India gets more voting rights in IMF reforms

In long-pending reforms that came into effect on Wednesday, emerging and developing economies gained more influence in the governance architecture of the International Monetary Fund (IMF). India’s voting rights increase to 2.6 per cent from the current 2.3 per cent, and China’s, to six per cent from 3.8, as per the new division. Russia and Brazil are the other two countries that gain from the reforms.

More than six per cent of the quota shares will shift to emerging and developing countries from the U.S. and European countries.

The combined quotas — or the capital countries contribute — doubles to about $659 billion from about $329 billion.

The significant resource enhancement will fortify the IMF’s ability to respond to crises more effectively. “…these reforms will reinforce the credibility, effectiveness, and legitimacy of the IMF,” an IMF statement said.

IMF reforms were agreed upon by its 188 members in 2010, in the aftermath of the global financial meltdown, and its delayed implementation has been a major concern for India. Former Prime Minister Manmohan Singh and Prime Minister Narendra Modi have raised the issue at international forums repeatedly, seeking more voice for he developing world in the global financial architecture.

Among the reasons for the delay has been the time it took the U.S Congress to approve the changes. U.S voting share will marginally drop, from 16.7% to 16.5%. Though the country holds a veto power, Republicans have been agitated over “declining U.S power.” The U.S Senate approved the changes in December 2015, paving the way for the implementation of the reforms.

“I commend our members for ratifying these truly historic reforms,” IMF Managing Director Christine Lagard said. She said that a “more representative, modern IMF will ensure that the institution is able to better meet the needs of its members in a rapidly changing global environment.”

The reforms bring India and Brazil into the list of the top 10 members of IMF, along with the U.S, Japan, France, Germany, Italy, the United Kingdom, China and Russia. Canada and Saudi Arabia slip below the top ten in the process.

As part of the reforms, for the first time, the IMF’s Executive Board will consist entirely of elected Executive Directors, ending the category of appointed Executive Directors. Currently the members with the five largest quotas appoint an Executive Director, a position that will cease to exist.