International Monetary Fund (I.M.F.)
The International Monetrary Fund (IMF) was organised in 1946 and commenced its operation in March, 1947. It was set up to adminster a ‘code of fair practice’ in the field of foreign exchange and to make short-term loans to member nation experiencing temporary deficits in their balance of payments, to enable them to meet these payments without resorting to devaluation or exchange control, while at the same time following international policies to maintain domestic income and employment at high levels. Thus basically there are four general objectives of the IMF:
- The elimination or reduction of existing exchange controls.
- The establishment and maintenance of currency convertibility with stable exchange rate.
- The wider extension of multi-lateral trade and payments.
- The solving of balance of payments problems faced by its member nations.
The Fund is an autonomous organisation affiliated to the UNO. Starting from the initial membership of 31 countries at the time of inception, the Fund nows commands a membership of more than 125 countries. It is financed by the participating countries, with each country’s contribution fixed in terms of quotas according to the relative importance of its prevailing national income and international trade. The quotas of all the countries taken together constitute the total financial resources of the fund. Moreover, the contributed quota of a country determines its borrowing rights and voting strength.
Functions of the IMF
The following are major functions of the IMF:
- It functions as a short-term credit institution.
- It provides a machinery for the orderly adjustment of exchange rates.
- It is a reservoir of the currencies of all the member nations who can borrow the currency of other nations.
- It is a sort of lending institution in foreign exchange. However, it grants loans for financing current trasactions only and not capital transaction.
- It also provides a machinery for altering sometimes the par value of the currency of a member country.
- It also provides a machinery for international consultations.
The World Bank
The International Bank for Reconstruction and Development more popularly known as the World Bank was formed in 1945. The World Bank was floated in order to give loan to members’ countries, initially for the reconstruction of their (world) war-ravaged economies, and later for the development of the economies of the poorer member countries. The World Bank provides its member countries long term investment loan on reasonable terms. By far the bulk of the World Bank loans have been for financing specific projects. In recent years, it has also been engaged in giving structural adjustment loans to the heavily indebted countries.
The World Bank is an inter-governmental institution, corporate in form, whose capital stock is entirely owned by its member governments. The World Bank Group consists of, apart form the World Bank itself, the International Development Association (IDA), the International Finance Corporation (IFC), and the Multi-lateral Investment Gurantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID).
Objective
The World Bank works in more than 180 countries with the primary focus of helping the poorest people and the poorest countries. It emphasize the need for,
- Investing in the people, particularly through basic health and education.
- Focusing on social development.
- Strengthening the ability of the governments to deliver quality services.
- Protecting the environment.
- Supporting and encouraging private business development.
- Promoting reforms to create a stable macro-economic environemnt, conducive to investment and long-term planning.
Functions
The main fucntions of the World Bank are:
- To help its member countries in the reconstruction an development of their territories by facilitating the investment of capital for productive purposes.
- To encourage private foreign investment and credit by providing guarantee of repayment of the private investors. If private capital is not forthcoming at reasonable terms, to make loans for productive purposes out of its own resources or funds borrowed by it.
- To promote the long-term balanced growth of international trade and the maintenance of equlibrium in balance of payments of its member countries.
Asian Development Bank (ADB)
Asian Development Bank was established in 1966 mainly to reduce poverty in Asia and the Pacific. It is a multilateral development finance institution owned by 59 members mostly from the Asian and the Pacific region.
Objectives
The Asian Development aims at improving the welfare of the people of Asia and the Pacific, especially of the 900 million poor living on less than a dollar a day. Besides the abvoe, ADB’s projects and programs emphasize one or more of the following priorities:
- Economic growth of its member countries.
- Human development including improving the health and education, living standards and livelihood of people in its member countries.
- Improving the status of the women of its member countries.
- Good governance of economies of its member countries.
- Private sector development in its member countries.
- Regional cooperation among its member countries
Functions
- Extends loans and equity investments to its developing member countries for their economic and social development.
- Provides technical and advisory assistance for the planning and execution of development projects and programmes.
- Provides and facilitates investment of public and private capital for development.
- Responds to requests for assistance in coordinating development policies and plans of its developing member countries.
Operations
ADB’s operation are diverse, covering,
- Agriculture and natural resources
- Energy
- Finance
- Industry and non-fuel minerals
- Social infrastructure, transport and communication
- Activities involving multiple sectors
European Union
An important landmark in the history of Europe was signing of Treaty of European Union in Maastricht in 1992 and in November 1993 the EC came to be known as the European Union (EU). The Maastricht treaty leading to the formation of EU was singed by Belgium, Denmark, Germany, Spain, France, Italy, Greece, Ireland, Luxemburg, Netherlands, Portugal and the U.K. Later Austria, Finland and Sweden also joined it. As a result, today it has 15 member states. The European Union is a unique experiment in the history of the world—the economic integration of different nations. It is a voluntary integration of the countries through the economic route to start with. The treaty on European Union not only covers fields covered by EC but covers new fields such as training, economic and social cohesion, research, technological development, economic environment, consumer protection and development co-operation.
Objectives
The European Union’s mission is to organize relations between the Member States and between their people in a coherent manner and on the basis of solidarity. The main objectives are:
- To promote economic and social progress and a high level of employment and to achieve balanced and sustainable development (the single market was established in 1993 and the single currency EURO was launched in 1999).
- To assert the identity of the European Union on the international scene.
- To introduce European citizenship (which does not replace national citizenship but complements it and confers a number of civil and political rights on European citizens).
- To develop an area of freedom, security and justice (linked to the operations of the internal market and more particularly the freedom of movement of persons).
- To maintain and build established EU laws.
Achievements
The European Union has emerged as a formidable economic institution in the world. The major impact of European Union has been the achievement of larger markets and economies of sale. Free movement of goods and services, capital, workers, freedom of establishment by self employed persons, freedom to pursue any occupation any where in the Union, freedom of higher education and recognition of diplomas and degrees all over the Member countries and community citizenships are tremendous achievements in the history of the world. Needless to say all this has helped the people from outside too in having several contacts with European Union. A small example is the Schengen visa itself covering the Benelux countries, (Belgium, Netherlands and Luxumbourg), France, Germany, Spain and Portugal. The economic integration has given way to political and social integration also.
In short, the European Union has important impacts—economic, political and social not only on its individual members and but also an other countries. For them, progress of the European Union represents both competition and opportunity.
EU and India
The establishment of EU and introduction of EURO will have considerable significance for India for many reasons. The first and foremost in India’s trade with EU. The EU is the largest trading partner of India. About 27 per cent of India’s export is accounted by the EU while India obtains 29 per cent of its imports from the EU. India’s market share in EU trade is below 1 per cent and this indicates that there is considerable scope for exports. The EU will be the biggest market and India will benefit in terms of large exports and low cost imports from EU. Exports will grow in volume and composition. Moreover, with single stable currency, the Indian trader will not be required to face different European currencies and thus will minimize losses due to exchange rate fluctuations. The EURO will provide Indian corporate and banks greater access to the European market.
So far, Indian cooperates have been raising funds through GDRs issued only in London. Now, they will have opportunity to turn to European banks and institutions. Thye will have much wider access to investment funds at lower costs becuase the Euro market will be bigger and more liquid.
