India to inject Rs 55,000 crore into IMF kitty

Bailout: BRICS nations to hike contribution to help tide over Eurozone crisis

India to inject Rs 55,000 crore into IMF kitty

India will contribute an additional $10 billion (almost Rs 55,000 crore) to the International Monetary Fund (IMF) as part of the international assistance to tide over the Eurozone crisis that triggered an economic crisis all over the world.

“India has decided to contribute $10 billion to the IMF’s additional firewall of $430 billion,” Prime Minister Manmohan Singh announced at the G-20 summit here on Monday (Tuesday in India).

The announcement was preceded by an informal meeting of the BRICS leaders in the morning ahead of the summit in which top leaders from Brazil, Russia, India, China and South Africa agreed to enhance their own contributions to the IMF after acknowledging the need to increase the resources available with the IMF.

BRICS leaders took the decision in anticipation that all the reforms agreed upon in 2010 will be fully implemented in a timely manner. Soon after Singh announced India’s contribution, China pledged $43 billion while Brazil and Russia pledged $ 10 billion each.

In Los Cabos, global leaders pledged $456 billion, $26 billion more than the expected $430 billion, to the IMF kitty. They are also expected to adopt a Los Cabos declaration, pledging to promote economic growth and jobs, investing in infrastructure and promoting trade, while sticking to its pledges to bring down budget deficits.

Till late night, negotiators were stuck on five specific points in the communiqué, which has 83 paragraphs. 

Earlier, addressing the summit, Singh admitted that IMF firewall was inadequate to deal with contagion as the crisis turned out to be more serious than what had been estimated a year ago.

He, however, asked the European nations to change their policies and practices to kick-start the growth process again by doing away with the austerity approach. “It can be argued that austerity now will lay the basis for sustained growth later. But there is also an alternative view that with growth impulses as seriously weakened as they are today, synchronised austerity across many countries may not be the right medicine,” he said.

Singh, an economist of international repute, whose views on the contentious issue of austerity and growth was sought by US President Barack Obama on the eve of the G20 summit, advocated in favour of undertaking measures to kick-start growth and doing away with austerity-based approach.

“Financial markets normally favour austerity, but even they are beginning to recognise that austerity with no growth will not produce a return to a sustainable debt position,” he said. Singh briefly interacted with Obama on the sidelines of the summit.

While the BRICS leaders agreed to make additional contribution to IMF, they emphasised the need for increasing the resource base of multilateral development banks, so that increased resources is available for investments in infrastructure and social sectors in developing countries.

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