India's voice in the International Monetary Fund is set to increase, with the country today giving approval to the proposed restructuring of quotas in the multilateral agency.
With the Cabinet clearing the proposed amendment in IMF's Articles of Agreement, India's quota is slated to go up from 1.91 per cent to 2.44 per cent in the world body.
As such, India's voting rights are also scheduled to increase from 1.88 per cent to 2.34 per cent, enabling it to have a greater say in the functioning of the Fund.
"It's a good development that India's participation level has been increased. Quota has been increased for the first time in International Monetary Fund. Our voice will be stronger in IMF," Information and Broadcasting Minister P R Dasmunsi told reporters after the Cabinet meeting.
India will also have to make a necessary expenditure towards capital payments to the Fund since its quota is likely to increase from 4,158.2 million special drawing rights to 5,821.5 million SDRs.
SDRs are an international type of monetary reserve currency, created by the Fund, and their value fluctuate relative to the basket of major currencies.
The amendment to the IMF's Articles of Agreement require approval by 60 per cent of the membership, having 85 per cent of the total voting power. Additionally, the individual quota increase also needs to be approved by the relevant member country.
Each member country of the IMF is assigned a quota, based broadly on its relative size in the world economy.
A member's quota determines its maximum financial commitment to the IMF and its voting power, and has a bearing
on its access to IMF financing.
Total quotas at the end of March 2008 were SDR 217.3 billion (about 357.3 billion dollars). To address the concerns of developing countries about equal voting rights and representation, the IMF this year began a review of the quota shares.
The IMF's executive board endorsed the quota reform on March 28 this year, which was okayed by its Board of Governors in April.
At that time, Finance Minister P Chidambaram had welcomed India's improved voice in the Fund, saying, "India views the current round of quota and voice reform as only the first step in a process that needs to be carried forward.
"We would welcome a periodic realignment of quota shares as the global economy gets re-structured over time."
Besides India, quota shares were increased for 53 countries, mainly emerging nations. The aggregate shift in quota shares for these 54 members is 4.9 percentage points.
These countries saw their quotas rising in the range of 12 per cent to 106 per cent this year from the original quota levels prevailing at the time when the IMF decided to review them in 2006.
While India , Brazil and Mexico had a 40 per cent increase in their quota, China's quota was hiked by 50 per cent and Korea's quota surged the most at 106 per cent.
Only last week, the Fund formed a committee of eminent persons, headed by South African Finance Minister Trevor Manuel, including Nobel laureate Indian economist Amartya Sen, to advise on any modification that might enable the body to fulfil its global mandate more effectively.
The panel will assess the adequacy of IMF's current framework for decision-making.