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India to join multilateral lender EBRD


Mains Paper 2: IR | Important International institutions, agencies & fora, their structure, mandate

From UPSC perspective, the following things are important:

Prelims level: EBRD

Mains level: India’s membership in various multilateral institutions and their significance


EBRD approves India’s membership

  1. India has got the go-ahead to join the European Bank of Reconstruction and Development (EBRD)
  2. Shareholders of the London-based multilateral lender agreed to the country becoming its 69th member

Effect of the membership

  1. The membership will enable Indian companies to undertake joint investments in regions in which the EBRD operates
  2. It will also enable Indian citizens to work for the organization
  3. India’s stake will also give it a say in the direction of the EBRD’s future work


European Bank of Reconstruction and Development (EBRD)

  1. EBRD is an international financial institution founded in 1991
  2. Headquartered in London, the EBRD is owned by 65 countries and two EU institutions
  3. As a multilateral developmental investment bank, the EBRD uses investment as a tool to build market economies
  4. The EBRD has members from all over the world (North America, Africa, Asia and Australia), with the biggest shareholder being the United States
  5. It only lends regionally in its countries of operations
  6. Despite its public sector shareholders, it invests in private enterprises, together with commercial partners
  7. The EBRD is not to be confused with the European Investment Bank (EIB), which is owned by EU member states and is used to support EU policy

[op-ed snap] Wealth Of The Nation


Mains Paper 2: Governance | Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and Bodies constituted for the protection and betterment of these vulnerable sections.

From UPSC perspective, the following things are important:

Prelims level: World Economic Forum

Mains level: The newscard talks about an important issue to be discussed at davos. As this issue(of wealth inequality) is more relevant from India’s point of view, this makes it more important from the UPSC perspective.


What is the news?

  1. The government has announced that PM would lead the “largest ever” Indian contingent to Switzerland during the four-day World Economic Forum 2018 in Davos on January 23
  2. Why important: he is the first Indian PM to be attending Davos in over two decades
  3. This year’s agenda for WEF includes “sustainable and inclusive economic development”

Main concern of the forum: Rising global inequality

  1. The inequality worries them because it makes economic
    (i) growth unsustainable,
    (ii) corrodes politics and undermines democracy
  2. Due to this inequality people feel that the only way to get rich is through violence, crime and corruption

Why is the list of Indian Billionaires not so special?

  1. According to a Credit Suisse Global Wealth data for India, in 2017, 73 per cent of the increase in wealth in India went to the top one per cent 
  2. India now has 101 billionaires, with 17 new billionaires added last year
  3. They have not all earned this wealth through hard work — 37 per cent of India’s billionaires have inherited wealth
  4. There are only four women billionaires and three of them inherited family wealth

What should the government do? : Action against inequality

  1. First, India needs to promote inclusive growth by ensuring that the income of the bottom 40 per cent of the population grows faster than of the top 10 per cent
  2. It can be achieved by promoting labour-intensive sectors that will create more jobs, investing more in agriculture and implementing fully social protection schemes
  3. Second, it needs to take stringent measures against tax evasion and avoidance
  4. Tax the super-rich by re-introducing inheritance tax and increasing the wealth tax
  5. It desperately needs more revenues to increase public expenditures on health and education
  6. Third, the government needs to collect and make available regular and high quality data on income and wealth
  7. It is the lack of availability of such data, that has allowed inequality to creep up to such high levels in India (without even policymakers themselves being aware of the nature and magnitude of the problem)


World Economic Forum

  1. The World Economic Forum (WEF) is a Swiss nonprofit foundation, based in Cologny, Geneva, Switzerland. Recognized by the Swiss authorities as an international body, its mission is cited as “committed to improving the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas”
  2. The Forum is best known for its annual meeting at the end of January in Davos, a mountain resort in Graubünden, in the eastern Alps region of Switzerland
  3. The meeting brings together some 2,500 top business leaders, international political leaders, economists, and journalists for up to four days to discuss the most pressing issues facing the world
  4. Often this location alone is used to identify meetings, participation, and participants with such phrases as, “a Davos panel” and “a Davos Man”
  5. The organization also convenes some six to eight regional meetings each year in locations across Africa, East Asia, and Latin America, and holds two further annual meetings in China and the United Arab Emirates
  6. Beside meetings, the foundation produces a series of research reports and engages its members in sector-specific initiatives

[op-ed snap] Why foreign aid does not reach the poor

Image Source


Mains Paper 2: Governance | Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and Bodies constituted for the protection and betterment of these vulnerable sections.

From UPSC perspective, the following things are important:

Prelims level: The report

Mains level: Foreign aid is an important part of every developed or underdeveloped Economy. It is very important to know about its effectiveness.


Importance of Foreign Borrowings

  1. Foreign aid from developed countries in the West has for long been touted as an important tool to help the poorest people in Asia and Africa lead better lives
  2. Organisations such as the World Bank, in fact, have acted as agents, transferring aid from Western governments to the poor in other parts of the world

“Does foreign aid target the poorest?” : A report by International Organization

  1. Surprisingly, the analysis(in the report) shows that foreign aid manages only to improve the lives of the richest people in the poorest countries of the world
  2. In fact, after adjusting for population size, the amount of aid that flows to the richest people in Africa is found to be about three times higher than what flows to the poorest people
  3. The study further suggests that there might be some political reasons why aid does not reach its intended targets in the recipient countries

Political interference

  1. The study further suggests that there might be some political reasons why aid does not reach its intended targets in the recipient countries
  2. Generally speaking, foreign aid is not dispatched by a bunch of good people trying to do some good to the poor. Instead, it is bureaucrats and politicians who usually direct the flow of aid into the developing world
  3. Their decisions, in turn, are driven mostly by political considerations rather than noble intentions. This naturally leads to various forms of corruption
  4. The supporters of foreign aid have tried various technocratic solutions to improve the effectiveness of foreign aid
  5. They are, however, yet to find a solution to the perverse incentives causing the misallocation of aid

Asian Development Bank to provide $20 billion loan to India over five years


 Mains Paper2 | Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

The following things are important from UPSC perspective:

Prelims: ADB and its Country Partnership Strategy 2018-22

Mains level: ADB will raise annual funding for India to up to $4 billion from next year under its Country Partnership Strategy 2018-22.



  1. Asian Development Bank (ADB) said it will raise annual funding to India to up to $4 billion from existing $2.7 billion, from next year.

ADB’s Country Partnership Strategy 2018-22

  1. ADB Country Director in India said the multilateral funding agency has decided to provide loans up to $4 billion on annual basis including non-sovereign or private debt during 2018-22.
  2. As part of ADB’s Country Partnership Strategy 2018-22, annual sovereign funding will increase from $2 billion to $3 billion while private sector funding would be doubled to $1 billion.
  3. The other priority pillars include increasing annual funding to low income states and climate change.

The India Programme

  1. It will focus on boosting economic competitiveness to create more and well paid jobs, improved access to infrastructure and services, and addressing climate change and improving climate resilience over these five years.
  2. ADB said infrastructure continues to be a major bottleneck.
  3. Also, it has identified an investment shortfall of $230 billion a year in infrastructure sector.
  4. ADB highlighted that on Gross Domestic Product (GDP) growth, India is expected to grow at 7 per cent in the current fiscal and will accelerate to 7.4 per cent next fiscal.
  5. Indian economy expanded by 5.7 per cent in the first quarter of the current fiscal, the lowest in the three years.
  6. Job creation is a challenge for India.
  7. India’s poverty reduction record has been quite substantial.
  8. And rural wages has grown faster than economic growth rate which has led to reduction of agriculture labour.
  9. Skill development is an area that would help in employability.

India’s Other Investment partners

  1. Apart from, the Japan International Cooperation Agency, KfW, and the World Bank are India’s other development partners.
  2. The Asian Infrastructure Investment Bank and the New Development Bank have also joined as new multilateral funding agencies.




What is an Extended Fund Facility (EFF)?

  1. The IMF can assist a country with the adjustment process under an Extended Fund Facility (EFF)
  2. When? A country faces serious medium-term balance of payments problems because of structural weaknesses that require time to address
  3. Assistance under EFF features longer program engagement—to help countries implement medium-term structural reforms—and a longer repayment period

IMF to disburse $102 million to Pakistan- II

  1. India: Did not oppose the decision since the amount involved is not large
  2. This is despite the rising hostilities between the two neighbours which has led India to strive to isolate Pakistan globally through diplomatic efforts
  3. A Factoid: India’s IMF Executive Director in Washington Subir Gokarn also represents Bangladesh, Bhutan and Nepal but not Pakistan, which is in the group that has Iran and other countries

Indian demands at Bretton Woods meeting

  1. Context: The ‘Spring Meetings’ interaction with various officials of the International Monetary Fund and the World Bank
  2. Financing: Jaitley has called on the World Bank to continue its concessional financing until 2030
  3. He also called for increase the development financing and non- concessional loans to $100 billion over the next five years
  4. Why? Delivering the SDGs on development and reconstruction agenda would require large amounts of concessional and non-concessional finance
  5. The ongoing revision of environmental and social standards required under the financing conditions must not compromise the primacy of the development objective

Stick to fiscal consolidation: WEO

  1. Context: Latest edition of the World Economic Outlook (WEO) by International Monetary Fund (IMF)
  2. India must continue on its fiscal consolidation path and focus on reforms, especially in the labour and infrastructure sectors
  3. Consumer inflation would be at 5.3% for the next two years and would ease by 2021
  4. Lower commodity prices, supply side measures, and a relatively tight monetary stance have resulted in a faster-than-expected fall in inflation
  5. But upside risks to inflation could necessitate a tightening of monetary policy

Lagarde lauds India’s Fiscal policy

  1. Context: At a 3-day Advancing Asia conference hosted by India and the IMF, IMF MD Christine Lagarde lauded India
  2. What? India’s fiscal stance of consolidation and higher capital spending is “appropriate and sensible”
  3. Investments in major infrastructure projects are the right way to stimulate economy
  4. Also the effort by Govt & RBI to clean bank balance sheets are appropriate

IMF and India to Set up a South Asia Regional Training and Technical Assistance Center(SARTTC)

  1. Context: Union Finance Ministry and International Monetary Fund (IMF) have signed a Memorandum of Understanding (MoU) on SARTTC
  2. Objective: SARTTC will set up for enhancing capacity development and training officials in dealing with macro-economic and financial issues in South Asia region
  3. Relevance: Will become the focal point for planning, coordinating, and implementing the IMF’s capacity development activities in the region on a wide range of areas
  4. Focus Areas: Macroeconomic and fiscal management, financial sector regulation, monetary operations and supervision, and macroeconomic statistics
  5. Help to address existing training needs and respond to the demand for IMF training in India, Bhutan, Bangladesh, Nepal, Maldives and Sri Lanka

Yet to receive a request from Cuba for IMF membership: IMF chief

  1. News: Cuba has not yet made a request for membership of the IMF, the fund’s chief said
  2. Context: IMF chief’s comments came just days after European Union(EU) and Cuba signed an agreement in Havana to establish normal relations
  3. Why? For bringing Communist-run island further into the international fold and paving the way for full economic cooperation with the 28-member bloc
  4. Relevance: Cuba was one of the founding members of the IMF until it quit in 1964

IMF prods India on GDP numbers

  1. Context: IMF came to the rescue of CSO amid consistent criticism of new GDP numbers
  2. It held that the country’s economic growth figures look credible
  3. It also prodded CSO to come out with the producer’s price index (PPI) in place of retail and wholesale price indices
  4. Critics: New GDP series portrays an overly robust picture of the Indian economy
  5. But other macro indicators such as bank credit growth, rural demand and factory output do not support it

IMF knowledge sharing centre to come up in India

  1. Context: IMF will set up a knowledge-sharing centre in India
  2. Objective: To counsel Delhi and other South Asian capitals, bringing more expertise in an economic crisis
  3. It is a first such office for Asia
  4. Countries: Will provide assistance to India, Nepal, Bangladesh, Sri Lanka, Pakistan and Bhutan
  5. Benefit: Will ensure better understanding of regional concerns- trade, agriculture, climate change, facilitating a reform process and support to regional integration

3 red flags from IMF

  1. Context: A study conducted by IMF on Indian firms
  2. Relevance: Leverage of Indian firms is among the weakest in emerging markets
  3. How? Following the global financial crisis, firms couldn’t raise money from new share issuances and instead relied increasingly on foreign borrowings, that made them vulnerable to external shocks
  4. Returns declined sharply: Because of delay in project approvals, land acquisition problems, fuel scarcity, 2 yrs of droughts, weak domestic and export demand, excess capacity, high interest rates
  5. Vulnerability to shocks is high: Capacity of firms to repay debt has fallen alarmingly

Christine Lagarde appointed for second term as IMF chief

  1. Context: She was sole candidate nominated for the post and was re-nominated by IMF’s Executive Board decision taken by consensus
  2. Background: She was for the first time appointed MD in 2011 after IMF Board had initiated selection process on merit-based and transparent process
  3. Prior to her appointment at the IMF in 2011, she had served as Minister of Finance and Minister for Foreign Trade of France
  4. Significance: First woman named to the top post of IMF since the institution’s inception in 1944

Let’s know more about IMF Quota

  1. It determines a country’s subscription to the IMF, access to fund and voting rights.
  2. The current quota formula is a weighted average of GDP (weight of 50 percent), openness (30 percent), economic variability (15 percent), and international reserves (5 percent).
  3. GDP is measured through a blend of GDP—based on market exchange rates (weight of 60 percent)—and on PPP exchange rates (40 percent)
  4. Emerging economies want changes to the formula as part of overall reform, giving more weight to GDP at PPP and dynamic factors such as GDP growth.
  5. Any changes in quotas must be approved by an 85 percent majority of the total voting power.
  6. This gives country holding >15% quota de facto veto over quota reforms and USA holds such a veto with more than 16% quota share.

Keep Pushing for IMF reform

Launch of BRICS Bank and Asian Infrastructure Investment Bank, finally pushed US and developed nations to modernize their quota structure.

  1. International Monetary Fund has finally made country quota reforms agreed by the G20 in 2010 a reality.
  2. The U.S. Congress which had blocked the reforms finally dropped its veto to allow quota reform to go through.
  3. With this structural shift, more than 6 % of the quota, including both the Fund’s capital and voting rights, have been transferred from developed to emerging economies.
  4. India and China have respectively increased their voting shares by 0.292 and 2.265 percentage points.
  5. All the directors on IMF board will now be elected and developed countries will not be able to nominate.

Let’s know about IMF?

  1. Created in 1945, the IMF is governed by and accountable to 188 countries that make up its near-global membership.
  2. The IMF, also known as the Fund, was conceived at a UN conference in Bretton Woods, New Hampshire, United States, in July 1944.
  3. To foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and reduce poverty around the world.
  4. The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.

India gets more voting rights in IMF reforms

More than 6 per cent of the quota shares will shift to emerging and developing countries from the U.S. and European countries.

  1. India’s voting rights increase to 2.6 per cent from the current 2.3 per cent, and China’s, to 6 per cent from 3.8, as per the new division.
  2. Russia and Brazil are the other two countries that gain from the reforms.
  3. The significant resource enhancement will fortify the IMF’s ability to respond to crises more effectively.
  4. IMF reforms were agreed upon by its 188 members in 2010, in the aftermath of the global financial meltdown.
  5. The reforms bring India and Brazil into the list of the top 10 members of IMF, along with the U.S, Japan, France, Germany, Italy, the United Kingdom, China and Russia.

:( We are working on most probable questions. Do check back this section.

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