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PM seeks reforms of global financial institutions

By V S Chandrasekar in Rome
Last updated on: July 07, 2009 15:49 IST
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Ahead of the G-8 meeting on Wednesday, Prime Minister Manmohan Singh has called for significant reforms of the international financial institutions to address global problems and asserted that India would seek its due place in such institutions.

Singh, who will be meeting U S President Barack Obama and other world leaders at the G-8 meeting with five outreach countries including India, said these institutions need to reform decision-making and ensure effective delivery to adequately reflect ground realities.

India, he said, was deeply committed to multilateralism and will "seek its due place, play its destined role and share its assigned responsibility, giving voice to the hopes and aspirations of a billion people in South Asia".

In an article in the compendium on contemporary global issues brought out for the summit, Singh said India will strive for the reform of the UN to make it more democratic.

"The Security Council has not changed at all and its present structure poses serious problems of legitimacy. The system of two-tiered membership, which gives a veto to the five permanent members i.e. the nations that emerged victorious after the Second World War, is clearly anachronistic," he said.

The Prime Minister noted that Germany and Japan, which have significantly larger economies than Britain and France, both permanent members, were excluded.

The Prime Minister noted that China was the only developing country in the P-5 which was there for historical reasons, not as a large and economically important developing nation.

"It is obvious that if the system was being designed today it would be very different. However, while the problems have long been recognised, efforts to reform the system have made little headway," he said.

Dwelling on the global financial crisis, he said it has brought out the deficiencies of the existing system of governance.

"It has forcefully exposed fundamental weaknesses in the approach to financial regulation which emphasised light regulation and greater reliance on in house controls and market discipline to control risk," he said.

Whatever the causes and specific failures underlying the crisis, the world was quick to realise that a crisis of this magnitude required a global solution, he said.

Singh also felt that major international groupings were not adequately represented. Referring to the G-8 plus five outreach countries, he said while "ad hoc" expansions of the grouping were a useful way of broadening the range of consultations, the expanded group was not cohesive and did not have special legitimacy within the UN system.

The grouping was expanded to G-8 plus 5 a few years back with India, China, Brazil, Mexico and South Africa being added as outreach countries. More recently some more were included as additional outreach countries.

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V S Chandrasekar in Rome
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