India today made a strong pitch for restructuring the International Monetary Fund (IMF), saying its present form makes it incapable of dealing with the global financial meltdown.
"Institutions that we have are not capable of dealing with the problem (global financial melt-down),'' deputy chairman of planning commission Montek Singh Ahluwalia said while speaking at a session at the World Economic Forum in Davos.
''Let us restructure these institutions. We have got a huge crisis, and the way institutions function needs to be rethought," he added.
Developing countries have lost more than $300 billion following the financial meltdown, he said, and demanded that the global community put in place an institutional mechanism that will restore this flow.
While the world needs an organisation on the lines of the IMF, he said, it should not be doing its job in bits and pieces.
Several developing countries had accumulated huge foreign exchange reserves as the IMF did not show sufficient operational flexibility to deal with the global financial problems, he pointed out.
With over 180 countries across the world, the G-20 would also not be able to properly represent global economy, he pointed out.
Earlier, speaking at the forum, on `Reviving Global Economic Growth', commerce and industry minister Kamal Nath said ''The global economic crisis started impacting India from the beginning of last year.''
''Rising crude prices, along with the global food grain shortage, caused a spillover into the real economy. As inflation rose, India was forced to repeatedly tighten credit and money supply,'' he said.
By the middle of September 2008, it became apparent that the global credit crisis had deepened and key financial institutions were in need of help. Governments and central banks across the world started intervening to cut interest rates, inject liquidity and recapitalise weakening banks and financial institutions.
Of course, the priority now is to ensure financial stability and lessen turmoil in the capital and money markets. But once a certain amount of stability in financial markets is achieved, there are bound to be long-lasting changes in the way financial, commodity and consumer markets are regulated.
In the new framework, there will be calls for much greater transparency required from banks and other financial institutions, restrictions on the extent of leverage, restrictions on the use of complex financial products and a mandate to build reserves when times are good.
The issues of government and corporate accountability have taken centre stage once again. There can be no other way forward but for increasing the ethical standards of corporate and capitalist behavior. It is important to start an international movement for identifying a core set of ethical values that will be expected to become the operating norm for capitalism as we go forward.
He said one effect of the financial crisis has exposed the shortcomings of national regulatory process, which can result in collateral damage far beyond the geographic borders of the country where the errant firms/corporations are based and under whose national regulatory jurisdiction they operate.
''With corporates becoming truly global and without borders, should we not try and move towards a global regulatory mechanism? This is not a call for creating a 'supra international regulator' which some may find desirable, but for designing a system of regulatory norms that are then followed in all national jurisdictions, or it could, for example, alert national regulators of risks building in the financial system, have influence over the alignment of exchange rates or oversee global financial institutions whose activities spill across borders,'' he said.