Comment: India and the IMF. (1992, 20 Marks)
India has been a member of the IMF in every capacity: founding member, repeated borrower, critic and now creditor. The question was set in 1992, a year after India had pledged gold and accepted a Fund programme. In the decades since, India has moved from asking the Fund for money to asking it for a fairer share of votes.
Founding member
- India attended Bretton Woods (1944) with a delegation that included Chintaman Dwarkanath Deshmukh, one of the few non-Western participants. It became a member in December 1945 with the sixth-largest agreed quota (US$400 million); once the Soviet Union stayed out, that gave India one of the five appointed seats on the Executive Board, a seat later lost as other quotas grew.
- India accepted the par-value system. In the Nehruvian period it also supported the Southern demand that the Fund should help development and not only discipline deficits.
Borrower: crises and conditionality
| Episode | What happened | What it shows |
|---|---|---|
| 1966 | Devaluation (4.76 to 7.50 per dollar) after aid was suspended | External pressure; a lasting distrust of conditionality |
| 1981 | Extended Fund Facility, up to SDR 5bn; last tranche given up in 1984 | A borrower can keep policy control |
| 1991 | Two gold operations (about 20 tonnes sold through SBI; 46.91 tonnes pledged to the Banks of England and Japan); stand-by of about SDR 1.66bn | The crisis set the timing; the reforms were India’s own |
The 1991 conditions covered fiscal deficits, the exchange rate and trade. The deeper reforms, ending industrial licensing and opening to investment, were decided in New Delhi. Calling 1991 a loss of sovereignty overstates it, but calling it painless ignores the humiliation of the gold pledge and the loss of control over sequencing.
Creditor
- India stopped borrowing in 1993 and repaid all credit by 2000. It now takes part in the Fund’s Financial Transactions Plan, committed up to US$10 billion to IMF notes in 2009, and bought 200 tonnes of IMF gold that November, eighteen years after pledging its own.
Voice and reform
- India’s quota is about 2.75% and its voting share 2.63%, eighth-largest, and it leads a constituency with Bangladesh, Bhutan and Sri Lanka. The 2010 reforms (in force 2016) were the last real realignment. The Sixteenth Review (2023) raised quotas proportionally without changing shares, and even that awaits members’ consents, extended in May 2026 to November 2026. Realignment now rests on the Seventeenth Review, due to end by 2028.
- Jagdish Bhagwati’s “Wall Street–Treasury complex” (1998) and neo-Gramscian writers explain why: the US veto over an 85% supermajority protects the existing hierarchy. Liberal institutionalists reply that India gains more from reforming the Fund than from leaving it, and India has kept to that view while backing the NDB and the BRICS Contingent Reserve Arrangement as complements.
Recent friction
- In May 2025 India abstained and recorded its objection when the Board approved further support to Pakistan, after the Pahalgam attack.
- The November 2025 Article IV review gave India’s national accounts a “C” grade and pressed for more exchange-rate flexibility. India had already disputed the Fund’s 2023 debt warnings, and in 2025 it placed former RBI Governor Urjit Patel in its Board chair.
These show a confident member arguing with the Fund as a peer.
Conclusion
India’s relationship with the IMF has turned around: the country that pledged gold in 1991 is now a creditor seeking a larger voice. Its approach has been consistent: comply when it must, keep control of the content, and reform from within. The Fund’s legitimacy in the Global South now depends on whether it gives countries like India the votes their economies justify.