Influence Of IMF & World Bank On Indian Economic Policy Making.

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Prabhu Ch , 3rd Mar, 2018 , 463
Education ENGLISH




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World Bank and IMF lend loans to member countries that are subject to conditional clauses, so their assistance is conditional. Through these conditional clauses these institutes influence the policy making of the member nations.

Their conditions mainly aim to make economies of developing countries market oriented. Through conditions they generally put pressure on member nations to draw policies that support 'free market'. Those policies include privitization or reduction of trade barriers (eg;reducing tariffs) so as to make it easy for MNC's to capture market in developing country. 

Conditions include-

  • Reducing budget deficit through policies by govt. that lowers the govt spending n higher taxes (this make a country to spend least on public welfare programmes or social security measures) resulting in transformation of socialistic economy into market economy(capitalist)
  • Reduction of BoP deficit by devaluation of domestic currency
  • Eliminating subsidies; especially agriculture related subsidies
  • Privitization of govt owned enterprises
  • Ensuring right of foreign investor may be through change in laws
  • Opening up more for FDI through ease of doing business framework.
  • Privatising and liberalizing the economy to open up for rest of the world.

The common policy requirement for lending loans by these institutes is Privatization- this results in failure of goal of public welfare/ public prosperity but private accumlation(especially when resources r transferred to foreign corporations).

These institutes no doubt dictate the economic policies of a nation, (especially of developing n underdeveloped nations.)

IMF n World Bank are dictated indirectly by the developed (capitalist) countries, since they have huge share in funding.

So in return these institutes safeguard the interests of those countries. 

For a instance to see how this works;  Developed countries will have production excess, so they want to catch up market to dump their excess into developing/ third world economies, so these institutes with their conditions put a pressure on developing nations to open on globally to achieve their goal. (Can be called modern form of colonization)

They generally prefer to give financial assistance to invest in physical infrastructure (like road/highway project, bridges etc) but not in social infrastructure (like education,health); again safeguarding the interests of market economy.



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