The International Monetary Fund and Its Effect on The Economy of India

Rising Economy in India

India is among the world’s developing countries with a fast-rising economy. It is rich with ever-increasing human capital. India is a member of the World Bank that automatically makes it a member of other lending institutions such as IMF. The association with the lending institutions comes with good policies although the implementation of some of these policies are challenging since most are designed to suit developed countries. Its association with lending institutions also enables it to benefit from loans. The short-term and long-term loans are used in stabilizing the economy and reducing poverty levels. The loans have led to a growth in India’s economy, its social and political scenes as well as the health sector that ensures a healthy nation with effective human capital.

Firstly, the IMF has come to the rescue of India at her time of foreign exchange crisis that was due to a persistent deficit in the balance of payments on current accounts. In the post-partition, period India was experiencing balance of payment problems specifically with the dollar and other hard currencies. Her imports were essential as they included food supplies, capital equipment and raw materials. Moreover, she could not expand her exports as it could cause severe shortages. The loan from IMF was of critical assistance. Secondly, the World Bank establishment of the ‘India Aid Club’ renamed as ‘International Development Forum’ provides economic assistance to India. Besides, India enjoys the advantages of independence inspection and advice from IMF as experts are on the watch out of India’s economy. Furthermore, projects in India such as the river projects, land reclamation schemes and communication development have benefitted from World Bank through the International Bank for Reconstruction, Development and other International Financing Agencies. These projects have a great social impact as people can benefit from agriculture and good communication networks. In New Delhi, December 13, 2017, India and World Bank agreement also led to the issuance of 250 billion for labour skills empowerment (LaRue, 2013). The Skill India Mission Operation enables the youth to have labour market skills after training of around six months. SIMO has a mission to specialise in instilling women with entrepreneurial skills. Lastly, Manmohan Singh acclaims credit for LPG reforms that saw a major change in the political scene in India that was previously under strict rules of Indira Gandhi. Narasimha Rao and Manmohan Singh influence on the western winds of LPG changes while serving in the 1984 government and RBI respectively (Fernando, 2011). The change became noticeable as Singh’s approval of market liberalisation was in practice. This is whereby foreign direct investment became common in the country. These political reforms are however facing criticism as they are thought to be due to IMF conditions. Nevertheless, India has seen the downside of the involvement with institutions such as IMF. This is majorly due to the conditions that are met in order to receive financial assistance. Involvement with IMF came with the implication of its policies such as trade liberalization whose impacts led to a significant fall in the India economy.