Indian Economy Quiz: India & IMF and other International Institutions |24 Feb, 2021

The agricultural subsidies which cause minimal or no distortions to trade are put under the green box. They must not involve price support.

· This box basically includes all forms of government expenses, which are not targeted at a particular product, and all direct income support programmes to farmers, which are not related to current levels of production or prices.

· This is a very wide box and includes all government subsidies like—public storage for food security, pest and disease control, research and extension, and some direct payments to farmers that do not stimulate production like restructuring of agriculture, environmental protection, regional development, crop and income insurance, etc.

Source: TMH Ramesh Singh

Presently, India is rated by six international credit rating agencies, namely Standard and Poor’s (S&P), Moody’s Investor Services, FITCH, Dominion Bond Rating Service (DBRS), the Japanese Credit Rating Agency (JCRA), and the Rating and Investment Information Inc., Tokyo(R&I).

Source: TMH Ramesh Singh and Sriram’s IAS

In recent times, India has become more conscious towards protecting its agricultural trade interests at the international platforms.

At the 10th Ministerial Conference of the WTO (Nairobi, December 2015), the Government of India adopted the following approach towards agri-trade policy:

· A Special Safeguard Mechanism (SSM) for developing countries.

· Public stockholding food for security purposes,

· A commitment to abolish export subsidies for farm exports, and measures related to cotton.

Source: TMH Ramesh Singh

The WTO provides a rule based transparent and predictable multilateral trading system.

· The WTO rules envisage non-discrimination in the form of National Treatment and Most Favoured Nation (MFN) treatment to India’s exports in the markets of other WTO Members.

· National Treatment ensures that India’s products once imported into the territory of other WTO Members would not be discriminated vis-à-vis the domestic products in those countries.

· MFN treatment principle ensures that members do not discriminate among various WTO members.

Source: TMH Ramesh Singh

The International Development Agency (IDA) which is also known as the soft window of the WB was set up in 1960 with the basic aim of developing infrastructural support among the member nations, long-term lending for the development of economic services.

· Its loans, known as credits are extended mainly to economies with less than $895 per capita income.

· The credits are for a period of 35–40 years, interest-free, except for a small charge to cover administrative costs.

· Repayment begins after a 10-year grace period. There was no human angle to its lending. But now there remain no hard and fast differences between the purposes for the IBRD and IDA lending.

· Every year developing nations make enough diplomatic attempts to carve out maximum loan disbursal for them.

· India had been the biggest beneficiary of the IDA support. The total support (IBRD + IDA) for India had been $ 91.81 billion till date.

Source: TMH Ramesh Singh

Farm subsidies form an integral part of the government’s budget.

· In the case of developed countries, the agricultural or farm subsidies compose nearly 40 per cent of the total budgetary outlay, while in India’s case it is much lower (around 7.8 per cent of GDP) and of different nature.

· The World Trade Organization (WTO) has put some ceilings on the amount of direct and indirect subsidies being provided by the various developing and developed nations due to the fact that these subsidies distort the free-market forces which have their own implications.

Source: TMH Ramesh Singh

In December 1997, the Executive Board (IMF) opened a new lending window—the SRF—for member countries experiencing exceptional balance of payments problems owing to a large short-term financing need resulting from a sudden and disruptive loss of market confidence reflected in pressure on the capital account and the member’s reserves.

Source: TMH Ramesh Singh

As the World Bank has adapted its mechanisms and approaches to address the evolving challenges developing countries have faced; it has evolved into the “World Bank Group”. This consists of five closely related institutions that specialize in different aspects of development:

· International Bank for Reconstruction and Development (IBRD);

· International Development Association (IDA);

· International Financial Corporation (IFC);

· Multilateral Investment Guarantee Agency (MIGA);

· International Centre for Settlement of Investment Disputes (ICSID).

The term “World Bank” refers only to IBRD and IDA. Together, these two organizations provide low-interest loans, interest-free credit, and grants to developing countries.

· Both IBRD loans and IDA credits support investment projects and programs designed to meet priority economic and social needs.

· They also provide financial support to help governments undertake reform in the structural and social policies that are crucial to effective private and public sector development, and to poverty reduction.

Source: TMH Ramesh Singh & World Bank

When a country joins the IMF, it is assigned an initial quota in the same range as the quotas of existing members of broadly comparable economic size and characteristics. The IMF uses a quota formula to help assess a member’s relative position.

· The current quota formula is a weighted average of GDP (weight of 50 percent), openness (30 percent), economic variability (15 percent), and international reserves (5 percent).

· For this purpose, GDP is measured through a blend of GDP—based on market exchange rates (weight of 60 percent) and on PPP exchange rates (40 percent).

· The formula also includes a “compression factor” that reduces the dispersion in calculated quota shares across members.

WIPO is the global forum for intellectual property (IP) services, policy, information and cooperation.

· We are a self-funding agency of the United Nations, with 193 member states.

· Our mission is to lead the development of a balanced and effective international IP system that enables innovation and creativity for the benefit of all.

· Our mandate, governing bodies and procedures are set out in the WIPO Convention, which established WIPO in 1967. Source: https://www.wipo.int/about-wipo/en/