India sought to join IMF Lagarde consensus

India supported France's Christine Lagarde as the International Monetary Fund's next leader because it wanted to be part of the consensus that was forming around her, Indian Finance Minster Pranab Mukherjee said on Tuesday.

Mukherjee told Reuters in an interview that he thought the IMF's selection mechanism should have been more transparent, but he believed that Lagarde, France's finance minister, was a worthy candidate.

Of course she has merit. Otherwise, why should I be supporting her? Mukherjee said.

The Indian finance chief kept his cards close to the vest, waiting until after the IMF board elected Lagarde as managing director on Tuesday, to reveal his country's support.

The decision kept the IMF's top job in the hands of a European, hewing to a tradition detested by many emerging market countries, which have been seeking a greater voice at the global rescue lender.

But Lagarde won the support of several large emerging market countries, including Brazil and China, over rival candidate, Mexican central bank chief Agustin Carstens.

We knew both of them, but we wanted to be part of the consensus, and the consensus emerged ... around Christine Lagarde. So naturally we became a part of it, Mukherjee said.

Mukherjee said he met with both candidates, but he noted that Lagarde did not promise to make any reforms on behalf of emerging market countries.

We didn't discuss any such thing when she met with us because it was not a quid pro quo. There was no question of that, Mukherjee said.

Asked if he would insist that the IMF choose its next leader from an emerging market country five years from now, he said it was too soon to predict anything, adding: The world may undergo many other changes; therefore, let us wait for that.

Mukherjee was in Washington for annual economic talks with Treasury Secretary Timothy Geithner. Both sides pledged to deepen cooperation, but did not announce any concrete actions that would boost access to India's growing market for U.S. firms.

Mukherjee said the lack of specific actions was due to the need for legislation that is taking time to win the support of multiple parties. Major legislation for pensions, banking and insurance reforms are still pending.

I told the secretary and other members (of the U.S. delegation), in India we consider reforms as a continuing process, Mukherjee said in reference to Geithner.

We do not have a simple, single-party majority in legislature and in parliament. We shall have to carry other people with us and we are exactly trying to do that, he added.

PRAISE FOR CENTRAL BANKER

Mukherjee, an influential cabinet member, declined to say whether India's top central banker Duvvuri Subbarao, would be appointed to another term as governor of the Reserve Bank of India when his term ends in September.

He's a good governor, Mukherjee said, but added that it was too soon for Prime Minister Manmohan Singh to decide on another term for Subbarao.

In addition, Mukherjee said India should be able to maintain its fiscal deficit targets despite a cut in customs and excise duties that will result in a revenue loss of 490 billion rupees ($10.9 billion) this year.

The government has been banking on strong growth to meet its deficit target of 4.6 percent of gross domestic product for the 2011/12 fiscal year.

We will be able to maintain the fiscal deficit target, Mukherjee said. Partly we will try to make up (losses) through revenue buoyancy, better compliance and we will also have some sort of expenditure controls.