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Tag Archives | Governance

Reforms in global financial system — Finally

The reforms at International Monetary Fund(IMF) has meant better voting share for India and a voice in global financial system

The IMF’s reform package of quotas and governance became effective on January 26, 2016. As a result of this, India, Russia, China, and Brazil gain entry into the club of 10 largest economies of the world. This review was long pending since December 2010. The delay was attributed to approval by the US Congress which finally gave its nod in December 2015. What do these reforms exactly mean?

First, it is essential to know the origin of IMF. It is an international organisation of 188 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth and reduce poverty around the world. To summarise — it is the lender of last resort for the all the countries in the world. It was formed at the end of World War II as part of international financial system led by the US.

Second, what exactly is ‘quota’? Each member country is assigned a quota — which is a value of its share in the IMF financing system. This is proportional to that country’s impact on the world economy. A country’s quota in the IMF determines its voting power, the amount of financial resources it must provide to the IMF, and its access to IMF financing. It then goes without saying that larger a country’s quota, greater will be its say in the governance of IMF. Quotas are based on a weighted average of GDP, openness, economic variability and international reserves. They are expressed in Special Drawing Rights (SDR), an international reserve asset determined by the value of the US dollar, euro, Japanese Yen and pound sterling. The increase in quota has meant enhanced resources for IMF.

The IMF’s capital has nearly doubled from $ 329 billion to $ 659 billion. Much of this has come because of funding from member countries, especially of G-20, contributed after the financial crisis of 2008. As a result, more than 6 percentage points of quota have been transferred from developed to the the emerging market countries. India and China have increased their voting shares by 0.292 and 2.265 percentage points respectively. India’s increase, though marginal has been enough to place it in the top 10 countries. The developed countries have had a decrease in their voting share from 0.2 to 0.5 percentage points. This redistribution has catapulted China from sixth to third position behind US & Japan. Saudi Arabia’s decrease by nearly a percentage point has placed it below India, Russia and Brazil. This reform will also affect the selection process of Executive Directors,i.e., the governance.

Once the reforms are in place, all positions on the board will be determined by election. In the earlier system, member countries with five largest quotas each appointed an Executive Director. This invariably meant a European as the head of IMF. It had been a common refrain among the developing countries that IMF would always be headed by an European and World Bank by an American. The reforms are reflective of the emerging economic order in the world and reinforce IMF’s legitimacy as a global financial institution.

Guru Aiyar is a Research Scholar at Takshashila Institution and tweets @guruaiyar

Featured Image: IMF by Javier Ignacio, licensed by creativecommons.org

 

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It’s the governance, stupid!

By Nidhi Gupta and Varun Santhosh

The recent spate of citizen protests in Bangalore is a symptom of the deep governance deficit in the city

The tech-savvy residents of the outer regions of Bangalore are increasingly taking to public protests to voice their discontent with the myriad infrastructure problems that beset their neighbourhoods. These problems are symptomatic of the underlying issues arising out of a myopic vision and a deficit (sometimes bordering on absence) of governance. As long as the state government and the city’s administrators remain mired in a cycle of firefighting, band-aid fixes and peddling ‘white-elephant’ projects as grand solutions, the protests will only spread and improving the livability of India’s Silicon Valley will remain a distant dream.

Residents of Sarjapur and Bellandur, along the Outer Ring Road(ORR), staged a protest yesterday to highlight their infrastructural woes. A fortnight ago, in a protest with a clarion call to “Save Whitefield“, around 10,000 residents of Whitefield, a suburb that is host to most of the IT companies, got together to form a human chain that stretched for 10 kilometres. The tipping point that mobilised the otherwise docile professionals was school children being stuck in traffic for almost 3 hours on their way back home. This followed similar other protests in Whitefield and HSR Layout in the past two months. Such vocal demonstrations by a section of the citizens bring to fore the issues plaguing the city and accentuate the extent of discomfort that people and businesses endure on a daily basis. But the response it garnered from the government is revealing. It ranged from half-hearted midnight operations to asphalt roads, hours before the protest, blaming different agencies for dug-up roads to mooting the idea of tunnel ring roads.

As pointed out earlier (by Pavan and Karthik), Bangalore has not only seen a rapid growth from about 200 sqkm to around 709.5 sqkm, but a failure of infrastructure and governance to catch up with such growth. The recently released BBMP restructuring report prepared by  a 3-member expert committee, points out that the existing 198 wards in the BBMP area demarcated in 2007 were based on the 2001 census. From 2001-11, the city expanded by 44.6 per cent, one of the highest in its comparable class in the world. During the same period, while the inner core areas grew by about 18 per cent, the outer regions expanded by more than 100 per cent. The report further states that 43 wards have a population more than 50,000 (based on 2011 Census) and the largest ward, Horamavu, is well over 1.1 lakhs at the moment. Compare this to the ward size recommended to be fixed ideally between 20,000 for the outer growth areas and 30,000 for the inner city areas.

Coming back to one of the main triggers of the protests – traffic. It is a norm in Whitefield and ORR regions for people to waste many productive hours negotiating traffic pileups. While narrow roads, potholes, lack of pavements, etc. contribute to the traffic jams, the primary issue, especially in Whitefield, is that the suburb has only two access points and no alternate routes. This nightmare scenario could have been averted had the city administration planned a more robust road network with multi-modal public transport options like commuter rail and bus rapid transit systems when it was wooing IT companies to set up shop. Furthermore, the problems not only stop at bad planning, but also extend to haphazard announcements of one-ways and arbitrary banning of U-turns leading to circuitous routes.

Consider the other perennial problem of lethal potholes in Bangalore. There are two parts to this problem — one, why do potholes appear in the first place and two, why are they not fixed? The first problem arises due to poor quality control in road-building practices and the utter lack of coordination between various civic departments such as the BWSSB, BESCOM, BSNL and BBMP that results in repeated mutilation of newly laid roads. The re-emergence of potholes can be blamed on patchwork repairs carried out with substandard materials. It is quintessentially the government’s way of trying to placate its frustrated citizens after each round of rains. To make matters worse, the administrators repeatedly slip on their self-declared deadlines of making the city pothole free. In short, there is neither sound planning nor a well-managed process.

Another classic case of the administration caught napping is the garbage issue that has dogged the erstwhile ‘garden city’ for the past many years.  Since 2012, the protests of villagers against landfills in their backyards, has moved from Mavalipura to Mandur to most recently, Bingipura. The response of the various governments, including spending 329 crores in the year 2013-14, has hardly changed the situation on the ground. The policy-making space has been ceded so much that the judiciary has continuously overstepped its mandate to propose tender rules for new contracts on waste management, to the latest 2-bin-1-bag ruling. The story follows a similar trajectory on the issue of degradation of lakes. Is it any surprise then that protests continue to arise at a frequent basis in Bangalore?

The solutions to these myriad problems exist. Many civic organizations, activists and experts have lent their time, energy and ideas to fix these issues in Bangalore over the years. The implementation of TenderSURE roads in the Central Business District has lit a beacon of hope. The 2015 BBMP Restructuring Committee’s report addresses most of the chronic problems and recommends a credible roadmap towards a more liveable Bangalore for all its citizens. However, it is yet to gather momentum. Dr. B.R. Ambedkar, in his famous speech during the Constituent Assembly debates said, “I feel, however good a Constitution may be, it is sure to turn out bad because those who are called to work it, happen to be a bad lot”. Similarly, all the good policies and governance mechanisms are doomed to fail, unless the intent and accountability of our policymakers is fixed. 

Nidhi Gupta and Varun Santhosh are Programme Managers at the Takshashila Institution and tweet at @nidhi1902 and @santvarun respectively.

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