Indian officials will argue with the IMF on this issue and the Government will seek the support of Brazil and South Africa in favour of the Indian viewpoint. India feels that while there is case for the widening of the SDRs basket to take recognition of new economic power balance in global economy, the Chinese currency in its present form does not meet the IMF standards. India has argued that the IMF norms say that any currency for being included in the basket of IMF reserve currency, has to be freely convertible and its value must be market determined. Chinese currency does not meet this standard, says Indian officials.

Reserve Bank of India has carried out a study and the study says that India should not favour any proposal for immediate change of IMF basket of currencies in a hurry. Chinese currency is still undervalued and this gives China a big advantage in the global export market. RBI says that India should not agree to the inclusion of Chinese currency in the basket of SDRs till the Chinese currency gets market determined rates.

Interestingly, China has got support from the European Union controlled IMF management. IMF chief Strauss Kahn has supported China’s inclusion in the basket. Similar is the opinion of the French President Nikolai Sarkozy who is currently the President of G-20 which is meeting in November to discuss among other issues, the expansion of SDRs basket also. Russia is also supporting the Chinese position while the US is not ready to allow renminbi inclusion in the SDRs basket at this stage. US also shares India’s view that the currency is undervalued and it is not market determined. The IMF completed its latest SDR review in November 2010 and the next review will take place in 2015.

China is aggressively campaigning for inclusion of its currency in the SDRs basket and the country has been able to influence the European Union member countries. China has followed closely the sovereign debt crisis in some European countries and has brought treasury bonds from them. China has helped the European countries to help the EU integration process and China believes that these steps taken by China have been well received by these countries and the European people.

China’s strategy is to work with EU to further deepen that comprehensive strategic partnership This closer relationship with China and the trade interests are the factors on which China is depending for getting EU support in favour of its campaign for inclusion of renminbi in the SDRs. China is aiming that at the next G-20 meeting in Paris later this year, there will be enough support in favour of the Chinese position.

Sources say that China is preparing in a big way for the G-20 summit on the basis of its success in articulating its views at the last month’s meeting at Sanya in China. China has given special focus on the reform of the international financial institutions at this meeting and the country will make all efforts to ensure that the summit takes more steps to accommodate and support the interests of the developing countries. (IPA)