Back to Projects JOIN WHATSAPP GROUP Free PSC MCQ 4 Lakhs+ Please Write a Review Current Affairs 2018 to 2022 PYQ 1200 Q/A Part - 1 PYQ 1200 Q/A Part - 2 PYQ 1200 Q/A Part - 3 PYQ 1200 Q/A Part - 4 PYQ 1200 Q/A Part - 5
Kerala PSC Indian Economy Book Study Materials Page 442Book's First Page
16.4 ndian onom borrowing6 can be done by the member nation— weight of gold. However, this British proposal India signed this agreement in the fiscal 1981–82. could not prevail against the interests of the India has been borrowing from the IMF due to United States, which at the Bretton Woods critical balance of payment (BoP) situations— conference established the US Dollar as the world once between 1981–84 (SDR 3.9 billion) and key currency. Milton Friedman9, the famous next during 1991 (SDR 3.56 billion). All the US economist insisted that Keynes’ theories loans taken from the IMF have been repaid. India were incorrect who believed that, ‘inflation was is now a contributor to the IMF as it participates highly destructive and that only monetary policy in the Financial Transactions Plan (FTP)7 of the could control it and that monetary policy is a IMF since September 2002—at this time India heavyweight instrument and cannot be used for was in strong balance of payment situation and in short-term economic management.’ a comfortable forex reserves position. Since the outbreak of the financial crisis in current us/eu finAnciAl crises: chAllenges 2008 Keynes’s proposal has been revived— regArDing internAtionAl PAyments in a speech delivered in March 2009 entitled Reform the International Monetary System, Zhou The recent financial crises of the US and the EU nations have raised the questions of the challenges Xiaochuan, the Governor of the People’s Bank of of international payments once again. At this China called Keynes’s bancor approach farsighted crucial juncture, the world seems tossing the and proposed the adoption of International idea of a reserved currency for all international Monetary Fund (IMF) special drawing rights payments—as if the famous Keynesian idea of (SDRs) as a global reserve currency as a response such a currency (Bancor) is going for a kind of to the financial crisis of 2007–2010. He argued revival. The Bancor was a supranational currency that a national currency was unsuitable as a global that John Maynard Keynes and E. F. Schumacher8 reserve currency because of the Triffin dilemma10 conceptualised in the years 1940–42 which the —the difficulty faced by reserve currency issuers United Kingdom proposed to introduce after in trying to simultaneously achieve their domestic the Second World War. The proposed currency monetary policy goals and meet other countries’ was, viz., be used in international trade as a unit demand for reserve currency.11 A similar analysis of account within a multilateral barter clearing was articulated in the Report of the United system, the International Clearing Union, which Nation’s Experts on Reforms of the International would also have to be founded. The Bancor was Monetary and Financial System12 as well as in a to be backed by barter and its value expressed in recent IMF’s study.13 6. Such facility from it is available once the member 9. M. Friedman., (1968) The American Economic Review, country has signed the agreement with the IMF called Vol. 58, No. 1, pp. 1-17. as the Extended Fund Facility (EFF). Popularly, this is known as the ‘Conditionalities of the IMF’ under 10. Zhou Xiaochuan, ‘Reform the International Monetary which India started its Economic Reform Programme System’, BIS Review 2009, Bank of International in 1991-92 once it borrowed from the IMF in the wake Settlements, Basel, Switzerland, 28 November, 2011. of the BoP crisis of 1990–91. 11. Zhou Xiaochuan, Financial Times, 12th Dec. 2011. 7. FTP is the mechanism of the IMF through which 12. Recommendations by the Commission of Experts of it finances/repays its operations—member nations the President of the General Assembly on reforms of contribute money into it from their ‘quota resources’ the international monetary and financial system, , on which they get ‘interest’. 20th March, 2009. 8. E. F. Schumacher, Multilateral Clearing Economica, 13. Reserve Accumulation and International Monetary New Series, Vol. 10, No. 38 (May, 1943), pp. 150-165. Stability, IMF, Washington DC, 13th April, 2010.