The Relationship Between India and the International Monetary Fund
A Brief History
India joined International Monetary Fund (IMF) on 27 December, 1945. The relationship between India and the IMF dates back to the time when India needed economic reform packages to strengthen its international reputation and fiscal policy. It is among one of the developing economies that effectively employed the various Fund programmes to fortify its fiscal structure. Through productive engagement with the IMF, India formulated a consistent approach to expand domestic and global assistance for economic reforms. Whenever India underwent balance of payments crises, it sought the help of IMF and in turn the internationally recognized reserve willingly helped India to overcome the difficulties.
The …show more content…
After using the first two installments, in 1984 Prime Minister Indira Gandhi announced that India’s balance of payments situation was strong enough that India could forego using the third tranche of the loan package. India actually prepaid its outstanding debt to the IMF. India had successfully shown that home grown conditionality could be a sustainable practice for economic reform in a democratic society.
Even one year later in 1985, at another IMF Executive Board Meeting, there was much praise for India’s achievements under the IMF loan and its decision not to draw the third tranche. India’s prompt repayment of the loan enhanced its reputation and credit worthiness at the IMF, which served India well when it returned to the IMF in 1991 to arrange a major structural adjustment programme.
Recently, India purchased IMF gold to lend money to developing countries. This proves that the fiscal reforms set in motion by the previous finance ministers have finally started gaining momentum, transforming India from fiscal borrower to major lender. Some analysts predict that India is purchasing gold to move forward for higher voting share in the IMF. India is also seeking for a considerable say in global fiscal affairs and greater account in the IMF.
In recent developments and according to the News reporting in The Hindu, Union Cabinet has approved India’s contribution up to Rs.15,000 crore (about more than USD 3