RBI to pay India's $10bn contribution to IMF: Montek

Deputy Chairman of the Planning Commission Montek Singh Ahluwalia has said that India's proposed contribution towards the recapitalization of the International Monetary Fund (IMF) to the tune of USD 10 billion would be routed through the Reserve Bank of India.

The RBI will buy Special-Drawing Right (SDR)-denominated IMF securities, he said. He indicated that this would not impact the fiscal deficit. He feels there is more room for monetary measures despite the recent round of rate cuts by the RBI.

Abhijit Neogy of CNBC-TV18 reports that the India's proposed contribution of USD 10 billion to the IMF would be paid out of RBI's dollar reserves. The RBI, it is said, would buy SDR denominated IMF securities and the modalities are still being worked out. This will have no impact on the fiscal deficit as the government’s money is not being used. In conversation with CNBC-TV18 Montek Singh said “India would be willing to contribute in proportion to its share in the IMF quota. Our view is that the quota in our share should be increased. Our present share is around 2% and we have been arguing that we should allocate more money to the IMF. We will certainly be willing to meet our share of this total allocation. If a modality can be worked out that’s a matter of detail India would be willing to contribute.”

Ahluwalia added that rate cuts by the RBI would be welcome steps and he sees more room for monetary measures. He believes Indian interest rates are still high. He endorses the 6% growth estimate by the RBI in FY09, terming it a ‘reasonable assumption’. He assured that India was not facing a balance of payments problem, adding that capital flows were sufficient enough to meet external financing requirements.