The International Monetary Fund (IMF) and relevant to India

The International Monetary Fund (IMF) and relevant to India

International Monetary fund, which is briefly called IMF, is one of the twin institutions which were established as a result of discussion among the monetary and financial delegations of the member countries of the United Nations held at Bretton Woods Z(U.S.A) in 1944. Its establishment on 1^st march, 1947, is a great land mark in the history of international economic relations, particularly in the monetary field.

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.

Main functions of IMF are:

• Regulating rate of exchange changes the internal policies of the member-countries to restore equilibrium are not to be interfered with by the IMF.
• Assistance for meeting balance of payments deficit, There is, however, a limit to the amount which it can thus obtain.
• Rationing out scarce currencies, the IMF has increase the supply of such ‘scarce’ currencies by borrowing or by purchasing them against gold. The member-countries are permitted to impose exchange restrictions in cash of such ‘scarce’ currencies.
• Elimination of exchange restrictions, IMF allowed a period of transition extending over 3 years during which the members could remain such restrictions.
• 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.

Programs of IMF are Stand-by arrangements, Extended fund facility (EFF), Poverty reduction and Growth Facility (PRGF), Supplement reserve facility (SRF), Contingent credit line (CCL), Special oil facility.

Role of IMF in shaping India’s development:

India joined the IMF on December 27, 1945, as one of the IMF's original members. India accepted the obligations of Article VIII in the IMF Articles of Agreement on current account convertibility on August 20, 1994. India borrowed both financial and other assistance from the IMF quite a number of times under several lending provisions of the fund.

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.

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.