Reading Comprehension: practice

In The Big League

The recently concluded G-20 summit in London marked the coming of age of India on the global economic stage. For a start, almost all the recommendations put forward by Prime Minister Manmohan Singh were accepted. These included a demand for greater surveillance of the financial system, a promise to reform multi-lateral lenders like the IMF and World Bank, as well as an expansion of the lender’s resource to aid developing countries. Singh’s call for a rollback of protectionist measures on goods and services was also heeded.

This is a far cry from 1991, when India had gone to the IMF with a begging bowl. Back then, it had been forced to pledge its gold to tide over a balance of payments crisis. In contrast, India has now pledged to make a contribution of $20 billion to the IMF kitty. Singh also said the country would not exercise its drawing rights, citing its adequate foreign exchange reserves.

The transformation from borrower to donor has certainly altered the way the country is perceived. What it means is that over the next couple of years, the IMF’s governance structure will be altered to give India and China, which has also upped its contribution to the IMF, a greater say in the running of the institution. Already, the G-20 has advanced its decision to reform the quota and voting rights system in the IMF from 2013 to 2011. Getting these new funds from India and China has also meant that the tough conditions that the multilateral lending agency used to impose as the price of bailout could be a thing of the past. “So, there is likely to be some change in the decision-making process of the IMF,” says Dhruba Gupta, former Deputy Treasurer at the IMF.

Along with China, India has given a voice to developing countries, especially those in Africa, Eastern Europe and Asia, which have been hit by the recession. And, should it need to borrow funds some day, India will have built itself a comfortable cushion by lending to the IMF. The lender’s rules stipulate that a country can borrow up to three times its quota. India is already co-chairing the Financial Stability Board, a successor to the Financial Stability Forum set up at the G-20 finance minister’s meet in December 2008. The body is expected to provide broad directions for improving the regulatory structure of the world’s financial system.

Singh’s call for avoiding trade protectionism and facilitating trade finance too has been accepted. The G-20 leaders agreed to set up a $250 billion fund for multilateral financial institutions and national export credit agencies, which will not only help Indian exports, but also the other export led countries of South-East Asia.

India’s coming out party is not the result of any new found love for the country. Rather, it is the result of a trillion dollar-plus GDP, its growth potential and $253 billion in forex reserves. Not too many countries can boast such numbers. The country’s growth rate is expected to range between 5-7% in 2008-09. That is better than most developed nations, prompting Lord Peter Mandelson, British Secretary of State for Business, to say India and China will be the “drivers of global growth.”

China, with its economic might, also flexed its muscles at the meet. Despite this, most leaders at the G-20 summit talked of the two neighbours in the same breath. As UK Prime Minister Gordon Brown said after closing the summit on April 2: “I believe people will be encouraged by the fact that China and India and Japan and many countries we have all come together in a way we could never have done even a year or two ago, and designed proposals that will reshape the global financial system.”

The shift in the centre of gravity of the global economy from the developed world to the developing world means that the latter cannot be denied its rightful place under the sun for too long. As for India, the G-20 may not be the perfect vehicle to show its leadership, but it’s a good place to start. (From Outlook Business, May 2, 2009)

1. The new acceptance that India enjoys is because of

(a) Strides in science and technology

(b) Growth in economy and growth

(c) Gains in relations and diplomacy

(d) Leaps in warfare and negotiations

2. In what way did India depend on the IMF in 1991?

(a) To avoid excessive poverty

(b) To expedite liberalization

(c) To come out declining financial growth

(d) To borrow to manage payments

3. The contribution made by India to IMF means the country—

(a) Will be more influential and can borrow more

(b) Will be treated fairly and can exert power

(c) Will be given an award and citation

(d) Will be praised as an exemplary model

4. What are the demands made by India?

(a) Opening up of more segments and deregularization of banking

(b) Privatization of core sections and protection for the poor

(c) Avoidance of protectionist measures and facilitation of trade finance

(d) Spread of more aggressive nationalization and special packages for farmers

5. How did the meet as a whole assess India and China?

(a) India and China were considered equals

(b) India and China were treated as rivals

(c) India and China were rated as ambitious

(d) India and China were regarded as trifles