Professor and Head of the Department
Prof Navneet Gera discussed about an interesting topic with PGDM students of JIMS, KALKAJI in class. Discussion opened with role and functions of IMF and World Bank. Students at JIMS, KALKAJI responded very well to the role and functions of IMF. Discussions were done in the physical classroom at JIMS KALKAJI and traditional system has several advantages of teaching-learning process. Participation from students was exceptionally good and to name a few -Jatin Prabhakar, Mohit Gupta, Vaishnavi verma and Sonali sharma took initiatives and responded to questions. Key objectives of IMF has been to promote trade across the borders, help countries during crisis and reduce poverty. IMF is said to be the last resort for balance of payments crisis. IMF also claims that poverty reduction has been an objective of IMF. The statement of IMF whether poverty has been reduced in India due to efforts of IMF was discussed during class at JIMS KALKAJI. Dr Gera discussed the session on IMF and world Bank initially and thereafter some technical points related to devaluation of India rupee during 1991 were dealt.
The International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) were created in July 1944 at the Bretton Woods Conference in New Hampshire, USA. The World Bank is global financial institution that presents financial and professional assistance to developing countries for development programs (e.g., bridges, roads, schools, etc.) with the asserted aim of reducing poverty. Initially, the World Bank was known as IBRD that is International Bank for Reconstruction and Development.David R. Malpass is heading as president of world bank group.
Professor Gera also emphasised on the key differences in both supranational organisations that is IMF and World Bank. Students at JIMS KALKAJI did some efforts to respond to differences. Dr Gera clarified that currency related issues are handled by IMF whereas developmental issues of countries are covered by world bank. World Bank provide loans for developmental issues such as loan for metro project or highways or port or educational development. Through direct and indirect aid, the World Bank has made a considerable contribution to India’s planned economic growth. Founder – member- India is a founding member of the Bretton Woods Twins, the World Bank and the International Monetary Fund.
The IMF now has 191 member countries. India is an IMF founding member. Since 1993, India has not received any financial help from the IMF. The repayment of all International Monetary Fund loans was completed on May 31, 2000. It predicted that India’s growth rate in 2021 will be 11.5 percent, making India the fastest-growing economy in this fiscal year. IMF claims to support economies whenever foreign exchange related or balance of payment issues occur. India also faced shortage of funds in the year 1991, as a result consulted IMF for reforms as well as policy advise. IMF advised to devaluate Indian rupee by 22.5 per cent in 1991. One of the reasons to accept currency devaluation indicates, India was not having forex to import for a week.
Students at JIMS KALKAJI were asked a question to explain the difference between devaluation and depreciation. Since this was a technical question -few students could recall it and responded well. Dr. Gera discussed the meaning of devaluation and explained it with the help of several examples. For example, in 1991 the value of 1 USD was equal to 25 INR and India rupee was devalued by Indian Govt (RBI(Governor)) by 22.5 per cent means that now 1 USD was equal to 31 Indian rupees. Dr Gera further explained that when 1 USD was equal to 25 and if any foreigner comes to India and spends 100 USD than he will get value of 2500 Indian rupee however after devaluation the foreigner will get value of 3100 Indian rupee. Dr Gera said that this devaluation will increase exports of India which will help in generating more foreign exchange in India. Dr Gera explained during his lecture that depreciation of currency takes place due to market forces that is change in demand and supply of currency in market.
During 1991, forex available with India were less than one billion dollars. India decided to go for liberalisation and globalisation in 1991. India follows managed float exchange rate system and presently holds 650 billion Dollar of forex reserves, which signifies moderately good position of India’s trade. Further, it has been noted that IMF generally advises countries to devalue their currency. Is it a standard solution or the only solution for countries having deficit of forex?
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