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Rediff News  All News  » Business » India seeks reforms in global financial institutions

India seeks reforms in global financial institutions

November 15, 2007 11:33 IST
Pressing for time-bound reforms in international financial institutions, India has warned that their "credibility" would be adversely affected if developing nations are not given an "effective voice" in the functioning of these bodies.

While developing countries have made significant efforts towards good governance and domestic resource mobilisation, the support by the international community has lagged far behind, Member of Parliament Sachin Pilot said addressing the economic and financial committee of the United Nations General Assembly.

He said there was a need for "time-bound" action to restructure international financial institutions to give adequate representations to the developing world or else the "legitimacy and credibility" of these bodies will be adversely affected.

Demanding that the developed nations fulfill their commitments regarding financial aid to the developing nations, Pilot rejected the contention that private sector investments are panacea for lack of development.

He particularly mentioned "trade distorting" agricultural subsidies by the rich and limited access to the developing countries in the markets of developed States.

Private sector, he asserted, cannot replace public sector investments in infrastructure development and in sustaining equitable and inclusive growth. Besides, public sector investment is particularly important in social sector and human resource development, he said.

Pilot also sharply criticised the developed countries for counting aid for debt relief in the official development assistance.

"Official development assistance to write off debt arrears, which does not generate new and additional resources, should not count as aid," he told the delegates, stressing that any aid given to the developing countries should assist in national efforts and strategies.

In this context, Pilot highlighted the importance of "predictable and stable" aid flows. "Sudden increase and decrease in aid can have negative macroeconomic impact, with difficulties in absorption of sharp aid increases."

Stating that sustaining high levels of employment is an indispensable element of domestic resource mobilisation, he said it should be ensured that international capital flows are channeled to sectors which would have multiplier effect on employment generation.

"Generating employment must be key goal of development strategy, not merely macroeconomic stability," he told the committee on which all 192 member states are represented.

Domestic resource mobilisation also requires the development of financial systems that can support the financing of productive domestic industry, instead of promoting consumer credit and government debt, he added.

Referring to the stalled Doha round of trade negotiations, Pilot called for comprehensive review of the implementation of Monterrey Consensus and enhancing the follow up mechanism.

Dharam Shourie
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