Role of imf in india. Role of IMF 2022-10-18

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The International Monetary Fund (IMF) is an international organization that was established in 1944 with the goal of promoting international monetary cooperation and facilitating the balance of payments of its member countries. One of the IMF's key functions is to provide financial assistance to countries facing economic difficulties, such as balance of payment problems or debt crisis. In this sense, the IMF plays a crucial role in supporting the economic stability and development of its member countries, including India.

India has been a member of the IMF since 1946 and has benefited from its financial assistance on several occasions. One of the most notable instances was in 1991, when India faced a severe balance of payments crisis and approached the IMF for financial assistance. The IMF provided India with a loan package under its Extended Fund Facility (EFF), which included both financial resources and policy recommendations for addressing the underlying economic issues.

The IMF's loan to India was instrumental in helping the country stabilize its economy and address its balance of payments problems. As part of the loan package, the IMF required India to implement a number of structural and policy reforms, including fiscal consolidation, deregulation, and liberalization of the economy. These reforms played a crucial role in improving India's economic performance and laying the foundation for its strong growth in the following decades.

In addition to providing financial assistance, the IMF also plays a role in providing technical assistance and policy advice to its member countries. This includes providing training and capacity building to national authorities and policymakers, as well as conducting economic and financial assessments of member countries.

In the case of India, the IMF has provided technical assistance in a range of areas, including public financial management, tax policy, and monetary and exchange rate policy. The IMF has also supported India's efforts to improve the financial sector and promote financial inclusion, through initiatives such as the Financial Sector Assessment Program (FSAP) and the Financial Sector Technical Assistance (FSTA) program.

Overall, the IMF has played a significant role in supporting India's economic development and stability. Its financial assistance and policy recommendations have helped India address economic challenges and implement reforms that have contributed to its strong growth and development. The IMF's technical assistance and policy advice have also helped India improve its economic management and strengthen its financial sector.

India and the IMF

role of imf in india

The system of exchange rate combines the element of stability with flexibility. Under this facility, IMF provides financial assistance to the member countries who are experiencing exceptional balance of payments problems arising from a sudden loss of market confidence in their currencies. India has been receiving benefits from the Fund from time to time. Under the borrowing arrangement with the IMF, India agreed to draw SDR 5 billion, over a three- year period. In the view of present author the small-scale and medium enterprises in India which employ a large number of workers could not complete with the imported products and also multinational corporations. IMF Short-term training courses for Indian personnel: The IMF conducted short term training courses for Indian personnel on monetary, fiscal, banking, exchange and BOP policies. India had recourse to borrowing from the Fund in the wake of the steep rise in the prices of its imports, food, fuel and fertilizers.


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Important Roles of International Monetary Fund

role of imf in india

It endeavors to achieve full global convertibility of currencies in the next decade. The London G20 summit gave a strengthened mandate to the IMF, while tripling its resources. At the same time current economic and political climate in the advanced economies such as the US, Germany makes it highly unlikely that they are in a position to provide additional resources to the IMF. There has been instances of IMF imposing conditional clauses upon India. To solve the problem of international liquidity, it has created the system of SDR. As a result, India was compelled to change its import, monetary and other policies in compliance with IMF guidelines. Fund provides short term training too.

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Role of International Monetary Fund (IMF) in India

role of imf in india

The fund from the very beginning has been conservative and laid down stringent condition for lending fund to member countries. Subsequently, India has been one of the most frequent borrowers from the IMF. ADVERTISEMENTS: i International regulation by IMF in the field of money has certainly contributed towards expansion of international trade and thus prosperity. Additional donor support to the Poverty Reduction and Growth Trust or PRGT, along with the RST will provide the IMF with resources to assist low-income countries with balance of payments support on concessional terms. In other words, conditionality clause was incorporated by the IMF against loans.

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IMF projects 6.8 per cent growth for India in FY23, says country navigating 'very difficult' external environment, Energy News, ET EnergyWorld

role of imf in india

The same policy approach has been applied to the vast majority of developing countries as if they all were one homogeneous mass and could be properly treated in the same way. It is true that the BOP problem is not so serious today than what it was 10 years ago, but debt burden is not showing any sign of abatement. IMF and European Debit Crisis : The IMF has been called upon to bail out several European countries such as Greece, Spain, Italy, Portugal which are faced with severe sovereign debt crisis. By the virtue of being member of the fund, India is also member of IBRD World bank , receiving financial aid. It sought to rebuild Europe after World War II.

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The changing role of IMF

role of imf in india

It has not done what it was supposed to doā€¦ provide funds for countries facing an economic downturn, and in spite of IMF efforts during the past quarter century, crisis around the world have been more frequent and with the exception of the Great Depression, deeperā€¦. That evolution is often prompted by crisis and the recognition that the existing tools are inadequate to address current economic conditions and challenges. With ninth review of quotas came down from 12th to 13th. The concessional assistance received by it from the International Development Association IDA for decades is worth a special mention. Special Oil Facility: The oil crises of 1973 touched off by the Arab oil producing countries created a most serious balance of payments problem for the developed as well as developing countries. Then, apart from her own gain, by her membership, she is contributing to international concord and co-operation in the monetary and financial fields.

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Role of IMF

role of imf in india

Her exports, on the other hand, could not be immediately expanded since under conditions of limited production in the country, increased exports were sure to create serious internal shortages. Nor could DSSI provide the deeper debt relief required of a subset of DSSI-eligible countries. India wanted large foreign capital for her various river projects, land reclamation schemes and for the development communications. The IMF has been projecting a below-par economic scenario for India even before the coronavirus pandemic. A Critique of the Role of IMF: The role of IMF in providing financial assistance to developing countries for overcoming balance of payments problem and undertaking structural adjustment for promoting economic development has been severely criticised. You can see our If you choose to ignore this message, we'll assume that you are happy to receive all cookies on ET EnergyWorld. One such measure is the creation of a free, competitive economy.

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What is the role of IMF in Indian economy?

role of imf in india

Functions of IMFThe IMF operates in such a way as to fulfill its objectives as laid down in the Breton woods Article of agreement. The period is over and many countries have relaxed their exchange restrictions. Third, the position of the euro will strengthen over time as more countries will join the euro zone. These more flexible lending policies reflect a new image of the IMF. This policy of premature capital-market liberalisation actually resulted in severe East Asian crisis in the late nineties.

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International monetary fund and India

role of imf in india

India now cease to hold permanent position. The IMF medicineā€”devaluation of Indian currency, reduction in budgetary and fiscal deficit, cut in government expenditure and subsidy, import liberalisation, industrial policy reforms, trade policy reforms, banking reforms, financial sector reforms, privatization of public sector enterprises, etc. Thus, India obtained substantial benefits from IMF. In recent years there has been realisation on the part of IMF of the improper nature of its policies and therefore some corrections are being made to achieve the goals of rapid global growth, global economic stability and the solutions of the problems of poverty and unemployment in the poor developing countries. Thus India has gained much as a member of the fund. The IMF has 184 member countries but they enjoys an equal say.

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Role of IMF in Shaping Indiaā€™s Development

role of imf in india

Quite a large number of times, India got financial accommodation from the Fund to cover deficits in BOP. The bulk of its financial resources comes from quota subscription of member countries. The issue of trade liberalisation is being hotly debated at WTO sponsored Ministerial Conferences where developed countries of EU European Union and the United States are reluctant to eliminate subsidies and reduce tariffs sufficiently which they are providing to protect their agriculture and manufacturing industries. To aid member-countries, the IMF has started a special fund, from which the member-countries in acute difficulties are helped out. In 1981 India succeeded in getting a massive loan of Rs. In 1999 it was felt to focus more on poverty reduction in the developing countries.

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International Monetary Fund: Definition, Role, Members

role of imf in india

These reserves are put to better use by assisting the IMF in maintaining an open and stable financial system and prevent crises like these from recurring. In April 1984, it had drawn 3. The IMF medicine devaluation of Indian currency, reduction in budgetary and fiscal deficit, cut in government expenditure and subsidy, import liberalisation, industrial policy reforms, trade policy reforms, banking reforms, etc. Some of the measures adopted were urgently called for. IMF has played an importance role in Indian economy. Although India borrowed from the Fund immediately after independence, her dependence on it for financial assistance became critical during the Second Five Year Flan 1955-56 to 1960-61 when she witnessed a sharp fall in her foreign exchange reserves. A total of Rs.


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