Mumbai: Almost exactly 70 years before Narendra Modi became one of the signatories to an agreement between five developing countries to establish a development bank as well as a formal arrangement to provide liquidity support to members facing balance of payments difficulties, delegates from 44 countries met at a hotel in the town of Bretton Woods near the US east coast to build a new global monetary system that is now being challenged by Brazil, Russia, India, China and South Africa (Brics). There was a small Indian delegation at the conference; it made up for its lack of numbers with intellectual heft.

The reasons for the choice of the venue were interesting. Bretton Woods was attractive because of its salubrious climate at a time when air conditioning was not a common offering. The conference was held at the Mount Washington Hotel because it was open to Jews. The delegates met over three weeks in July 1944 to ensure that a repeat of the financial calamities that had scarred the world in previous decades would be avoided in the future with sensible international coordination done through new global institutions.

The Indian delegation to Bretton Woods was led by two British officials—Jeremy Raisman and Theodore Gregory. The Indians in the team were C.D. Deshmukh, Shanmukham Chetty, A.D. Shroff and B.K. Madan. Deshmukh later became finance minister. So did Chetty. Shroff was a director of Tata Sons. Madan became an executive director of the International Monetary Fund (IMF). David Meek was an advisor to the Indian delegation.

In his fine history of Indian finance, Barons of Banking, Bakhtiyar K. Dadabhoy says that the Indian delegation to Bretton Woods had four main concerns: to convince the conference participants that IMF should also be sensitive to economic development issues, a fair settlement of the problem of sterling balances that had built up during World War II, securing a satisfactory quota for India and bagging a permanent seat on the executive board of the institutions that emerged from the Bretton Woods negotiations. The last two items are still contentious issues for those who quite rightly argue that developing countries need higher quotas as well as a greater say in the governance of major global institutions, or the so-called quota and voice reforms. Deshmukh also worked very closely with John Maynard Keynes on the commission that designed the World Bank; it is said Keynes was deeply impressed by the abilities of his Indian colleague.

The transcripts of the Bretton Woods negotiations have recently been released in a book edited by Kurt Schuler and Andrew Rosenberg. The main debates were between the Americans headed by Harry Dexter White and the British led by Keynes. Much has been written about how the global power that came to dominate the post-war world got its way against the older power that was soon to be cut down to size by decolonization. But the transcripts also show how the Indians punched way above their weight. So did delegates from Belgium, Cuba, Czechoslovakia, Greece and Norway, according to the editors of the transcripts.

One issue should interest all those who currently worry that the New Development Bank that will be set up by the Brics nations will be a tool of Chinese hegemony.

The Indian delegation at Bretton Woods protested when the original quotas suggested by the Americans gave $300 million to India and $600 million to China. The main worry was not the absolute numbers but the relative lack of importance given to India compared to China. France was another country that felt slighted.

Dadabhoy notes: “It was here that Keynes played a decisive supporting role having sensed that India was as much concerned with equality or near equality with China than with the absolute amount." Keynes convinced White that some rebalancing was necessary. India eventually got a quota of $400 million while China was given $550 million.

The Bretton Woods transcripts suggest that new institutions emerge from a combination of high idealism, intellectual clarity and hard bargaining. What the Indian delegation did in 1944 is now a forgotten episode in our history. But their commitment to protect national interest even as they were ready to play a positive role in the creation of new international institutions is exemplary. “The United States and the United Kingdom had the greatest influence at the conference...but Bretton Woods was a genuinely multilateral negotiation. The other large and medium-size countries also shaped the conference," say Schuler and Rosenberg in their introduction to the transcripts.

Many commentators believe that the two new institutions being set up by the Brics nations will eventually threaten the Bretton Woods system that has not created more space for countries such as India and China despite their economic resurgence. There is also talk about how this could be the first step towards dislodging the dollar as the global reserve currency.

Most of this seems far-fetched. But it is definitely ironical that this potential challenge to Bretton Woods comes almost exactly seven decades after 730 delegates from across the world met in a hotel to redesign the global monetary architecture.