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The shareholding of India, China and other developing countries grew on Sunday when the bank approved a three per cent shift in voting rights.
With this, India has emerged the seventh largest shareholder in the bank. China moved to the third position after the US and Japan and ahead of Germany. India’s equity share now stands at 2.91 per cent, against 2.77 per cent earlier.
The chairman of the prime minister’s economic advisory council, C Rangarajan, speaking to Financial Chronicle, described it as a historical move that would ensure that India would be kept in mind in the making of the bank’s policies.
“India has always been a major shareholder in the World Bank. The latest development, which is what G20 members agreed upon at the Pittsburgh summit in September, will ensure a greater administrative role for India. It will also be useful as the bank, in adopting policies, will keep in mind the needs of the developing world,” Rangarajan said.
Former finance secretary and Rajya Sabha member N K Singh thought the change was only nominal. “Deeper changes are required. The Nordic countries continue to enjoy a greater say in the functioning of the bank, while contributing very little to the global economy,” he said.
The voting power of China, Brazil, Indonesia, Mexico and Turkey, among others, has increased, while that of UK, France, Germany, the Nordic and Benelux countries, Japan, Australia and Canada has decreased.
Singh, however, added that India would now have more headroom to borrow, though the country never fully leveraged its actual borrowing power. He said what the change signalled was the recognition of a greater reform in the financial sector and a shift in economic power.
Former Reserve Bank of India governor Bimal Jalan described the change as positive and said countries now got a share and say in accordance with their GDPs. “For India it’s not a question of borrowing or needing financial assistance, but helping out in the financial assistance itself,” said Jalan.
The director-general of the National Council of Applied Economic Research, Suman K Bery, said, “Financial assistance from the bank is a facility that we should use, especially with a lot of work on environment side still to be done … There will now be more capital to go around.”
The realignment in shareholding will allow the bank to lend $86 billion more.
The change in the voting structure, in which developing countries now hold 47 per cent, up from about 44 per cent earlier, doesn’t necessarily mean that changes in the International Monetary Fund are also in the offing.
“For many years, there was a structural parallelism in the shareholding in the bank and the fund. This could be a departure from it,” said Bery.
Finance secretary Ashok Chawla led the Indian delegation to the spring meetings of the bank and the fund in Washington. A finance ministry news release quoted Chawla as saying, “These changes are transformative in nature and will reposition the World Bank group in the international financial architecture. They will strengthen the role of the World Bank group in being an effective multilateral instrument and keep it relevant in a dynamic world.”
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