured the IMF Chief that India would play its “due” role in the G20 and support the process of policy cooperation in addressing external imbalances and development imbalances.

In this regard, he reiterated India’s view that global savings need to be recycled to address development imbalances as part of world community addressing global imbalances.

Against this backdrop he stressed that efforts were being made to bring about reforms in the IMF to give more voice to emerging economies like that of India to make it (IMF) more legitimate.

Later talking to newspersons Kahn said Indian economy was growing at its “full potential” and was likely to match the IMF forecast of over 9 per cent.”

However, he suggested that in order to sustain its ongoing growth momentum India would have o give more focus on fiscal consolidation on medium term.  Asked about impact of ongoing surge in capital inflows on Indian economy Kahn said expressed confidence in India’s handling of capital inflows. Earlier at interactive session with Ficci, Kahn responding queries on capital inflows he said “long term capital inflows should be welcomed always. One has to be careful of short term capital inflows, abrupt shifting of which could have adverse effects.”