Rebutting IMF's low growth projection of 3.8 per cent for India for the current fiscal, Finance Minister P Chidambaram has made a strong case for expediting quota reforms of the multilateral lending institutions arguing that delay was impacting the credibility and legitimacy of such entities.
The Minister, who is here to the attend the Fund-Bank meeting, also underlined the need for making IMF surveillance more forward looking to help nations take advance actions to deal with the emerging situation.
"We do not share this pessimistic outlook. We also believe there is a need for reviewing the methodology for growth projections as in the past International Monetary Fund (IMF) projections have often been at divergence with final growth numbers," he said here.
IMF has lowered India's growth projection for the current fiscal to 3.8 per cent from 5.6 per cent estimated by its World Economic Outlook update in July. Chidambaram, however, has been insisting that growth will range between 5 to 5.5 per cent in 2013-14.
Noting that the recent financial market developments have taken all by surprise, Chidambaram said an important question is why on-going IMF surveillance failed to foresee the market impact of exit from unconventional monetary policy.
"The IMF's failure to identify certain risks and give clear warnings has demonstrated yet again the weakness of its Surveillance framework. It also questions the relevance and usefulness of the IMF exercise with regard to policy settings of member countries because repeated downward revisions could significantly influence market expectations besides spreading gloom," he said.
Chidambaram further said that although the Fund has taken various measures to strengthen its surveillance activities, particularly with regard to spillovers, there was need for further reflection on it so that it could better foresee the significant global macroeconomic developments.
"The surveillance should be forward looking and it should forewarn the member countries of the impending threats, if any, to the global economy," he said.
Chidambaram had earlier said the IMF needs to undertake a detailed study as to how the unwinding will unfold, what impact it will have on advanced and emerging market economies, and how they should deal with the evolving situation.