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NMIMS EMBA Group 1 International Finance

NMIMS Executive MBA International Finance Group 1

Topic: World Bank, World International Monetary Fund

Trade

Organization

and

Group Members:

Sr No 1 2 3 4 5 6 7

Name Deepak Chawla Subhandu Dakssi Deepak Divecha Vishal Doshi Niraj Gupta Tapan Sanghvi Nandlal Singh

Roll Number 80118 110014 80118 110016 80118 110021 80118 110025 80118 110036 80118 110097 80118 110104

Date: 9 Aug 2011 14 Aug 2011 Submitted on 16 Aug 2011

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NMIMS EMBA Group 1 International Finance World Trade Organization (WTO): The mission statement of the WTO is The WTO is the international organization whose primary purpose is to open trade for the benefit of all. (Source: http://www.wto.org/english/thewto_e/whatis_e/wto_dg_stat_e.htm) Thus, from the above statement, it is clear that the purpose of existence of WTO is to reduce the hurdles of international trade and ensure a level playing field for all the participants in international trade. The WTO also has legal framework to monitor these trades and settle disputes arising out of these trades. The current body of trade agreements comprising the WTO consists of 16 different multilateral agreements (to which all WTO members are parties) and two different plurilateral agreements (to which only some WTO members are parties). The WTO agreements cover goods, services and intellectual property. WTO was established in 1995. WTO alongwith its predecessor General Agreements on Tariff and Trade (GATT) have helped create strong international trading system and helping global economies grow. The WTO currently has 153 members, of which 117 are developing countries or separate customs territories. WTO activities are supported by a Secretariat of some 700 staff, led by the WTO Director-General. The Secretariat is located in Geneva, Switzerland, and has an annual budget of approximately CHF 200 million ($180 million, 130 million). The three official languages of the WTO are English, French and Spanish. The highest body in the WTO is the Ministerial Conference which meets once in 2 years. WTO also has several other committees and sub committees that monitor international trade system. The WTO was born out of negotiations, and everything the WTO does is the result of negotiations. The bulk of the WTOs current work comes from the 198694 negotiations called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and Trade (GATT). The WTO is currently the host to new negotiations, under the Doha Development Agenda launched in 2001.

The Activities of WTO: The activities of the WTO primarily comprise the following: Reduction of hurdles to international trade such as import tariffs and agreeing on the rules governing the conduct of international trade such as anti dumping duties Monitoring the implementation of the agreed upon rules of the WTO by the participating members Reviewing the trade policies and ensuring transparency in trade Settling disputes amongst the members regarding the interpretation and application of the agreements Creating awareness, explaining the public at large about the WTO, its vision, its mission and other such activities. The systems overriding purpose is to help trade flow as freely as possible so long as there are no undesirable side effects because this is important for economic development and wellbeing. That partly means removing obstacles. It also means ensuring that individuals, companies and governments know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy. In other words, the rules have to be transparent and predictable.

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NMIMS EMBA Group 1 International Finance Understanding the WTO:

Non discrimination

Protect the environment

More Open towards trade and development

Principles of the WTO

Give more benefits to developing countries

Transparency in operations

More competitive

The above 6 principles form the edifice of the WTO. The WTO agreements are lengthy and complex because they are legal texts.

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NMIMS EMBA Group 1 International Finance Functions of WTO: The WTO is run by its member governments. Major decisions are taken by the members as a whole or by their delegates or ministers or their ambassadors. The meetings take place atleast once in two years. Trade negotiations: The WTO spells out the broad principles of liberalization alongwith some permitted exceptions. The principles primarily include the commitment of the individual member nation to lower the trade barriers, tariffs and to open up the service markets. The WTO also sets up dispute resolution procedures. It must be remembered that these agreements are dynamic in nature. They keep changing with the change in the markets conditions. The current agreements are being negotiated under the Doha Development Agenda launched by the WTO trade ministers in Doha in Nov 2001. Implementation and monitoring: WTO agreements require the governments to make their trade policies transparent by notifying the WTO about the laws currently in force in the member nation and the measures adopted. The WTO councils and committees seek to ensure that the requirements of the agreements are being followed and properly implemented. The WTO member nations undergo periodic scrutiny of the trade policies and practice implemented. Dispute settlement: The countries bring the dispute to the WTO is they think their rights under the agreement are being jeopardized. The judgments are delivered by specifically appointed experts on the subject and their interpretation of the agreements and the countries commitments. The WTO has set up a Dispute Settlement Understanding mechanism for this purpose. Building Trade Capacity: The WTO agreements contain special provisions for developing countries which allows them to take longer time period to implement the WTO policies and procedures, longer time to increase their opportunity to build and develop trade opportunities, to handle disputes and settle technical standards. The WTO organizes hundreds of technical cooperation missions to developing countries annually. It also holds numerous courses each year in Geneva for government officials. Aid for Trade aims to help developing countries develop the skills and infrastructure needed to expand their trade. Outreach: The WTO maintains regular dialogue with non-governmental organizations, parliamentarians, other international organizations, the media and the general public on various aspects of the WTO and the ongoing Doha negotiations, with the aim of enhancing cooperation and increasing awareness of WTO activities.

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NMIMS EMBA Group 1 International Finance Principles of the trading system: The agreements of WTO deal with agriculture, textiles and clothing, banking, telecommunications, government purchases, industrial standards and product safety, food sanitation regulations, intellectual property, and much more. The basic business principles are: Most Favored Nation (MFN): Treating other people equally Under the WTO, countries cannot discriminate between their trading partners. For example, if India grants a special favor to say USA in a particular business arrangement, then India has to grant the same favor to all the other nations with which it does the similar business. Some exceptions are allowed. For example, countries can set up a free trade agreement that applies only to goods traded within the group discriminating against goods from outside. Or they can give developing countries special access to their markets. National treatment: treating foreigners and locals at par The principle here is that the national and foreign goods should be treated equally once the foreign goods enter the market. The similar case applies for the services as well as copyrights, patents and trademarks. National treatment only applies once the product has entered the market. Hence, charging customs duty on an import is not a violation of the agreement even if locally produced goods are not charged an equivalent tax. Free trade: through negotiation Lowering of trade barriers is one of the most important means of encouraging trade. The barriers concerned include customs duties (or tariffs) and measures such as import bans or quotas that restrict quantities selectively. From time to time other issues such as red tape and exchange rate policies have also been discussed. Opening markets can be beneficial, but it also requires adjustment. The WTO agreements allow countries to introduce changes gradually, through progressive liberalization. Developing countries are usually given longer to fulfill their obligations. Transparency: With the stability and transparency, the business houses around the world get a clearer view of the trade policy of a particular country. With transparency, the investment is encouraged, jobs are created and the consumer gets a better choice of products through lower prices and better varieties. In the WTO, when countries agree to open their markets for goods or services, they bind their commitments. For goods, these bindings amount to ceilings on customs tariff rates. Sometimes countries tax imports at rates that are lower than the bound rates. Frequently this is the case in developing countries. In developed countries the rates actually charged and the bound rates tend to be the same. A country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. Many WTO agreements require governments to disclose their policies and practices publicly within the country or by notifying the WTO. The regular surveillance of national trade policies through the Trade Policy Review Mechanism provides a further means of encouraging transparency both domestically and at the multilateral level.

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NMIMS EMBA Group 1 International Finance Promoting fair competition: The purpose of existence of WTO is to promote fair trade practices. In this limited purpose, the WTO is sometimes inaccurately referred to as a free trade organization. The system does allow tariffs and protection under some circumstances. The WTO can be described as a system of rules dedicated to open, fair and undistorted competition. The rules on non-discrimination MFN and national treatment are designed to secure fair conditions of trade. So too are those on dumping (exporting at below cost to gain market share) and subsidies. The issues are complex, and the rules try to establish what is fair or unfair, and how governments can respond, in particular by charging additional import duties calculated to compensate for damage caused by unfair trade. Encourage developments and reforms: The WTO has inherited some of the agreements from the erstwhile General Agreements on Tariffs and Trade (GATT). Under the GATT, developing countries are given special concessions and assistance in implementing the policies and procedures of WTO. One of the objectives of the WTO is to promote development. The developing countries need time to understand the implications of the policies and procedures of implementation of WTO rules. An estimated 75% of the WTO members are developing countries. During the Uruguay Round which lasted for around seven and half years, around 60 countries implemented the trade liberalization programs. It is claimed that developing countries and economies that are in transition mode, have a larger say in the WTO Doha around of 2001. At the end of the Uruguay Round, developing countries were prepared to take on most of the obligations that are required of developed countries. Benefits of the WTO Trading System: The system helps promote peace Constructive handling of disputes Rules for all make life easier Trade cuts and better costs of living More choice of products to the consumers Trade raises income Stimulate economic growth Efficient business principles Governments shielded by lobbying Encouraging good environment The organizational chart of the WTO is for reference. The chart has been downloaded from http://www.wto.org/english/thewto_e/whatis_e/tif_e/org2_e.htm

the

site

below:

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NMIMS EMBA Group 1 International Finance The WTO in India: India as a member and its rights and obligations: India became the member of WTO on 1 Jan 1995. India was a signatory of the General Agreement on Tariffs & Trade (GATT), and as a part of the commitment had to change several laws and policies; the major changes that were incorporated were as a follows 1. India being a founder member of the WTO and also being categorized under the developing countries group, can access the concessions granted by the organization. As a result, there are several implications for India for the various agreements that India has signed. Some implications are: Reduction of peak and average tariffs on manufactured products Commitments to phase out the quantitative restrictions over a period as these were considered non-transparent measure in any countries policy structure. The result of this agreement as mentioned earlier was limited as, GATT was only an agreement and there was no enforcing agency to strictly implement the clauses and punish the country which breaks the clauses. Thus the impact was partial. However, with WTO coming into effect, the competition from imports for the domestic firms has increased. WTO had the deadline till 2005, for the domestic policy was supposed to phase out the QR's; for those countries which face severe balance of payments problems special concession period was given. Thus it is very clear that only those firms that have competitive advantage would be able to survive in the long run, and those firms which are weak would fade into history in the process. 2. Trade Related Investment Measures (TRIMS): The agreement relates to investments originating from one country to another. The agreement prohibits the host country to discriminate the investment from abroad with domestic investment, which implies that it favors national treatment of foreign investment. One agreement requires investment to be freely allowed within domestic borders without any maximum cap on it. Another restricts to impose any kind of export obligation or import cap on the investment. Another requires that there should not be any domestic content requirement on foreign firms operating and manufacturing in other countries. These agreements have a direct impact on Indias Trade, Investment and Foreign Exchange Policy and on the industrial policy. 3. Trade Related Intellectual Property Rights (TRIPS): An intellectual property right refers to any creation of human mind which gets legal recognition and protection such that the creator of the intangible is protected from illegal use of his creation. This agreement includes several categories of property such as Patents, Copyrights, Trademarks and Trade Secrets. Since the law for these intangibles vastly varied between countries, goods and services traded between countries which incorporated these intangibles faced severe risk of infringement. Therefore the agreement stipulated some basic uniformity of law among all trading partners. This required suitable amendment in the domestic IPR laws of each country. Since this process is not a simple one, a time period of 10 years was given to the developing countries. As a result, in India there was a requirement to change the Patents Act, Trade and Merchandise Mark Act and The Copyright Act. Besides these main laws, other related laws also required changes. The main impact of this is on industries such as pharma and bio-technology, because now with the law in place, it is not possible to reverse engineer the existing drugs and formulas, change the process and produce the same product. Now new investment in fresh research is required. This is quite a burden for small industries and there is a possibility that they are thrown out of business due to competition.

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NMIMS EMBA Group 1 International Finance 4. Agreement on Agriculture (AOA): The Agriculture happens to be one of the most protected sectors in all the countries without any exceptions, and therefore an agreement on the agricultural issues have always been evading and debated strongly by all the countries involved in trade in agriculture. The agreement on agriculture deals with market access, export subsidies and government subsidies.

5. Agreement on Sanitary and Psyto - sanitary measures (SPM): this agreement refers to restricting exports of a country if they do not comply with the international standards of germs / bacteria etc if the country suspects that allowing of such products inside the country would result in spread of disease and pest, then there is every right given to the authorities to block the imports. 6. Multi - Fiber Agreement (MFA): This agreement is dismantled with effect from 1 January 2005. The result was removal of QR on the textile imports in several European countries. As a consequence a huge textile market is opened up for developing countries textile industry as well as for other countries that have competitive advantage in this area. The immediate impact is on the garment and textile manufacturers and exporters. However, it still needs to be seen whether the industry is able and ready to take advantage of the large markets. This requires quite an amount of modernization, standardization, cost efficiency, and customization and frequent up gradation of designs to meet the changing need of global customers. The dismantling of QR also mean more competition to Indian textile exporters and therefore, it becomes imperative to enhance the competitiveness in niche areas. The trading countries are allowed to impose an Anti-Dumping Duty (ADD) against imported products if the charge of dumping is claimed against them. The requirement is to prove that the product is being sold at a price, which results in material injury to the domestic industries. There are several cases in which the duty is imposed but it still remains to be proven by the Dispute Settlement Tribunal in case the other trading party opposes the duty imposed as "unfair". However, the proposal always should come from the representatives of the industries affected; this may result in a problem, as small industries voice may remain unheard in the process. The WTO and the problems facing India: There are several problems facing the Multilateral Trade Agreements (MTA). Some of them are: Clout of developed countries in negotiations and extracting maximum benefits out of the developing nations and least developed countries. Resource and skill limitations of smaller countries in understanding and implementing the various clauses under the WTO Resource imbalance between the developed and developing countries Non tariff barriers created by the developed nations Poor implementation of the Doha development agenda Agriculture seems to be bone of contention for all types of countries where France, Japan and some countries are just not willing to budge downwards in matter of domestic support and export assistance to farmers and exporters of agriculture produce. Dismantling of MFA (Multi Fiber Agreement) and its likely impact on countries like India

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NMIMS EMBA Group 1 International Finance India and the WTO Charter: The most important things for India is: To address are speed up internal reforms in building up world-class infrastructure like roads, ports and electricity supply. India should also focus on original knowledge generation in important fields like Pharmaceutical molecules, textiles, IT high end products, processed food, installation of cold chain and agricultural logistics to tap opportunities of globalization under WTO regime. Indias tariffs are still high compared to those in the developed countries and there will be pressure to reduce them further and faster. India has solid strength, at least for mid term (5-7 years) in services sector primarily in IT sector, which should be tapped and further strengthened. India would do well to reorganize its Protective Agricultural policy in name of rural poverty and Food security and try to capitalize on globalization of agriculture markets. It should rather focus on Textile industry modernization and developing international Marketing muscle and expertise, developing of Brand India image, use its traditional arts and designs intelligently to give competitive edge, capitalize on drug sector opportunities, and develop selective engineering sector industries like automobiles & forgings & castings, processed foods industry and the high end outsourcing services. Improve legal and administrative infrastructure, improve trade facilitation through cutting down bureaucracy and delays and further ease its financial markets. Downsize non-plan expenditure in Subsidies (which are highly ineffective and wrongly applied) and Government salaries and perquisites like pensions and administrative expenditures. The petroleum sector has to be boosted to tap crude oil and gas resources within Indian boundaries and entering into multinational contracts to source oil reserves. The performance of India in attracting major FDI has also been poor and certainly needs boost up, if India has to develop globally competitive infrastructure and facilities in its sectors of interest for world trade. Although a lot of the above is being done, for example, the Food Security Bill is on its way in the Parliament of India; still a lot needs to be done.

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NMIMS EMBA Group 1 International Finance WTO and its role in the World Economy Crisis: Help the developing countries sustain the development process: Nations should preserve the space under current WTO law to place controls on capital outflows, use safeguard mechanisms when faced by unjustified floods in imports or investment, subsidize credit to domestic firms, and stimulate the domestic economy through government procurement programs. Participate in global response to the crisis: Developing nations need to be part of a coordinated global response to the crisis. As per an estimate, at least USD 1 trillion in new capital needs to be infused into the developing world to preserve currencies, support coordinated stimulus packages, and cover the costs of adjustment, such as tariff revenue losses and job retraining in ailing sectors. The International Monetary Funds (IMF) Trade Integration Mechanism (TIM) and Short-term Liquidity Facility (SLF) can help. However, the IMF will need to double its budget by issuing more Special Drawing Rights (SDR). Agriculture in the developed world: In agriculture, the US and Europe should honor WTO rulings that have found their subsidies for cotton and sugar to be in violation of trade rules that forbid the exporting products at subsidized prices. This would give a tangible boost to farmers in West Africa and Latin America and send a strong signal to developing countries that developed nations are willing to honor existing WTO rules. Manufacturing sector: In this sector, the longstanding WTO principle of special and differentiated treatment should be re-enshrined for poorer nations and made more meaningful in practice. Developed nations should, for instance, agree to rolling back patent laws that impede poorer nations from manufacturing cheaper generic drugs and allow selective industrial policy so governments can diversify their economies. What worked for development in the United States, China, and South Korea must not be prohibited by the WTO. (Contributed by Kevin Gallagher from his books The Enclave Economy: Foreign Investment and Sustainable Development in Mexicos Silicon Valley, and Putting Development First: The Importance of Policy Space in the WTO and IFIs and Timothy A. Wise, Director of Research at the Global Development and Environment Institute, Tufts University)

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NMIMS EMBA Group 1 International Finance The World Bank (WB):

Mission: The mission of the World Bank is to fight poverty with passion and professionalism for lasting results and to help people help themselves and their environment by providing resources, sharing knowledge, building capacity and forging partnerships in the public and private sectors. Structure:

International Bank for Reconstruction and Development (IBRD)

International Development Association (IDA)

World Bank Aim Aim

To reduce poverty in middle income and creditworthy poor countries

To help the worlds poorest countries

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NMIMS EMBA Group 1 International Finance The WB, established in 1944, is headquartered in Washington, with more than 10000 employees in 100 offices worldwide. Functions of the WB: The WB provides to the developing countries: low interest loans interest free credits and grants Purposes of the loan: Investments in education health care public administration infrastructure financial and private sector development agriculture environment and natural resources development Manner of achieving the objectives and mission:

Results

Innovation from within

Open development

Reforms

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NMIMS EMBA Group 1 International Finance Goals of the World Bank: The biggest challenge the WB faces is the eradication of global poverty. To achieve this objective, the WB has developed the goals called as the 8 Millennium Development Goals. These are enumerated as under:

Global partnerships for development

Eradicate extreme poverty and hunger

Achieve universal primary education

Ensure environment sustainability

Millennium Development Goals

Promote gender equality and empower women

Combat HIV / AIDS, malaria and such other diseases Improve Maternal Health

Reduce Child Mortality

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NMIMS EMBA Group 1 International Finance Manner of addressing these challenges: The WB president R. Zoellick has articulated 6 strategic themes for global development. They are The Challenge The WB Method of Addressing Knowledge sharing: The World Bank Group is committed to Poor and developing countries seek the World remaining the premier source of development Bank Group's expertise as much as they seek knowledge through reports, data and analytical its financial assistance. As clients, they tools, conferences, and the Internet. It is increasingly expect integrated solutions to enhancing its capacity to share this knowledge address their particular needs. To become globally and is helping build partnerships and more economically competitive, they need data expertise in client countries. WB is moving to benchmark their progress. More than ever, toward an open data platform, making Webin-depth analysis of local challenges and based information more accessible and practical experience gathered from around the interactive, and improving the focus and depth world form the groundwork for sustainable of learning and capacity-building programs. development. The Poorest Countries: The World Bank Group has assembled record Many of the UN's Millennium Development funding to help the poorest countries through Goals for 2015 seem out of reach for the its International Development Association world's poorest countries. An estimated 1.4 (IDA). It places new emphasis on fighting billion people survive on incomes of $1.25 or hunger and malnutrition, particularly through less a day. Rising food prices threaten to better agricultural productivity. It encourages increase hunger and malnutrition, while climate regional integration and help develop change is affecting agriculture, the mainstay of infrastructure: power, water, transport, and most people in poor countries. Communicable information and communications technologies. diseases, especially HIV/AIDS and malaria, are To produce faster results, IDA is undertaking widespread. Many of the poorest countries in joint programs with International Financial Africa are landlocked and lack reliable Corporation (IFC), the World Bank Group's electricity, hampering the development of lead agency for private sector development, as business and trade. well as with other nonprofit organizations. Post Conflict Fragile States: Helping prevent conflict and support Many of the world's poorest countries have reconstruction remains a critical part of the faced a vicious cycle of conflict and poverty. World Bank's global mission of poverty Some 80 percent of the 20 poorest countries reduction; The World Bank Group is working have suffered a major war in the past 15 years, with many partners, including donor trust bringing extraordinary suffering to their people funds and the United Nations, to offer more and often affecting the larger region. Peace responsive, flexible, and comprehensive can also be fragile: countries emerging from solutions in difficult environments war face a 44 percent chance of relapsing within five years. Even with rapid progress on economic recovery, it can take a generation or more just to return to prewar living standards. Middle income countries: The World Bank Group is working to meet Middle-income countries are still home to most middle-income countries' specific needs with of the world's poor people, often with a heavy tailored assistance that draws on an array of concentration in specific regions or ethnic competitive financial products and knowledge groups. These countries are generally and learning services. creditworthy and have some access to financial markets, but they face constraints in mobilizing the funds they need to invest in infrastructure and essential services. They also need help to reform policies and institutions in ways that improve the investment climate.

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NMIMS EMBA Group 1 International Finance

The Challenge Global public goods: Global public goods are aspects of development that reach across borders: examples include the environment, public health, and international trade and financial infrastructure. Actions are often needed that extend beyond what market systems or individual countries can do on their own developing new vaccines, for instance, and reducing carbon emissions to address global warming. The Arab World: The Arab world has strong potential for growth and development, but it remains poorly integrated into the global economy apart from the oil sector. It has the highest unemployment among developing regions, as well as the lowest economic participation by women. The region's poor and rich countries alike suffer from such problems as water scarcity, lack of economic diversity, weak public accountability, and conflict.

The WB Method of Addressing The World Bank Group is helping spur multilateral action and global partnerships involving governments, nonprofit organizations, and socially responsible corporations. Its work on global public goods focuses on the environment, especially climate change; controlling communicable diseases, such as HIV/AIDS and malaria; preventing and mitigating crises in international financial systems; and promoting an open, multilateral trade system. The World Bank Group, in close cooperation with the League of Arab States, has established the Arab World Initiative (AWI), a partnership to foster effective collaboration in the interests of economic integration and knowledge sharing among the countries of the Arab world. The initiative focuses on three key pillars: Human Development and Improving the Quality of Education, Infrastructure Projects, and Micro, Small and Medium Enterprise Development

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NMIMS EMBA Group 1 International Finance Operations of the World Bank: The World Bank's two closely affiliated entitiesthe IBRD and the IDA provide low or no interest loans (credits) and grants to countries that have unfavorable or no access to international credit markets. Unlike other financial institutions, WB does not operate for profit. The IBRD is market - based, and WB uses its high credit rating to pass the low interest WB pays for money on to its borrowers developing countries. It pays for its operating costs. Fund Generation IBRD lending to developing countries is primarily financed by selling AAA-rated bonds in the world's financial markets. While IBRD earns a small margin on this lending, the greater proportion of its income comes from lending out its own capital. This capital consists of reserves built up over the years and money paid in from the Bank's 185 member country shareholders. IBRDs income also pays for World Bank operating expenses and has contributed to IDA and debt relief. IDA is the world's largest source of interest - free loans and grant assistance to the poorest countries. IDA's funds are replenished every three years by 40 donor countries. Additional funds are regenerated through repayments of loan principal on 35 to 40 - year, no interest loans, which are then available for re - lending. IDA accounts for more than 40% of WBs lending. Loans Through the IBRD and IDA, WB offers two basic types of loans and credits: investment operations and development policy operations. Countries use investment operations for goods, works and services in support of economic and social development projects in a broad range of economic and social sectors. Development policy operations (formerly known as adjustment loans) provide quick disbursing financing to support a countrys policy and institutional reforms. Each borrowers project proposal is assessed to ensure that the project is economically, financially, socially and environmentally sound. During loan negotiations, the Bank and borrower agree on the development objectives, outputs, performance indicators and implementation plan, as well as a loan disbursement schedule. While WB supervises the implementation of each loan and evaluates its results, the borrower implements the project or program according to the agreed terms. As more than 30% of WBs staff is based in over 100 country offices worldwide, three-fourths of outstanding loans are managed by country directors located away from the World Bank offices in Washington. IDA long term loans (credits) are interest free but do carry a small service charge of 0.75 percent on funds paid out. IDA commitment fees range from zero to 0.5 percent on undisbursed credit balances. Trust Funds and Grants Donor governments and a broad array of private and public institutions make deposits in Trust funds that are housed at the World Bank. These donor resources are leveraged for a broad range of development initiatives. The initiatives vary significantly in size and complexity, ranging from multibillion dollar arrangementssuch as Carbon Finance; the Global Environment Facility; the Heavily Indebted Poor Countries Initiative; and the Global Fund to Fight AIDS, Tuberculosis, and Malaria.

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NMIMS EMBA Group 1 International Finance IDA grantswhich are either funded directly or managed through partnershipshave been used to: o o o o o o Relieve the debt burden of heavily indebted poor countries Improve sanitation and water supplies Support vaccination and immunization programs to reduce the incidence of communicable diseases like malaria Combat the HIV/AIDS pandemic Support civil society organizations Create initiatives to cut the emission of greenhouse gases

Analytic and Advisory Services: While WB is the best known as a financier, another of its roles is to provide analysis, advice and information to its member nations so they can deliver the lasting economic and social improvements their people need. It does this through economic research and data collection on broad issues such as the environment, poverty, trade and globalization Another is through country-specific, non-lending activities such as economic and sector work, where it evaluates a country's economic prospects by examining its banking systems and financial markets, as well as trade, infrastructure, poverty and social safety net issues, for example. Capacity Building Another core Bank function is to increase the capabilities of its partners, the people in developing countries, and its own staff to help them acquire the knowledge and skills they need to provide technical assistance, improve government performance and delivery of services, promote economic growth and sustain poverty reduction programs.

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NMIMS EMBA Group 1 International Finance World Bank The India Scenario India joined the WB at its inception in 1944. The WB works in close association in India with the Central Government, State Governments, Non Government Organizations (NGO), public and private sector and the general public. India Plan: WB outlines country specific strategies in its document Country Strategy (CAS). The country strategy for India (2009 2012) is aligned with its Eleventh Five Year Plan. The WB focuses on helping the country to fast track the development of infrastructure, support the poor states and respond to the financial crisis. WB estimates lending to India to be at around USD 14 billion during the period 2009 2012. Since the global crisis, the WB has recently agreed to extend the financing by another USD 3 billion. The abstract of Country Strategy Project Report Financial Year 2005 2008 of the WB was as under: The India Country Strategy (CAS) for FY05-08 was prepared at an important juncture: a coalition of political parties led by Indian National Congress-which fought the election on the plank of "reforms with a human face"-was voted to power in May 2004, and the Indian economy emerged out of a slump to register an unprecedented growth rate of 8.4 percent in 2003/04. Given the fortuitous timing, the CAS anticipated the impending shift in the policy stance toward a more inclusive development agenda and the approaching economic boom-thereby internalizing them in its design and contents. As a result, nearly two and a half years since its Board approval, the core strategy of the 2004 CAS remains largely unchanged. This report reviews the progress made in implementing the CAS, and discusses how the strategy will be deployed for the remaining period. It begins with an overview of the country context, assessing political, economic, and social developments since the CAS discussions, then describes the experience to date, and finally suggests the way forward for the Bank Group, and presents the risks.

(Source: CAS Report dated 2007 / 05 / 09, Report Number 39796, Volume 1 of 1).
At the end of June 30, 2010, the World Bank group had 75 active projects in the country. The net commitment for these projects was about $21.4 billion. New lending in FY10 (1 July 2009- 30 June 2010) amounted to $9.3 billion. The WB had spelt out the India Plan in its document CAS India 2009 2012. However, due to the impending global financial crisis, it has deviated from the plan spelt out in the document. The other factors that led to the deviation are the efforts to refocus and realign the India Program and increased demand from the government of India for more financing. The WB lent USD 9.2 billion to India in FY 10 and 14 new projects were undertaken.

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NMIMS EMBA Group 1 International Finance World Bank lending to India is organized around the key challenges mentioned below: Achieving rapid and inclusive growth Build strong partnerships with the low income states of Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan and Uttar Pradesh. Agricultural and rural developments Infrastructure o Transport o Energy o Urban development o Financial sector development o Support to the Small and Medium Sized Companies Ensuring sustainable growth Elementary education Secondary education Heath Skills Water supply and sanitation

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NMIMS EMBA Group 1 International Finance The International Monetary Fund (IMF): Mission: The IMF works to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty. The IMF has 187 member nations. Role of IMF: The IMF expects its member nations to take the advantage of the opportunities offered by globalization and develop a nation economically. The IMF alerts a nation when it foresees a risk, provides advisory services to needy governments and passes know how to governments on ways to tackle financial crisis. Reduction in poverty and macroeconomic stability also comprise the aims of the IMF. The IMF supports its member nations by providing: Policy advice to governments and central banks based on analysis of economic trends and cross-country experiences; Research, statistics, forecasts, and analysis based on tracking of global, regional, and individual economies and markets; Loans to help countries overcome economic difficulties; Concessional loans to help fight poverty in developing countries; and Technical assistance and training to help countries improve the management of their economies. The main goal of IMF is to ensure financial stability of the international monetary system. It helps resolve crisis and works with the member nations to alleviate poverty. IMF uses 3 main tools to carry out its mission: Surveillance The goal of the IMF is to promote economic stability and global growth by encouraging countries to promote and adopt sound financial and economic policies. It does so by monitoring the policies adopted by individual countries and also assesses its impact on the other member nations. The IMF usually conducts surveys of a country once a year. The member nation may choose to publish the IMFs recommendations and reports. Most countries publish IMFs views. The IMF works closely with the World Bank to promote sound financial systems through its program Financial Sector Assessment Program (FSAP). The FSAP is supported by experts from a range of national agencies. The WB assesses the strengths and weaknesses of the financial system and the vulnerability of the system. Technical assistance and training IMF primarily provides the technical assistance in 4 predominant areas o Monetary and financial policies such as monetary policies, bank system supervision and restructuring, foreign management operations and the like o Fiscal policy formulation and management o Compilation, management, assessment, dissemination and analysis of statistical data o Economic and financial legislations Lending In the event that member countries experience difficulties financing their balance of payments, the IMF is also a fund that can be tapped to facilitate recovery. A policy program supported by financing is designed by the national authorities in close cooperation with the IMF. Continued financial support is conditional on the effective implementation of this program. The IMF also provides low-income countries with loans at a concessional interest rate through the Poverty Reduction and Growth Facility (PRGF) and the Exogenous Shocks Facility (ESF).

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NMIMS EMBA Group 1 International Finance IMF and India: The IMF has forecasted Real GDP growth of India at 8.2% for FY 2011 and 7.8% for FY 2012 (Source: World Economic Outlook Jun 2011). The following are the observations according to James P Walsh, Chanho Park and Jiangyan Yu of the IMF in their work paper 11 / 181 titled Financing Infrastructure in India Macro Economic Lessons and Emerging Market Case Studies dated 4 Aug 2011: Overall, however, this analysis can only go so far in telling us that fiscal and financial condition, and to a lesser extent savings, tend to improve during periods where infrastructure investment is growing. Countries experiences differ, and it would be informative to look in detail at how individual countries have secured infrastructure finance. The analysis below looks at four emerging markets. Rather than focus on boom periods, the analysis is focused on how private and public capital have been mobilized to finance infrastructure in recent years. With more and more experience in how to gain private sector support for infrastructure finance, focusing on the current period, with its relatively well developed markets, makes more sense than focusing on earlier years where private mechanisms were less well developed. IMF and the global financial crisis: Tackling Current Challenges Source: http://www.imf.org/external/about/onagenda.htm As the world economy became engulfed in the worst crisis since the Great Depression of the 1930s, the IMF mobilized on many fronts to support its member countries, increasing its lending, using its cross-country experience to advise on policy solutions, and introducing reforms to modernize its operations and become more responsive to member countries needs. With the worldwide recovery becoming more established but remaining fragile on a variety of fronts, the IMF is now rethinking its policy advice and the economic theory that underpins it and stepping up its global economic monitoring role to help countries anticipate looming problems and take early action to avoid future crises. Reinforcing multilateralism The crisis highlighted the tremendous benefits from international cooperation. Without the cooperation spearheaded by the Group of Twenty industrialized and emerging market economies (G-20) the crisis could have been much worse. The IMFs Executive Board has also been considering a range of options to enhance multilateral, bilateral, and financial surveillance, and to better integrate the three. It has launched spillover reports for the five most systemic economies China, the Euro Area, Japan, United Kingdom, and the United Statesto assess the impact of policies by one country or area on the rest of the world. Rethinking macroeconomic principles The severity of the crisis immense hardship and suffering around the world and the desire to avoid a repeat also raised some profound questions about the pre - crisis consensus on macroeconomic policies. In this context, the IMF is encouraging a wholesale re-examination of macroeconomic policy principles in the wake of the global economic crisis. In March 2011, the IMF hosted a high profile conference to take stock of these policy questions and promote a discussion about the future of macroeconomic policy. The agenda focused on six key areas: monetary policy; fiscal policy; financial intermediation and regulation; capital account management; growth strategies; and the international monetary system.

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NMIMS EMBA Group 1 International Finance Stepping up crisis lending As part of its efforts to support countries during the global economic crisis, the IMF is increasing its lending capacity. It has approved a major overhaul of how it lends money by offering higher amounts and tailoring loan terms to countries varying strengths and circumstances. More recently, further reforms have been approved that strengthen the IMFs capacity to prevent crises. The IMF has committed more than USD 280 billion to countries hit by the crisis including Greece, Ireland, Portugal, Romania, and Ukraineand has extended credit to Mexico, Poland, and Colombia under a new flexible credit line. The IMF is also stepping up its lending to low-income countries to help prevent the crisis undermining recent economic gains and keep poverty reduction efforts on track. Strengthening the international monetary system The current International Monetary System the set of internationally agreed rules, conventions, and supporting institutions that facilitate international trade and crossborder investment, and the flow of capital among countries has certainly delivered a lot. But it has a number of well-known weaknesses, including the lack of an automatic and orderly mechanism for resolving the buildup of real and financial imbalances; volatile capital flows and exchange rates that can have deleterious economic effects; and related to the above, the rapid, unabated accumulation of international reserves, concentrated on a narrow supply. Supporting low-income countries The IMF has upgraded its support to low - income countries, reflecting the changing nature of economic conditions in these countries and their increased vulnerabilities due to the effects of the global economic crisis. It has overhauled its lending instruments, especially to address more directly countries' needs for short-term and emergency support.

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NMIMS EMBA Group 1 International Finance Sources: 1. 2. 3. 4. 5. 6. www.wto.org www.worldbank.org www.imf.org Country Strategic Report India FY 2005 2008 and FY 2009 2012 Articles of James Walsh Kevin Gallagher, book The Enclave Economy: Foreign Investment and Sustainable Development in Mexicos Silicon Valley

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