Why this matters now
The IMF is examined for its functions, the quota system, SDRs, and the debate over its governance and conditionality. India’s 1991 BoP crisis and IMF programme are a classic case study.
Three core functions
- Surveillance — monitoring members’ economies and global financial stability (e.g., the World Economic Outlook);
- Lending — financial assistance to members facing balance-of-payments problems (instruments like Stand-By Arrangements and the Extended Fund Facility), usually with conditionality (policy reforms);
- Capacity development — technical assistance and training.
It is headquartered in Washington, D.C.
Quotas and SDRs
Membership is based on a quota (roughly reflecting a country’s economic size), which determines its financial contribution, voting power and access to loans. The Special Drawing Right (SDR) is the IMF’s international reserve asset, whose value is based on a basket of major currencies (USD, EUR, RMB, JPY, GBP). A long-standing reform demand is to increase the quota/voice of emerging economies like India and China, which remain under-weighted.
India and the IMF
India is a founding member. In the 1991 balance-of-payments crisis, India borrowed from the IMF and pledged gold, and the conditionalities helped catalyse the LPG reforms (liberalisation, privatisation, globalisation). Today India is a creditor rather than a borrower, contributes to IMF resources, and pushes for quota reform to better reflect the rising weight of emerging economies.
UPSC angle
Know the three functions (surveillance, lending, capacity-building), the quota-based voting, the SDR currency basket, and India’s 1991 IMF programme + the quota-reform demand.
Frequently asked questions
When was the IMF created?
At the Bretton Woods conference in 1944; it is headquartered in Washington, D.C.
What are the main functions of the IMF?
Surveillance of economies, lending to members in balance-of-payments difficulty (with conditionality), and capacity development.
What is an SDR?
The Special Drawing Right — the IMF’s international reserve asset, valued on a basket of major currencies (USD, EUR, RMB, JPY, GBP).
How is the IMF linked to India’s 1991 reforms?
India borrowed from the IMF during the 1991 balance-of-payments crisis, and the associated conditions helped trigger the LPG economic reforms.