What are the caveats?
Two recent events have redrawn power structure of the International Monetary Fund (IMF).
First, the inclusion of the Chinese Yuan (Renmenbi) in the basket of 5 (now 6) currencies the IMF recognises for valuing its Special Drawing Rights (SDRs). This is a major leg up towards the making of an 'Asian century'.
Second, the IMF has created a new definition for 4 countries, China, India, Russia and Brazil calling them Emerging Markets Developing Countries (EMDCs) who has been allocated 6% more than their existing quotas, thus reducing the shares of original Bretton Woods signatories.
The proposal for this increase was put forward in the 14th review meeting of the IMF in 2010. But it was held up for 5 years because the US Congress refused to ratify it. This gave an impression that the US establishment considered the IMF an extension of the US Treasury department.
While the increases may seem marginal if one looks at the Western quotas and votes, this has immense psychological importance in terms of the Asian continent.
First, it acknowledges that the China and India have become major drivers of global growth, ahead of the slow growth out of a debilitating recession in the USA, and a really shrinking Europe.
Second, the quota increase that also includes other developing and less developed countries (LDCs) is not all that insubstantial in aggregate terms as this goes out of the kitty of the USA and other developed economies of the "global North".
Clearly, its inability in performing its primary task of maintaining economic and financial stability proven during the 2008 crisis has taken its toll on its edifice. Christine Lagarde, the Fund's managing director has begun sounding less like a stern central banker of sorts and more humane when she talks about issues related to economic developments of the developing countries and, even micro issues like status of women in the economic structures.
This change at the bastion of big Capital has come on the back of 3 developments.
The G-7 or Group of 7 countries that held the capital - it became G-8 once after Russia was born out of the Soviet Union - had to extend its footprint by including more members and becoming G-20 at the beginning of 'Great Recession.'
Second was the formation of the Asian Infrastructure Investment Bank (AIIB) at the inspiration of Beijing, where India has recently been made the Chief Financial Officer (CFO).
Third, founding of the BRICS Bank dubbed the New Development Bank (NDB) has also created ripples on the global stage. All these new entities challenge the Bretton Woods monopoly over Capital.
Having said that, India's former executive director at the Fund's Washington headquarters, Dr Arvind Virmani, believes that the members of these alternative institutions may have struck common ground in the AIIB and the NDB. They will still be driven by their own national interests, rather than create a block.
Virmani said: "China is not and (has) never been a member of the non-aligned group. Though it verbally supports this group, its actions in the IMF are driven by its own interests. Similarly many developing countries and lesser developed countries do not hesitate to vote along with the rich countries who contribute foreign aid and bilateral development assistance to them."
Edited by Aditya Menon