IMPACT OF IMF POLICIES ON INDIA:
India is the 4th largest economy of the world in terms of GDP and PPP in 2010 .The current quota of India in IMF is SDR 41,258.20 million .In terms of quota the position of India in IMF is improved to the 8TH position from the current 11th .The quota share of India in IMF is improved up to 2.75% from the current position of 2.44% which was decided in the meeting of finance minister of G-20 economies. In Indian economy IMF plays a vary vital role .IMF provides India financial assistance from time to time and also provide consultancy to determine various policies in the economy.
The Finance minister of India said that, reforms in quota would provide legitimacy to the IMF in the new world economic order.IMF promises to give more power to India but China ,Mexico, Turkey and South Korea get more vote and more power in IMF.According to the Union Finance Minister P.Chidambaram said that power in IMF must be given according to the present economic status not according to the status in 1944 when IMF established.
The Union Finance Minister of India P.Chidambaram said that ,India is not angry to cooperate with IMF. India promised to the IMF to work with IMF for more reforms which may enhance its power and other multilateral institutions .India opposed the IMF plan and Indian repetitive said clearly to IMF ,the plan which is made by IMF is totally rejected by the public and other institutions which include high voting for four countries in IMF and also asked from IMF to redefine the role of multilateral bodies. Indian Ministry of Finance give approve to increase Indian contribution in IMF.which makes it the eight largest shareholder in the multilateral agency. India because the lender country to IMF from few decades .There is a great shift of economic power to the south countries in the period of global recession.IMF said to India to increase its key policy rates, it also said that tight labor markets, strong productivity growth and policy measures in India would increase the household income .There would be a negative impact of high prices on real disposable income & consumption.
IMF said to India that fiscal policy is the best method for tightening ,largest capital flows, government debt, existing strong domestic demand, there is required to renew the fiscal consolidation .The government should make step by step plan to reduce public debt and deficit.IMF also provide support to achieve their objectives regarding to raise public investment specifically ,infrastructure it is also essential to improve social outcomes. There is a need to make savings to fulfill these objectives .
IMF said to India that it must take tax reforms ,there is also need of subsidy reforms including liberalization in fertilizer prices and diesel.IMF recommended for India that it should reduce the risk of fiscal consolidation, there is also need to make stronger budget frame work. In the present year, the stronger revenue position states that to reconstitute fiscal space faster which minimize the risk of over heating. The tight monetary policy should be adopted by India to meet the inflation objectives and inflation expectations. There are great challenges for India regarding the rising in food prices. In the last year authorities have increased policy rates and cash receive requirements .The projected current account deficit in 2010-2011 is 3.3% of GDP which would be 3.5% in the next year. Authorities should keep in view the level of current account deficit.IMF wants structural reforms in India and are required to minimize the infrastructure cost, encourage private investment ,and allows India for the proper allocation of resources.
The Finance minister of India said that, reforms in quota would provide legitimacy to the IMF in the new world economic order.IMF promises to give more power to India but China ,Mexico, Turkey and South Korea get more vote and more power in IMF.According to the Union Finance Minister P.Chidambaram said that power in IMF must be given according to the present economic status not according to the status in 1944 when IMF established.
The Union Finance Minister of India P.Chidambaram said that ,India is not angry to cooperate with IMF. India promised to the IMF to work with IMF for more reforms which may enhance its power and other multilateral institutions .India opposed the IMF plan and Indian repetitive said clearly to IMF ,the plan which is made by IMF is totally rejected by the public and other institutions which include high voting for four countries in IMF and also asked from IMF to redefine the role of multilateral bodies. Indian Ministry of Finance give approve to increase Indian contribution in IMF.which makes it the eight largest shareholder in the multilateral agency. India because the lender country to IMF from few decades .There is a great shift of economic power to the south countries in the period of global recession.IMF said to India to increase its key policy rates, it also said that tight labor markets, strong productivity growth and policy measures in India would increase the household income .There would be a negative impact of high prices on real disposable income & consumption.
IMF said to India that fiscal policy is the best method for tightening ,largest capital flows, government debt, existing strong domestic demand, there is required to renew the fiscal consolidation .The government should make step by step plan to reduce public debt and deficit.IMF also provide support to achieve their objectives regarding to raise public investment specifically ,infrastructure it is also essential to improve social outcomes. There is a need to make savings to fulfill these objectives .
IMF said to India that it must take tax reforms ,there is also need of subsidy reforms including liberalization in fertilizer prices and diesel.IMF recommended for India that it should reduce the risk of fiscal consolidation, there is also need to make stronger budget frame work. In the present year, the stronger revenue position states that to reconstitute fiscal space faster which minimize the risk of over heating. The tight monetary policy should be adopted by India to meet the inflation objectives and inflation expectations. There are great challenges for India regarding the rising in food prices. In the last year authorities have increased policy rates and cash receive requirements .The projected current account deficit in 2010-2011 is 3.3% of GDP which would be 3.5% in the next year. Authorities should keep in view the level of current account deficit.IMF wants structural reforms in India and are required to minimize the infrastructure cost, encourage private investment ,and allows India for the proper allocation of resources.
FINANCIAL SOUNDNESS OF INDIA:
During the period of global recession the emerging economies shows tremendous growth. There is a great shift of economic power towards south countries .After Liberalization from few decades India becomes the lender country to IMF , from RBI reserves the India invested up to $10 billion .which are used to purchase IMF notes in March ,2011.The cabinet has declared to purchase further IMF notes for $4 billion. In the earlier of 2010 India’s financial soundness can be perceived from this fact that India becomes the lender of funds to the IMF not the borrower .From the reliable sources says that India has ample reserves of funds the lending to the IMF cannot impact the fiscal situation of India. Financial Soundness Indicators which are introduced by IMF, the purpose of financial soundness indicators to support the macro prudential analysis and to assess the strengths and dangers of financial systems. Latest Indian Data Point Available up to 2011 Q1 and Regulatory Capital to Risk-Weighted Assets are 13.5% and Regulatory Tier 1 Capital to Risk-Weighted Assets are 9.3%.
Financial stability report which is issued by RBI on June,2011in which Governor Dr. Subbarao said that, the Indian financial sector remain stable. Indian banks are fully capitalized and central bank of India adopts vary vigilantly prudential & macro prudential measures to enhance the soundness of banking sector.
The Reserve Bank of India issued the financial stability report on December 22,2011 in which reported that the Indian economy specially financial sector remains sound and stable but there are some horrible macro economic issues are involved .These issues are slowdown in the US ,the Euro zone crises, inflation and rapidly increasing in oil prices. It is also necessary for India to monitor very attentively the down side risk which is faced by globally and Indian economy by means of financial & trade channel. At the domestic and global level the cost of raw material & interest increased which shows the pricing power is reduced. This report also tells that both sovereign and non sovereign sectors are facing a significant deterioration in the financial markets and this situation would be worse further, and credit rating agencies down graded the financial position of both sectors.
The funding market which provides short & long term finances facing great stress due to the financial & non-financial firms which are facing great challenges to raise long term funds. The report shows the soundness of the financial institutions that there has been increased in non-performing assets specially sectors such as retail, priority sector, real estate, and infrastructure etc.There is a consistent decrease in CRAR and deterioration in assts quality shows that there is a great risk which are rising for banking sector even accredit growth is reduced. The banking stability indicators shows that there is an increase in dangers in the banking sectors.
Financial stability report which is issued by RBI on June,2011in which Governor Dr. Subbarao said that, the Indian financial sector remain stable. Indian banks are fully capitalized and central bank of India adopts vary vigilantly prudential & macro prudential measures to enhance the soundness of banking sector.
The Reserve Bank of India issued the financial stability report on December 22,2011 in which reported that the Indian economy specially financial sector remains sound and stable but there are some horrible macro economic issues are involved .These issues are slowdown in the US ,the Euro zone crises, inflation and rapidly increasing in oil prices. It is also necessary for India to monitor very attentively the down side risk which is faced by globally and Indian economy by means of financial & trade channel. At the domestic and global level the cost of raw material & interest increased which shows the pricing power is reduced. This report also tells that both sovereign and non sovereign sectors are facing a significant deterioration in the financial markets and this situation would be worse further, and credit rating agencies down graded the financial position of both sectors.
The funding market which provides short & long term finances facing great stress due to the financial & non-financial firms which are facing great challenges to raise long term funds. The report shows the soundness of the financial institutions that there has been increased in non-performing assets specially sectors such as retail, priority sector, real estate, and infrastructure etc.There is a consistent decrease in CRAR and deterioration in assts quality shows that there is a great risk which are rising for banking sector even accredit growth is reduced. The banking stability indicators shows that there is an increase in dangers in the banking sectors.
