The announcement of the contribution was made by Prime Minister Manmohan Singh in his address at the Plenary Session of the seventh summit of the Group of developed and developing countries (G-20) in this Mexican resort town against the backdrop of growing calls to nations to increase contributions to the International Monetary Fund (IMF) for the bailout fund.
India's contribution along with pledges by other member countries of the five-nation BRICS bloc has helped increase IMF's resources and give a boost to the $430 billion fund being used as a firewall to support struggling eurozone economies.
"The International Monetary Fund has a critical supportive role to play in stabilising the Eurozone. All members must help the Fund to play this role, I am happy to announce that India has decided to contribute USD 10 billion to the IMF's additional firewall of USD 430 billion," he told the world leaders at the seventh summit of the grouping which accounts for 80 per cent the world's GDP.
India has previously pledged to make contributions to the bailout fund but did not disclose the exact amount of its contribution to the fund.
According to Chinese Vice Finance Minister Zhu Guangyo, the BRICS is committed to pledge USD 60 billion to boost the firewall.
In an announcement late Monday, the IMF said China was offering $43 billion, Brazil, Russia and Mexico $10 billion each, $5 billion from Turkey, and smaller sums from a handful of other up-and-coming economies.
IMF managing director Christine Lagarde said that 12 more countries offered money to the fund during the Group of 20 meeting in the Mexican resort of Los Cabos, bringing the total number of donors to 37.
The contributions show "the broad commitment of the membership to ensure the IMF has access to adequate resources to carry out its mandate in the interests of global financial stability," she said.
"Countries large and small have rallied to our call for action, and more may join. I salute them and their commitment to multilateralism," she added.
The announcement brought an end to the mystery of how much the powerful BRICS countries -- Brazil, Russia, India, China and South Africa -- would provide.
The IMF fund will serve to help governments that are struggling to cope with debt repayments but eurozone leaders still faced pressure from their G-20 peers to make reforms to head off future financial crisis.
Calls were being made to the eurozone to put in place a bigger financial firewall to combat the crisis before other countries will pour more cash into the IMF.
Prime minister Manmohan Singh said the risks of contagion in Europe remained because they reflected weaknesses in the banking sector arising from excessive sovereign debt and low growth prospects.
"A crisis in the European banking system can choke trade finance quite quickly, and end up choking economic growth not just in the Eurozone but in the world in general," he said.
Singh said the Las Cobas Summit needed to send a strong signal to the markets that the Eurozone countries will make every effort to protect the banking systems and the global community will back a credible Eurozone effort and response.
He also spoke about the contentious issue of the relationship between austerity and growth.
"It can be argued that austerity now will lay the basis for sustained growth later. But there is also an alternative view that with growth impulses as seriously weakened as they are today, synchronised austerity across many countries may not be the right medicine," he said.
Financial markets normally favour austerity, but even they are beginning to recognise that austerity with no growth will not produce a return to a sustainable debt position, the prime minister added.
Stating he is not suggesting that fiscal prudence is not important, Singh said that he is only saying that given the large adjustment needs, not all of it can be front-loaded everywhere.
"This is especially relevant within a currency area. Austerity in the debt-ridden members of the Eurozone can work only if surplus members are willing to expand to offset contraction elsewhere in the currency area," he said.
(Source- http://economictimes.indiatimes.com)
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