IMF & World Bank — Functions & India’s Role
IMF — SDR, quota, conditionality. World Bank — IBRD, IDA, IFC. India’s relationship with both institutions.
🏛️ Bretton Woods Institutions
The IMF and World Bank were both established at the Bretton Woods Conference (1944) in New Hampshire, USA. They are called “Bretton Woods Institutions” or “twin sisters.” Both are headquartered in Washington D.C., USA.
| Feature | IMF | World Bank |
|---|---|---|
| Full Name | International Monetary Fund | World Bank Group |
| Established | 1944 (operational 1945) | 1944 (operational 1946) |
| HQ | Washington D.C., USA | Washington D.C., USA |
| Members | 190 countries | 189 countries |
| Focus | Monetary stability, BoP support | Long-term development, poverty reduction |
| Loans | Short-term (BoP crisis) | Long-term (development projects) |
💰 IMF — International Monetary Fund
The IMF’s primary purpose is to ensure the stability of the international monetary system — the system of exchange rates and international payments.
Key Functions of IMF:
- Surveillance: Monitors global economy and member countries’ economic policies
- Lending: Provides short-term loans to countries facing BoP crises
- Technical assistance: Helps countries improve economic management
- SDR allocation: Creates and allocates Special Drawing Rights
IMF Quota System:
Each member country has a quota — based on its economic size. Quota determines: (1) voting power, (2) maximum borrowing, (3) SDR allocation. USA has the largest quota (~17.4%) — giving it effective veto power over major decisions.
During the 1991 BoP crisis, India borrowed $2.2 billion from IMF under a Structural Adjustment Programme. IMF imposed “conditionalities” — India had to reduce fiscal deficit, devalue rupee, and liberalise economy. This forced India to undertake the LPG reforms. Today, India is a net creditor to IMF — it lends to IMF rather than borrowing.
🌍 World Bank Group
The World Bank Group consists of 5 institutions:
| Institution | Full Name | Focus |
|---|---|---|
| IBRD | International Bank for Reconstruction and Development | Loans to middle-income countries at market rates |
| IDA | International Development Association | Concessional loans/grants to poorest countries |
| IFC | International Finance Corporation | Private sector investment in developing countries |
| MIGA | Multilateral Investment Guarantee Agency | Political risk insurance for investors |
| ICSID | International Centre for Settlement of Investment Disputes | Arbitration for investment disputes |
World Bank funded the Pradhan Mantri Gram Sadak Yojana (rural roads), Delhi Metro, and various state-level water supply projects in India. These projects improved connectivity and quality of life for millions of rural Indians.
🔑 Key Terms
- Bretton Woods: 1944 conference that created IMF and World Bank
- SDR: Special Drawing Rights — IMF’s reserve asset; basket of 5 currencies
- Conditionality: IMF’s conditions attached to loans — fiscal discipline, structural reforms
- IBRD: Loans to middle-income countries (India borrows from IBRD)
- IDA: Concessional loans to poorest countries
- IFC: Private sector arm of World Bank
- Quota: IMF member’s contribution — determines voting power and borrowing limit