Why in the news?

  • The International Monetary Fund (IMF), in its annual assessment, has assigned a ‘C’ grade to India’s national accounts statistics, including crucial indicators like Gross Domestic Product (GDP) and Gross Value Added (GVA).

International Monetary Fund (IMF)

  • What is  it?: The International Monetary Fund (IMF) is a global financial institution created in 1944 at the Bretton Woods Conference and came into force in 1945 with Washington D.C as its Headquarter.
  • Objectives:
    • Promote international monetary cooperation.
    • Ensure exchange rate stability.
    • Facilitate balanced global trade.
    • Provide financial assistance to member countries facing balance of payments (BoP) crises.
    • Promote economic growth & employment.
    • Reduce global poverty through structural reforms.
  • Functions:
    • Monitors global, regional, and national economies.
    • Provides loans to countries facing balance of payments (BoP) crises.
      • Types of Lending: Stand-By Arrangement (SBA), Extended Fund Facility (EFF), Extended Credit Facility (ECF) (for low-income nations), Rapid Financing Instrument (RFI), and Rapid Credit Facility (RCF).
      • Conditions often include structural reforms, termed “IMF conditionalities.”
    • Technical assistance and training in Fiscal policy, Monetary policy, Financial sector management and Statistics
    • Publishes key reports like World Economic Outlook (WEO), Global Financial Stability Report (GFSR), External Sector Report (ESR) and Article IV Consultations.
  • Membership:
    • 190 member countries (as of 2025).
    • India is a founding member.
    • Membership tied to quota system
  • Quota System:
    • Each member is assigned a quota based on its economic size and openness.
    • It determines Voting power, Financial contribution and Borrowing limits.
  • Special Drawing Rights (SDRs):
    • IMF’s international reserve asset.
    • Based on a currency basket (USD, EUR, RMB, GBP, JPY).
    • Used for-
      • Supplementing foreign exchange reserves
      • Settling international payments
      • Boosting BoP stability
  • IMF and India:
    • India is a founding member.
    • India’s quota: 2.75% (approx; among top 10).
    • India received IMF assistance during the BoP crisis of 1991.
    • IMF supports India’s fiscal consolidation, GST reforms, financial sector strengthening.
    • India’s Concerns:
      • Under-representation of Global South.
      • Need for reform in quota formula, voting power.
      • Desire for greater focus on development, climate financing, and inclusive growth.
  • Criticisms:
    • One-size-fits-all conditionalities often seen as harsh
    • Dominance of developed countries: US & EU have disproportionate voting power.
    • Conditions undermine the sovereignty of borrower nations.
    • Slow pace of quota reforms
    • Greater focus on stability than on development or equity

Source: The Hindu