International Monetary Fund (IMF)
- Context: Despite the impact of prevailing geopolitical tensions in West Asia on the global economy, the International Monetary Fund (IMF) has stated that India will emerge as the world’s fastest-growing major economy in the years 2026 and 2027.
- Due to disruptions caused to international markets and supply chains by conflicts in West Asia, the global economic growth forecast has been downgraded from 3.3 percent to 3.1 percent.
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- Specifically, if tensions between the United States and Iran escalate further, global economic growth could decline to approximately 2 percent in 2026 a scenario that is particularly likely to materialize if energy infrastructure is compromised.
- Amidst such global challenges, India’s growth rate is projected to remain robust at 6.5 percent in both 2026 and 2027.
- India’s growth estimate for the year 2025 has been set at 7.6 percent; this figure exceeds previous projections.
- Driven by rising global energy and food prices, India’s inflation rate is expected to rise to 4.7 percent in 2026, before subsequently moderating to 4 percent in 2027.
About the International Monetary Fund (IMF)
- Established in 1944 at the Bretton Woods Conference (alongside the World Bank), the IMF officially commenced its operations in 1945.
- Its headquarters are located in Washington, D.C.
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- Its core objectives include ensuring the stability of the international monetary system, fostering global monetary cooperation, and facilitating international trade.
- It acts as the “Lender of Last Resort” for countries facing financial crises.
- Currently, it has 191 member countries. India is a founding member of the International Monetary Fund (IMF). The most recent country to join was Andorra (in 2020).
- The Union Finance Minister of the Government of India serves as the ex-officio Governor on the IMF’s Board of Governors. The Governor of the Reserve Bank of India (RBI) serves as the Alternate Governor.
- The SDR (Special Drawing Rights), created by the IMF in 1969, is an international reserve asset. Its value is based on a basket of five major currencies: the US Dollar, the Euro, the Chinese Renminbi (Yuan), the Japanese Yen, and the British Pound Sterling.
- The IMF provides loans to member countries facing Balance of Payments (BoP) difficulties. Its primary lending instruments include the Stand-By Agreement (SBA) for short-term needs and the Extended Fund Facility (EFF) for medium-term structural issues.
Key Reports
- World Economic Outlook (WEO)
- Global Financial Stability Report (GFSR)
India’s Position
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- India currently ranks 8th in terms of Quota allocation. Although India borrowed heavily during the economic crisis of 1991, it repaid all its debts by the year 2000.
- Since 2002, through the Financial Transaction Plan (FTP), India has served as a creditor nation to the IMF.
