International Monetary Fund,World Bank,AIIB, ADB and India

International Monetary Fund,World Bank,AIIB, ADB and India

SDR general allocation by IMF

Note4Students

From UPSC perspective, the following things are important :

Prelims level : SDR mechanism

Mains level : Issues with SDR mechanism

  • Finance Minister has said that India could not support a general allocation of new Special Drawing Rights (SDR) by the IMF because it might not be effective in easing coronavirus-driven financial pressures.
  • FM Nirmala Sitharaman has stated that such a global liquidity boost by the IMF could produce potentially costly side-effects if countries used the funds for “extraneous” purposes.

Details of SDR mechanism:

What is SDR?

  • The SDR is an interest-bearing international reserve asset created by the IMF in 1969 to supplement other reserve assets of member countries.
  • To participate in this system, a country was required to have official reserves.
  • This consisted of a central bank or government reserves of gold and globally accepted foreign currencies that could be used to buy the local currency.
  • It is based on a basket of international currencies comprising the U.S. dollar, Japanese yen, euro, pound sterling and Chinese Renminbi.
  • It is not a currency, nor a claim on the IMF, but is potentially a claim on freely usable currencies of IMF members.
  • The value of the SDR is not directly determined by supply and demand in the market but is set daily by the IMF on the basis of market exchange rates between the currencies included in the SDR basket.

Who can hold SDRs?

  • SDRs can be held and used by member countries, the IMF, and certain designated official entities called “prescribed holders”.
  • It cannot be held, for example, by private entities or individuals.
  • Its status as a reserve asset derives from the commitments of members to hold, accept, and honour obligations denominated in SDR.
  • The SDR also serves as the unit of account of the IMF and some other international organizations.

General allocation of SDRs

  • An SDR allocation is a low-cost way of adding to members’ international reserves, allowing members to reduce their reliance on more expensive domestic or external debt for building reserves.
  • The IMF has the authority under its Articles of Agreement to create unconditional liquidity through “general allocations” of SDRs to participants in its SDR Department (currently, all members of the IMF) in proportion to their quotas in the IMF.

The SDR Interest Rate

  • The interest rate on SDRs, or the SDRi, provides the basis for calculating the interest rate that is charged to member countries when they borrow from the IMF and paid to members for their remunerated creditor positions in the IMF.
  • It is also the interest paid to member countries on their own SDR holdings and charged on their SDR allocation.
  • The SDRi is determined weekly based on a weighted average of representative interest rates on short-term government debt instruments in the money markets of the SDR basket currencies, with a floor of five basis points.

How many SDRs have been allocated so far?

The general SDR allocation of August 28, 2009 is by far the biggest allocation to date:

  • SDR 9.3 billion was allocated in yearly installments in 1970–72.
  • SDR 12.1 billion was allocated in yearly installments in 1979–81.
  • SDR 161.2 billion was allocated on August 28, 2009.

What happens to the SDRs once they are allocated?

  • The IMF’s SDR Department keeps records of members’ SDR allocations and holdings; the SDR Department is also the channel through which all transactions and operations involving SDRs are conducted.
  • Once allocated, members can hold their SDRs as part of their international reserves or sell part or all of their SDR allocations.
  • Members can exchange SDRs for freely usable currencies among themselves and with prescribed holders; such exchange can take place under a voluntary arrangement or under designation by the Fund.
  • IMF members can also use SDRs in operations and transactions involving the IMF, such as the payment of interest on and repayment of loans, or payment for future quota increases.

Issues with new allocations

  • New reserves are allocated according to members’ quotas — or shares in the IMF.
  • A great deal of the benefit in 2009 went to advanced economies that didn’t need help in accessing markets or financing fiscal deficits.
  • If the same system is being used now, only 40 per cent of the total would be given to the emerging economies. That is not good enough.

Other reasons

  • The possible extraneous purposes FM could be referring to maybe misuse of resources for terror funding or some such purpose by neighbours.
  • This may seem far-fetched to some, but is par for the course for the government.
  • The other possibility is that India is merely trying to prove its loyalty to the Trump administration.
  • India has already requested to access the US Fed’s currency swaps.

International Monetary Fund,World Bank,AIIB, ADB and India

Special Data Dissemination Standards (SDDS) of IMF

Note4Students

From UPSC perspective, the following things are important :

Prelims level : SDDS

Mains level : IMF and India


  • In 2018, India failed to comply with multiple requirements prescribed in the Special Data Dissemination Standard (SDDS) mandatory for all IMF members

Special Data Dissemination Standard (SDDS)

  • The SDDS is an IMF standard to guide member countries in the dissemination of national statistics to the public.
  • It was established in 1996 to guide members that have, or might seek, access to international capital markets in providing their economic and financial data to the public.
  • It is a global benchmark for disseminating macroeconomic statistics to the public. Its subscription indicates that a country meets the test of “good statistical citizenship.
  • Countries that subscribe to the SDDS agree to follow good practices in four areas: the coverage, periodicity, and timeliness of data; public access to those data; data integrity; and data quality.
  • India subscribed to the SDDS on December 27, 1996.

Indian datasets not updated

  • India failed to comply with multiple requirements prescribed in the SDDS — a practice mandatory for all IMF members.
  • Whereas comparable economies comprising the BRICS grouping of Brazil, China, South Africa and Russia, have maintained a near impeccable record in the same period.
  • Also, India’s non-compliance in multiple categories in 2018 and to an extent in 2017 breaks with an otherwise near perfect dissemination record.
  • When contacted, the IMF acknowledged India’s deviations but termed them “non-serious”.
  • However, independent observers see these deficiencies as a result of indifference to data dissemination procedures.

Importance of SDDS

  • The IMF launched the SDDS initiative in 1996 to guide members to enhance data transparency and help financial market participants with adequate information to assess the economic situations of individual countries.
  • The yearly observance report for each member country lists the compliances and deviations from the SDDS under each data category for that year.
  • There are over 20 data categories which IMF considers for this report to capture a nation’s economic health including national accounts (GDP, GNI), production indices, employment, and central government operations.

A recent phenomenon

  • India’s non-compliance with IMF standards is a recent phenomenon.
  • When asked for the reason for the delays in 2018, Deputy Director in the Department of Economic Affairs termed it as a “one off event due to technical glitches”.
  • They were made available on other (Indian) government websites on a timely basis through links on the NSDP to these websites”.

Implications of non-compliance

  • The IMF document states that monitoring observance of the SDDS is central to maintaining the credibility of the IMF’s data standards initiatives and its usefulness to policymakers.
  • It further states that if the IMF staff considers a non-observance as a “serious deviation” then procedures would be initiated against the member country.
  • When the IMF was asked to explain why India’s non-observance was deemed as non-serious , their statistical department persisted that this was due to “information availability in other government websites”.
  • It added that “the forthcoming harmonisation of the NSDPs for all SDDS countries with those for SDDS Plus and e-GDDS countries (other similar standards)” will solve this issue.

International Monetary Fund,World Bank,AIIB, ADB and India

India urges IMF to introduce quota reforms

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: IMF Quota, GFSN

Mains level: The newscard highlights necessary reforms to protect Emerging Market & Developing Countries in the light of ongoing uncertainties over global trade.


News

Context

  • Stressing on the need to strengthen institutions like IMF to tackle financial crisis, India’s Economic Affairs Secretary Mr. Garg called for quota reforms so that share of emerging nations increases in line with their growing economic position.

Building buffers against protectionism

  1. Protectionism, trade tensions and tightening of financial conditions are challenges for the world.
  2. In the context of these challenges, the time for building buffer and policy action by the emerging market economies is not there.
  3. A suitable approach could be the association of the IMF being at the centre of the GFSN (global financial safety net), at an earlier stage rather than when crisis has already occurred.

Need for Quota Reforms

  1. Speaking at 15th General Review of Quotas in Bali, Indonesia Garg said this agenda of IMF is urgent as there is a deadline fixed for its conclusion next year.
  2. Both, enhancement in the Quantum of Quota Resources and Realignment of Voting Shares should take place.
  3. It is priority wise important because quota shares of EMDCs need increase in line with its growing relative economic position in the world.

Back2Basics

IMF Quotas

  1. The IMF is a quota-based institution. Quotas are the building blocks of the IMF’s financial and governance structure.
  2. An individual member country’s quota broadly reflects its relative position in the world economy.
  3. Quotas are denominated in Special Drawing Rights (SDRs), the IMF’s unit of account.

Global Financial Safety Net (GFSN)

  1. The GFSN is comprised mainly of countries’ own reserves and external public sources of insurance and financing.
  2. The safety net seeks to provide countries with insurance against crises, financing when shocks hit, and incentives for sound macroeconomic policies.
  3. It consists of four layers: countries can self-insure against external shocks using foreign reserves or fiscal space at national level.
  4. At the bilateral level, there are swap lines concluded bilaterally among countries. At regional level, the protection comes from Regional Financing Arrangements.
  5. And finally, the IMF provides a global financial backstop.

International Monetary Fund,World Bank,AIIB, ADB and India

World Bank loan for Biopharma Mission

Note4students

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

From UPSC perspective, the following things are important:

Prelims level: Particulars of the Mission

Mains level: Importance of the Mission


News

Loan for National Biopharma Mission

  1. The government has secured a loan of about Rs. 1,600 crore from the World Bank to develop new vaccines, medical devices and medicines
  2. The money will be disbursed over five years and is part of the Department of Biotechnology-led National Biopharma Mission

Particulars of the National Biopharma Mission

  1. The pharmaceutical industry holds a promising future for India, and the National Biopharma Mission is anticipated to be the game changer for Indian Pharmaceutical Industries
  2. The mission aspires to create a conducive ecosystem to encourage entrepreneurship and indigenous manufacturing in the sector by strengthening technology transfer capabilities in the private and the public sector.
  3. It aims to make India a hub for design and development of affordable, novel and effective biopharmaceutical products and solutions
  4. The mission strives to encourage entrepreneurship to transform the health standards of the people of India through affordable medicines
  5. A Public Sector Undertaking of Department of Biotechnology(DBT) – Biotechnology Industry Research Assistance Council (BIRAC) is involved in the implementation of the mission

Legal Agreement between the World Bank and the DBT

  1. The Legal Agreement with World Bank for flexible financing arrangements for this Mission of DBT was executed on April 24, 2018 between the project implementing agency – BIRAC

Why is this mission important?

  1. This mission will mark the beginning of a new partnership between DBT and World Bank. It is envisaged that this programme will revolutionize the Biotech market
  2. It will help deliver 6-10 new products in the next five years, create several dedicated facilities for next-generation skills, and hundreds of jobs in the process
  3. It is anticipated that in the long term it would benefit the Indian population at large due to availability of affordable solutions and products relevant to Indian health needs

International Monetary Fund,World Bank,AIIB, ADB and India

India to join multilateral lender EBRD

Note4students

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

Back2Basics

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

International Monetary Fund,World Bank,AIIB, ADB and India

[op-ed snap] Wealth Of The Nation

Note4students

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.


News

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)

Back2basics

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

International Monetary Fund,World Bank,AIIB, ADB and India

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

Image Source

Note4students

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.


News

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

International Monetary Fund,World Bank,AIIB, ADB and India

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

Note4Students

 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.


News

Context

  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.

 

 

 

International Monetary Fund,World Bank,AIIB, ADB and India

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

International Monetary Fund,World Bank,AIIB, ADB and India

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
  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

International Monetary Fund,World Bank,AIIB, ADB and India

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
  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

International Monetary Fund,World Bank,AIIB, ADB and India

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
  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

International Monetary Fund,World Bank,AIIB, ADB and India

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
  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

International Monetary Fund,World Bank,AIIB, ADB and India

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
  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

International Monetary Fund,World Bank,AIIB, ADB and India

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
  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

International Monetary Fund,World Bank,AIIB, ADB and India

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
  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

International Monetary Fund,World Bank,AIIB, ADB and India

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
  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

International Monetary Fund,World Bank,AIIB, ADB and India

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
  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

International Monetary Fund,World Bank,AIIB, ADB and India

Keep Pushing for IMF reform

  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.

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.

International Monetary Fund,World Bank,AIIB, ADB and India

India gets more voting rights in IMF reforms

  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.

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.
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