Role of imf in india. Important Roles of International Monetary Fund 2022-10-10

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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.

What is the role of IMF in Indian economy?

role of imf in india

On the other hand, India repaid to the IMF 1143 million dollars in 1994-95, 1817 million dollars in 1995-96, 975 million dollars in 1996-97 and 618 million dollars in 1997-98. To-date, only Chad has reached agreement on financing assurances with creditors, while negotiations between Zambia and its creditor committee are ongoing. It also provides technical advice on monetary and fiscal matters. Of course these is higher industrial growth due to the use of highly capital-intensive technologies but unemployment rate has increased in the post-reform period as a result of structural adjustment policies. IMF brings Stability in Exchange rate: The IMF has laid down a clear guidance of exchange rate policies.

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The Role of the International Monetary Fund in a Changing Global Landscape

role of imf in india

The Government headed by Narasimha Rao entered an agreement with the IMF to borrow from it. The SDRs represent entirely a new form of paper money which will serve like gold or US dollar, and hence are called Paper Gold. Recently, the requirement of gold payment has been done away with. It maintains stability in exchange rates. In this letter, India promised to launch several structural reforms in the coming years. It's in the best position to do so because it requires members to subject their economic policies to IMF scrutiny.

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International Monetary Fund (IMF) and Indian Economy

role of imf in india

That is why; India receives various kinds of help for various development projects from the World Bank. In this way India has had the benefit of independent scrutiny and advice. He is non-voting chairman of the executive board. Among the developing countries India was the most severely hit. As the IMF and the World Bank are inseparable twins, membership in the former is a prerequisite for membership in the latter. As a result, India was compelled to change its import, monetary and other policies in compliance with IMF guidelines. Today, much of the world remains in the grip of Covid-19, and the global economy still struggles to deal with the economic fallout.


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India and the IMF

role of imf in india

Interest charged on the loans given by IMF under this programme is only 0. This two- speed recovery has various causes, starting with disparate access to vaccines and inadequate health systems to get shots in arms. The seven countries out of a total of 196 countries that are not IMF members are Cuba, East Timor, North Korea, Liechtenstein, Monaco, Taiwan, and Vatican City. The repayment period for the loan taken is also 2. The concessional assistance received by it from the International Development Association IDA for decades is worth a special mention.

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The changing role of IMF

role of imf in india

It has pegged GDP growth for the nation at 9. The important special facilities are: 1 Poverty Reduction and Growth Facility PRGF 2 Supplemental Reserve Facility SRF , and ADVERTISEMENTS: 3 Contingent Credit Line CCL. Critical appraisal of fund's workingIMF has performed well as an international monetary institution. 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. The IMF provides short-term financial assistance to the members so as to enable them tide over critical balance of payments situation.

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Role of IMF

role of imf in india

This is called the special oil facility. IMF is strict on multiple exchange rates: The IMF does not permit the member countries to adopt multiple exchange rates leading to restrictive practices. ADVERTISEMENTS: i International regulation by IMF in the field of money has certainly contributed towards expansion of international trade and thus prosperity. Besides, the manner in which IMF dealt with financial crisis in East Asian countries in the late nineties has also come under severe attack. It exercise vast power including day to day working of fund. Finally, the IMF also engages its membership on climate-related issues through Capacity Development activities and in coordination with other institutions and donors.


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Role of International Monetary Fund (IMF) in India

role of imf in india

To solve the problem of international liquidity, it has created the system of SDR. This is why India receives various kinds of help for various development projects from the World Bank. 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. In this letter, India promised to launch several structural reforms in the coming years. Majority of total voting power and this voting power is decided on the basis of quotas of the member countries.


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International monetary fund and India

role of imf in india

Still more has to be done. The fund from the very beginning has been conservative and laid down stringent condition for lending fund to member countries. India is one of the founder members of the Bretton Woods institutions. India borrowed both financial and other assistance from the IMF quite a number of times under several lending provisions of the Fund. These efforts are important, but they come with trade-offs, including prolonged imbalances leading to heightened vulnerability for longer.

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