The role of IMF in Indian economy/IMF and India
India is among one of the developing economies which effectively employed the various fund programmes to enhance its fiscal structure. Through productive engagement with the IMF, India has formulated a consistent approach is enhancing domestic and global assistance for economic reforms. In case of balance of payments crises, India sought the help of IMF and in turn, the internationally recognized reserve that willingly helped India to overcome the difficulties. Role of IMF in India is as follows:
1. Guidance and Advice: Being a member of the fund, India got the expert opinion from the fund to solve its economic problems. The fund has given valuable advice to the Government of India regarding the financing of the Five-Year Plans.
2. Timely Help: India has received timely help from the fund to eliminate the deficit on its balance of payments. The fund has granted loans to meet the financial needs. Hence, the fund has given timely help in economic crisis.
3. Membership of the World Bank: India has become a member of the World Bank also by virtue of its membership of the fund due to which India got several loan facilities from the World Bank for the development purposes.
4. Independence of the Indian Rupee: The Indian rupee was linked with the British Pound Sterling before the establishment of the IMF. But Indian rupee has become independent after the establishment of IMF. Its value is expressed in terms of gold and is not determined by the Pound Sterling. This means that Indian rupee is easily convertible into the currency of any other country.
5. Availability of Foreign Currencies: The Government of India has been purchasing foreign currencies from the fund from time to time in order to meet the requirements of development activities. The large amount of availability of foreign currencies has also greatly promoted the economic development of the country.
6. Reputation in International Circle: India is one of those six countries that have occupied a special place in the Board of Directors of the fund. Hence, India has played a creditable role in determining the policies of the fund. This has raised India’s reputation in the international circles. As a result, India takes keen interest in formulating fund’s policies.
7. Economic Consultation: In the financial management of Five-Year Plans, IMF has also given valuable advice to Government of India and to suggest the measures for its economic development.
8. Sale and Purchase of Foreign Exchange: Fund has entrusted the sale and purchase of foreign exchange worth more than Rs. 2 lakhs to Reserve Bank of India which cannot enter into any transaction of foreign exchange that is of the value of less than Rs. 2 lakhs.
9. Freedom from Sterling: Indian rupee was inconvertible into other currencies through the medium of sterling before it became the member of the fund. With the fixation of paper value of the rupee in gold, Indian currency is now freely convertible into any other currency.
