India and the IMF

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. IMF provided major loans to India to structure its finances and maintain average economic growth rate.

About the IMF

The International Monetary Fund (IMF) is an association of 186 nations, working towards strengthening the international fiscal system, protecting monetary stability, assisting international trade, endorsing greater employment, maintaining fiscal growth, and diminishing poverty rate across the globe.

The organization maintains its association by facilitating:

  • Policy guidance to administrations and nationalized financial institutions on the basis of the assessment of fiscal trends cross national know-how;
  • Providing study data, statistics, predictions and assessments based on the survey of international, local and respective financial systems and markets.
  • Providing loans to assist nations to surmount financial difficulties;
  • Providing provisional finances to help evade poverty in progressing nations and
  • Providing technological support and training to aid nations enhance the administration of their financial systems.

IMF and India Relations

India 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.

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.

The speed at which the gold was purchased by India on September 18, 2009 astonished the market observers, who later considered it as a smart move towards shoring its bullion funds and steadily trying to stake on the US dollar. 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.

The Reserve Bank of India forfeited USD 1,045/ ounce of yellow metal paying the amount in hard exchange and not in the IMF's internal division of account.

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.

IMF 2010-11 prediction of Indian Economy

The International Monetary Fund (IMF) predicted 8% expansion during 2010-11. However, the growth will be affected by high inflation and increasing monetary deficit in the concerned fiscal year.

India's long term economic prospects will continue to remain sturdy in 2010-11 followed by lower growth rate at 7.7% for the FY 2011-12. Other than high inflation and rising financial deficit, the major areas of concern are rise in asset cost and the prospects of an unanticipated slowdown in the influx of foreign investment in India caused due by the chaos in worldwide financial markets.

Last Update on 12 May 2011