The presentation talks about India and It's relations with IMF along with IMF's role in developing countries and it's past and current status

2. •The International Monetary Fund (IMF) is an international organization
that was conceived on July 22, 1944 originally with 45 members.
•Presently it has 187 registered countries as a part of this organization.
• Goal is to stabilize exchange rates and assist the reconstruction of the
world’s international payment system.
• It is a specialized agency of the United Nations but has its own charter,
governing structure, and finances.
• Upon joining, each member country of the IMF is assigned a quota,
based broadly on its relative size in the world economy.
• They have concept of SDR as minimum 25% payment by any member
country who joins IMF.

4. Provision of M onetary C ooperation to the
m em ber countries

5. The fund s aim s at provid ing and establishing
m ultilateral paym ents and trad e system in
place of bilateral agreem ents

6. It will lend or sell to its m em ber -
countries currencies of other countries.
This facilitates foreign exchange
transactions am ong the m em bers.

7. The fund aim s at provid ing short - term
m onetary help to m em ber countries d uring
em ergency.

8. To lesson the chances of
d isequilibrium in the international
BO P of m em ber countries.

9. To red uce the poverty in m em ber
countries and to prom ote high
em ploym ent by facilitating
sustainable econom ic growth.

10. Another objective of the fund is to
help the m em ber countries invest
their long - term fund s in profitable
activities.

11. Quota subscriptions are a central component of the IMF’s financial resources
Quotas are denominated in Special Drawing Rights (SDRs), the IMF’s unit of
account.
The IMF uses a quota formula to guide the assessment of a member’s relative
position.
The current quota formula is a weighted average of:
GDP (weight of 50 percent)
Openness (30 percent)
Economic variability (15 percent)
International reserves (5 percent)

12. GDP is measured as blends of GDP based on market exchange rates (weight of
60 percent) and on PPP exchange rates (40 percent)
Up to 25 percent must be paid in SDRs or widely accepted currencies (such as
the U.S. dollar, the euro, the yen, or the pound sterling), while the rest is paid in
the member's own currency.
Largest Member is U.S: SDR 42.1 Billion
Smallest Member Tuvalu : SDR 1.8 Million
India : SDR 5.8 Billion
As on March 9 SDR rates are:
1 USD = SDR 0.648429

13. (In thousand’s of SDRs) 1 SDR = $1.615

14. A member’s Quota describes Financial and Organizational
relationship with IMF:
Subscriptions (Quota Share) determines the amount it is
required to pay upon joining the Fund.
Voting power (Voting Share) determines member’s
voting power in IMF decisions.
Access to Financing The amount of financing a member
can obtain from IMF is also based on Quota.

17.  Under Stand-By and Extended Arrangements, a
member can borrow up to
• 200 percent of its quota annually
• 600 percent cumulatively
 Access may be higher in exceptional circumstances

18. For India :
Governor = Finance Minister Pranab Mukherjee
Alternate Governor = RBI Governor D.Subbarao

20. IMF v/s The World Bank
What according to you is the
major difference???

22.  policy advice
 technical assistance
 financial support
 debt relief
to achieve its eight
MDGs (Millennium
Development Goals)

23.  eradicating extreme  Combating HIV/AIDS
poverty and hunger malaria and other
 achieving universal diseases
primary education  ensuring environmental
 promoting gender sustainability
equality and  creation of a global
empowering women partnership for
 reducing child mortality development, with
 improving maternal targets for aid, trade,
health and debt relief.

24.  Global Monitoring Report
 2011 Global Monitoring Report:
 two-thirds of developing countries close to all
the MDGs.
 Clear progress in reducing hunger and achieving
universal primary education and access to clean
water.
 health-related progress much slower, with
many countries likely to miss MDGs on child and
maternal mortality.

25. Financial assistance:
 The Extended Credit Facility
 The Standby Credit Facility
 The Rapid Credit Facility.
Non Financial assistance:
 Policy Support Instrument

26. • India still had a fixed exchange rate system
which lead to balance of payment crisis.
•Reasons
Debt waiver for small farmers shaved
off 1% of GDP.
Ramped up exports to soviet union by
50% at the cost of trade with hard
currency areas.

27.  Choices Provided
 To go for adjustments and have an
orderly, growth-oriented adjustment
program with external financial support
 Not go for adjustments and cut itself
from international capital markets and
reduce growth.

28. • Opted for policies and got bailout package from IMF
for $1.8 Billion.
• Had to pledge 20 tons of gold to Union Bank of
Switzerland and 47 tons to Bank of England
 Resource allocation shifted from public sector to
privatization.
 The Indian economy became an open end economy.

29.  Although a trade off had to be between
growth and adjustment costs such job losses.
 Political developments interfere with
structural reform process started in 1991.
 Administrative decisions essential for the
processing of projects got delayed.

31. India: Financial Position in the Fund
as of February 29, 2012

33. May 2003
India contributed $498 million to the IMF's Financial Transaction
Plan, thus turning from a debtor into a lender to the IMF
What are the implications of the same???

34. Feb 13 2003:
Considering that India's foreign exchange reserves of
$73 billion could sustain 15 months import, Gordon
said, "it is extremely comfortable.“
"As of now, IMF's role in India is that of surveillance”
IMF’s new roles are in surveillance, lending and technical assistance

36. "Reforms in multilateral agencies like IMF and WB
are necessary to give fair representation to the
countries that are providing stability to the global
economy,"
BRIC countries are anchoring the global economy at a time when the
developed economies are faltering.

37. As multilateral lending agency IMF may need more funds to help countries
facing a sovereign debt crisis in Europe, India plans to pledge additional
support of $4 billion to the fund.
This would increase India's total commitment to the IMF to $14 billion, as it
had already pledged $10 billion in March this year (2011) for countries
facing a financial crisis.

38. Positives:
Youngest Labor Force in the world for the next 50
years
Extremely Vibrant Private Sector
India doesn’t borrow in foreign currency.
Risks and Constraints:
Inclusive growth
Large Fiscal Deficit & Debts to the range of 8% of
GDP
350 million living below the poverty line

39.  India’s current need of the hour is Infrastructure projects
which need a more mature debt-markets or corporate-bond
markets.
 Reforms are required to be made in labour laws and tackling
with unions and other such issues.
 Change from pull based to push based economy

40. The history of India's engagement with IMF illustrates that
with premeditated planning it is possible to alleviate a
macroeconomic calamity and sustain the rights of reform
package without negotiating on democratic organizations
or international policy autonomy.