Pitching for further quota reforms in the International Monetary Fund (IMF) to give emerging economies greater say in the working of multilateral institutions, Prime Minister Narendra Modi Saturday said India has never undervalued its exchange rate to boost trade and does not follow “beggar thy neighbour” macro-economic policies.
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He also said “cooperative and competitive federalism” was one way of promoting economic growth and maintaining social stability in a large, diverse country like India. “The states and the Centre come together to pursue common objectives. States which pursue good policies and deliver essential services for the poor, induce others to follow.”
Speaking at the Advancing Asia Conference organised by the IMF and the Finance Ministry, Modi said India can contribute to Asian prosperity and development by being economically strong. “Amid global problems, I am happy to say that India is a haven of macro-economic stability and a beacon of hope, dynamism and opportunity.”
“Our rapid economic growth is also very distinct in Asia. We have never tried to gain in trade at the expense of our partners. We do not follow ‘beggar thy neighbour’ macro-economic policies. We have never undervalued our exchange rate. We add to world and Asian demand by running current account deficits. We are, therefore, good Asian and good global economic citizens, and a source of demand to our trading partners,” he said.
“India has dispelled the myth that democracy and rapid economic growth cannot go together. India’s growth rate of over seven per cent is being achieved in a country that is also a vibrant democracy.”
Listing a series of steps taken to push growth and improve economic governance, the Prime Minister said: “We do not intend to rest on these achievements because my agenda of ‘reform-to-transform’ still needs to be finished. Our recent budget provides a roadmap for our future plans and ambitions. Our underlying philosophy is clear: To create the climate for wealth generation and for that wealth to be spread to all Indians, especially the poor, vulnerable, farmers, and disadvantaged communities.”
He said public investment was essential to boost growth at a time when private investment remains weak. “In addition to agriculture, we have increased public investment in roads and railways. This will improve the productivity of the economy and the connectivity of our people. Public investment is also essential at a time when private investment remains weak.”
“We have also made other reforms that will help create wealth and economic opportunity. Given the enormous entrepreneurial potential in the country, my motto is Start Up India and Stand Up India. The budget has provided a further boost to the ecosystem for start-ups.”
He\ said the long-pending IMF quota revisions agreed in 2010 have finally come into effect but still do not reflect global economic realities.
\”Reform of global institutions has to be an ongoing process. It must reflect changes in the global economy, and the rising share of emerging economies. Even now, IMF quotas do not reflect the global economic realities. Change in quotas is not an issue of increasing the ‘power’ of certain countries. It is an issue of fairness and legitimacy,” Modi said.
“The belief that quotas can be changed is essential for the fairness of the system. For poor nations to respect the legitimacy of such institutions, they must be able to aspire and to hope. I am, therefore, very happy that the IMF has decided to finalise the next round of quota changes by October 2017,” he said.
He said the quota reforms implemented by IMF in January led to emerging countries such as India and China now better reflecting their weight in the world economy. India’s quota in IMF rose to 2.7 per cent from 2.44 per cent and its voting share increased to 2.6 per cent from 2.34 per cent. India is now among the top ten members of the IMF.
\Speaking at the conference, IMF Managing Director Christine Lagarde said India is the world’s fastest growing large economy and “with the promise of more reforms to come, its star shines bright.”
She emphasised the need for India to step up infrastructure investment, improve banks’ balance sheets, empower women and pursue greater trade integration with the world.
Lagarde said Asia needs to take up a leadership role in the global economy as the region now accounts for over 40 per cent of the world economy and will deliver nearly two-thirds of global growth over the next four years.