India and the IMF

ECONOMICS

Submitted by:
Mannem srinivas gowd
Roll no: 2013066
Semester-3

DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

Visakhapatnam

ACKNOWLEDGEMENT
This project is done as a semester project, as a part of course titled
India and the IMF. I am really thankful to our course instructor
Dr.ramachandrudu, Professor, Department of economics, DAMODARAM
SANJIVAYYA NATIONAL LAW UNIVERSITY, for his valuable guidance
and Assistance, without which the accomplishment of the task would have
never been Possible. I also thank him for giving this opportunity

introduction

The meaning of IMF

Indias relation with IMF

IMF lauds India for avoiding financial crisis

current relation between IMF and India

conclusion

bibliography

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TABLE OF CONTENTS

Introduction:
India and the IMF have had a friendly relationship, which has been beneficial for both.
The IMF has provided India with loans over the years and this has helped the country to
grow. The IMF has also praised India for it has been able to maintain average growth rate
of its economy.

The meaning of International Monetary Fund (IMF):

International Monetary Fund (IMF) is an administrative unit that is international in nature
and whose objective is to regulate and administer the financial system of the world. The
IMF does this by observing the payments balance and exchange rates of the world.
International Monetary Fund also offers technical and financial help to the member
nations. Its head office is in Washington D.C, USA.

India's relations with the International Monetary Fund:

India and the IMF has a positive relationship. The IMF has provided financial assistance
to India, which has helped in boosting the country's economy. The IMF praised the
country for it was able to avoid the Asian Financial Crisis in 1999 and was also able to
maintain the average rate of growth of its economy. The Managing Director of
International Monetary Fund Rodrigo De Rato visited India in May 2005. In 2005, the
IMF said that the budget of India is very positive for it points that the economy of the
country will grow at the rate of 6.7%. International Monetary Fund said that the reasons
behind the economy growth of India are that the RBI has been able to control inflation
and has also handled its monetary policies very skillfully. The IMF has suggested that

India can become a financial super power by bringing in more reforms in its economic
policies that will increase its growth rate to 8%.

India has attacked changes to the voting structure of the International

Monetary Fund (IMF) after it saw its share of the vote decrease.
Its comments came after the 184 IMF nations agreed a deal on Monday to give some
emerging economies a bigger vote. While China, South Korea, Turkey and Mexico all
saw their voting quotas rise, India's declined. India said the reforms were "hopelessly
flawed". The IMF has now pledged to overhaul its voting system by 2008. Indian Finance
Minister Palaniappan Chidambaram said it would "hold the IMF to its promise" of a
complete reform of the voting system within two years. "We may have lost the vote but
we have not lost the argument," he said. Under the temporary reforms agreed at the IMF's
annual meetings in Singapore on Monday, India saw its voting quota drop slightly to
1.91% from 1.95%. Mr. Chidambaram said the reform formula used to determine
Monday's changes - including a country's GDP and market openness - did not accurately
reflect the economic might of emerging economies such as India.
India wants the next formula to take into account the need of large developing economies
to protect their farmers and young industries from foreign competition.

October 17, 2007

An IMF training course in Pune for senior civil servants from India and around the
region went into the varied experiences with this second generation budget reform.
Making program and performance budgeting (PPB) work in the context of capacity
constraints and politicians familiar only with traditional line item budgeting led to lively

discussions with the 29 participants from Indias central and state governments, and
invited representatives of other countries' ministries of finance.
The FAD's PFM 2 Division provided the training course in Pune from October 1-5, 2007.
The team of presenters included Messrs. Holger van Eden and Justin Tyson (FAD), Mr.
Jack Diamond (FAD panel of experts), and Mr. Aru Rassapan from the Center for
Development & Research in Evaluation (CeDRE) in Malaysia. Mr. Sang Dae Choi
(World Bank) provided a lecture through video-link on the Korean experience with
introducing performance budgeting1

India and IMF:

This is with reference to "India turns creditor to IMF" The new report arouses
enthusiasm. While many of the developing countries continue to be indebted to the IMF,
it is really delightful to note that India has obtained a place in the "financial transaction
plan" by way of its strong BOP and foreign exchange reserves position.2
This, indeed, sends very positive signals to the global community. The gaining strength of
the Indian rupee in recent times amidst the euro-dollar competition places the Indian
economy in a safe mode. The present dip in the forex reserves on account of transfers to
IMF under the FTA scheme can be disregarded as it can be easily replenished soon
through fresh inflows.

India Reports I.M.F. Loan:

A top Indian official said today that the International Monetary Fund had agreed to lend
India $2.5 billion.
1

Program and Performance Budgeting Enthusiasm in India -- IMF Training Course,pune.

(Business Line, June 29).

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The proposed loan is among the largest that the I.M.F. has given to India in recent times
and follows a declaration by Prime Minister Chandra Shekhar that he had authorized
senior officials to negotiate such assistance in Washington.
The Commerce Minister, Subramanian Swamy, was quoted today by the newspaper
Economic Times as saying at a meeting of industrialists that the loan agreement will be
signed on Jan. 23.
Mr. Swamy said that the Government would not cut back industrial imports because this
would hurt overall growth. He advocated increased exports to improve India's foreign
exchange reserves and trade deficit.
It has been reported that of the total loan, about $800 million will be disbursed from the
institution's compensatory contingency financing facility and the rest as a standby credit.
Separately, Iran was reported to have agreed to supply India with one million tons of
crude oil. The oil will be supplied in the next three months and Iran has offered 90 days'
credit and "attractive prices," The Times of India said.
The loans provided by IMF to India:

SDR 3,260,405,000

1992

SDR 3,584,905,000

1993

SDR 2,763,180,833

1994

SDR 1,966,633,125

1995

SDR 1,085,250,003

1996

SDR 589,791,667

1997

SDR 284,916,664

1998

SDR 38,500

1999

IMF Lauds India for Avoiding the Asian Financial Crisis

International Monetary Fund (IMF) has said that a very positive aspect of Indias recent
economic performance is that it avoided the worst of the Asian financial crisis, and
growth has been maintained at a rate close to the average seen over the past decade. From
a longer term perspective, however, IMF feels it is important that India does not consider
a growth rate of 5% to 6% to be the best that can be achieved.IMF feels that there is
considerable scope for improving the allocation of resources through structural reforms,
and also for increasing the rate of investment in the economy. The main priority for
macroeconomic policy continues to be to rein in the public sector deficit, which has
widened to almost 10% of GDP. The recent budget implies some modest deficit
reduction at the central government level, but measures will also need to be taken by state
governments and public enterprises to ensure consolidation for the public sector overall.
There is also a need to contain rapid monetary growth to reduce risks of a renewed upturn
in inflation. IMF has projected that the current slowdown in the Indian economy will
continue in 1999-2000 with output at 5.1% as against the governments target of 6.5% to
7%. In its forecast for the year 2000, IMFs publication the World Economic Outlook
(WEO) also projected a continuation of the external sector imbalances with the current
account deficit at 2.2% of gross domestic product (GDP) which is higher than the
governments figure of 1.7%. IMF has also forecast a rise in consumer prices to 7.9% in
1999-2000. The WEO has stated that India could have maintained a growth rate of 7% to
8% over the past years had it reformed faster.3

India PM appoints ex-IMF chief economist as adviser

http://nation.com.pk/business/18-Mar-2009/IMF-lauds-India-for-avoiding-economic-crisis

Indian Prime Minister Manmohan Singh on Monday appointed former International

Monetary Fund chief economist Raghuram Rajan as an economic adviser.
Indian policymakers are struggling to fend off damage to the domestic economy from the
global financial crisis and on Monday Singh said his government would take all steps
necessary to protect growth in Asia's third-largest economy.
A statement from the Prime Minister's Office said Rajan had been appointed as an
honorary economic adviser to Singh and would hold the rank of a secretary to the
government of India.4

The current relationship between IMF and India:

The relationship between the IMF and India has grown strong over the years. In fact, the
country has turned into a creditor to the IMF and has stopped taking loans from it. India
and IMF must continue to boost their relationship this way, as it will prove to be
advantageous for both.

Conclusion:
the historical relationship between the Government of India (GOI) and the International
Monetary Fund (IMF) as a successful model for the ways in which a developing country
can learn to work with and through multilateral organizations to promote economic and
political development while sustaining democratic institutions and relative international
political autonomy. In the mid-1960s, India's relations with the USA, IMF, and World
Bank were strained after an attempt by these institutions to exert 'leverage' over Indian
economic policies was exposed to parliamentary debate and the scrutiny of a free press.
By the late 1970s, the GOI charted a new course in its interaction with the IMF. In 1981,
India was awarded the largest IMF loan to a developing country up to that time. This
4

http://in.reuters.com/article/2008/11/03/india-economy-adviser-idINDEL12487220081103

article will evaluate India's economic reform strategy in the early 1980s and explain the
development of the concept of 'homegrown conditionality' within the GOI.

Bibliography:
Books:

Jean Dreze and Amartya Sen, India: Development and Participation, Oxford
University Press, 2nd edition, 2002.

Debraj Ray, Development Economics, Oxford University Press, 2009

Websites:

http://in.reuters.com

http://nation.com

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