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Quick recap: International economic organisations on one page
All three parts of International economic organisations condensed for quick revision: Bretton Woods and its breakdown, IMF governance, quotas, SDRs, the reserve tranche and lending, the World Bank Group, the ADB, AIIB, NDB and CRA, and the WTO's principles, dispute settlement, agriculture boxes, peace clause, TRIPS and GATS, with a one-table overview and eight mixed questions.
This chapter covers the three families of international economic bodies that India works with: the International Monetary Fund for payments and exchange stability, the World Bank and other development banks for long-term finance, and the World Trade Organization for trade rules. The first two were born at Bretton Woods in July 1944; the trade body arrived only in 1995. India is a founding member of the IMF, the IBRD and GATT, and of the WTO.
| Body | Founded | Headquarters | Main job | India |
|---|---|---|---|---|
| IMF | 1944 (Articles in force 1945) | Washington, D.C. | Payments help, SDRs, surveillance | Founding member; Finance Minister is Governor |
| World Bank (IBRD + IDA) | 1944 / 1960 | Washington, D.C. | Long-term development loans and credits | Founding member and large borrower |
| ADB / AIIB / NDB | 1966 / 2016 / 2014-15 | Manila / Beijing / Shanghai | Regional and infrastructure finance | Founding member in all three |
| WTO (from GATT 1947) | 1 January 1995 | Geneva | Trade rules and disputes | Founding member |
The Bretton Woods system fixed currencies to the US dollar, and the dollar to gold at USD 35 an ounce. It ended when the United States stopped converting dollars into gold in August 1971; by 1973 major currencies floated, and the IMF's Second Amendment (1978) let members choose their own arrangements. The IMF, headquartered in Washington, D.C., is run by a Board of Governors (India's Governor is the Finance Minister), an Executive Board and a Managing Director. A member's quota sets its subscription, votes, access to loans and share of SDRs; key decisions need 85 per cent of votes, which gives the United States a veto.
Special Drawing Rights (1969) are a reserve asset, not a currency: a potential claim on members' freely usable currencies, valued on a basket of the US dollar, euro, renminbi (since 2016), yen and pound. The reserve tranche position is the part of a quota paid in reserve assets; it can be drawn without conditions, and with SDRs it counts in India's foreign exchange reserves. For bigger needs the IMF lends through the Stand-By Arrangement, the Extended Fund Facility and other windows, with conditions on policy. India borrowed in 1981 and 1991. The Fund also watches economies through Article IV consultations and publishes the World Economic Outlook and the Global Financial Stability Report.
The World Bank strictly means the IBRD (1944), which lends to middle-income and creditworthy governments using money raised on world markets, and the International Development Association (1960), which gives grants and cheap credits to the poorest countries from donor replenishments. With the IFC (private sector), MIGA (political risk insurance) and ICSID (investment disputes) they form the World Bank Group; India belongs to all except ICSID. The Bank publishes the World Development Report and Global Economic Prospects; Doing Business was dropped in 2021 and replaced by Business Ready (2024).
Beside the World Bank stand other development banks. The Asian Development Bank (1966) is based in Manila, with Japan and the United States its largest shareholders and India a founding member. The Asian Infrastructure Investment Bank began work in January 2016 in Beijing; China is its largest and India its second-largest shareholder. The New Development Bank, agreed at the BRICS summit in Fortaleza in 2014 and based in Shanghai, gave its five founders equal shares; the separate BRICS Contingent Reserve Arrangement offers USD 100 billion for payment crises.
Trade rules began with GATT (1947, 23 countries including India) and became the World Trade Organization on 1 January 1995 after the Uruguay Round. Its core rules are most-favoured-nation treatment and national treatment, with exceptions for free trade areas and for developing countries. The Ministerial Conference meets at least every two years; the General Council also acts as the Dispute Settlement Body, whose Appellate Body has been stalled since December 2019. Under the Agreement on Agriculture, amber box support is capped (de minimis 10 per cent for developing members) while green box support is not. India's procurement at MSP is protected by the peace clause of Bali (2013), which India first invoked in 2020. TRIPS brought 20-year product patents to India in 2005, tempered by Section 3(d) (Novartis, 2013), and GATS defines four modes of services trade.
Exam traps
- The SDR is not a currency; the IMF describes it as a potential claim on members' freely usable currencies. Its basket has five currencies and no rupee.
- India's Governor at the IMF is the Union Finance Minister; the RBI Governor is the alternate.
- The World Bank means only the IBRD and IDA; the Group adds the IFC, MIGA and ICSID, and India is not in ICSID.
- World Economic Outlook and Global Financial Stability Report are IMF reports; World Development Report and Global Economic Prospects are World Bank reports.
- In the AIIB China is the largest and India the second-largest shareholder; in the NDB the five founders hold equal shares.
- MFN means non-discrimination among members, not special favour; national treatment does not bar border duties.
- De minimis is 10 per cent for developing members and applies to amber box support; green and blue box support is uncapped.
- The Appellate Body has been stalled since December 2019, and India has not joined the MPIA.
Recap
- Bretton Woods, July 1944: IMF and IBRD; dollar-gold link ended August 1971; Second Amendment 1978.
- IMF quota sets subscription, votes, borrowing and SDR share; 85 per cent majority, US veto.
- SDR (1969): five-currency basket; reserve tranche drawable without conditions; both in India's reserves.
- India borrowed from the IMF in 1981 and 1991; IMF surveillance through Article IV consultations.
- World Bank Group: IBRD 1944, IFC 1956, IDA 1960, ICSID 1966, MIGA 1988; India not in ICSID.
- ADB 1966 Manila; AIIB 2016 Beijing (India second-largest); NDB Shanghai (equal shares); CRA USD 100 billion.
- GATT 1947 (23 countries) to WTO 1 January 1995, Geneva; MFN and national treatment.
- Agriculture boxes; peace clause Bali 2013, invoked first by India in 2020; TRIPS and Section 3(d); GATS four modes.
Practice questions
Q1. Consider the following statements:
1. The Bretton Woods conference of 1944 created the IMF and the International Bank for Reconstruction and Development.
2. The IMF's Second Amendment allowed members to choose their own exchange arrangements.
Which of the statements given above is/are correct?
- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Show answer
Answer: C. Both 1 and 2
Both are correct: Bretton Woods set up the IMF and the IBRD, and the Second Amendment (1978) ended par values and let members choose their arrangements. So '1 only', '2 only' and 'Neither' are wrong.
Q2. Which one of the following is NOT among the currencies in the SDR basket?
- Japanese yen
- Chinese renminbi
- Swiss franc
- Pound sterling
Show answer
Answer: C. Swiss franc
The basket is the US dollar, euro, renminbi (since 2016), yen and pound sterling, so the yen, renminbi and pound are all in it; the Swiss franc is not.
Q3. Which of the following are components of India's foreign exchange reserves?
1. Special Drawing Rights
2. Reserve tranche position in the IMF
3. Loans taken from the Asian Infrastructure Investment Bank
Select the correct answer using the code given below:
- 1 and 2 only
- 2 and 3 only
- 1 and 3 only
- 1, 2 and 3
Show answer
Answer: A. 1 and 2 only
SDR holdings and the reserve tranche are two of the four components of the reserves, with foreign currency assets and gold. Project loans from the AIIB are external debt, not reserves, so any option containing 3 is wrong.
Q4. India is NOT a member of which one of the following institutions of the World Bank Group?
- International Finance Corporation
- Multilateral Investment Guarantee Agency
- International Centre for Settlement of Investment Disputes
- International Development Association
Show answer
Answer: C. International Centre for Settlement of Investment Disputes
India belongs to the IBRD, IDA, IFC and MIGA but has not joined ICSID; so the IFC, MIGA and IDA options are wrong.
Q5. Match the banks with their headquarters:
A. Asian Development Bank — 1. Shanghai
B. Asian Infrastructure Investment Bank — 2. Manila
C. New Development Bank — 3. Beijing
Select the correct answer using the code given below:
- A-2, B-3, C-1
- A-3, B-2, C-1
- A-2, B-1, C-3
- A-1, B-3, C-2
Show answer
Answer: A. A-2, B-3, C-1
The ADB is in Manila, the AIIB in Beijing and the BRICS New Development Bank in Shanghai. Every other code swaps at least two of these.
Q6. Consider the following statements:
1. GATT was signed in 1947 and India was one of its original contracting parties.
2. The WTO's Ministerial Conference is required to meet every year.
Which of the statements given above is/are correct?
- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Show answer
Answer: A. 1 only
Statement 1 is correct: India was among the 23 original signatories. Statement 2 is wrong: the Ministerial Conference must meet at least once every two years, not every year. So '2 only', 'Both' and 'Neither' are wrong.
Q7. Under the WTO Agreement on Agriculture, which kind of domestic support is subject to a reduction commitment or de minimis ceiling?
- Green box
- Blue box
- Amber box
- Development box under Article 6.2
Show answer
Answer: C. Amber box
Only amber box support, the most trade-distorting kind, is capped through the Aggregate Measurement of Support or the de minimis level. Green and blue box support is not capped, and Article 6.2 support for poor farmers in developing countries is exempt.
Q8. Consider the following statements:
1. TRIPS requires patent protection for at least 20 years from the filing date.
2. In Novartis v. Union of India (2013), the Supreme Court relied on Section 3(d) of the Patents Act to refuse a patent.
Which of the statements given above is/are correct?
- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Show answer
Answer: C. Both 1 and 2
Both are correct: TRIPS sets a minimum 20-year term from filing, and the Supreme Court applied Section 3(d) to deny Novartis a patent on a new form of imatinib mesylate. So '1 only', '2 only' and 'Neither' are wrong.
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- International Monetary Fund: Articles of Agreement, factsheets on quotas, SDRs and lending, IMF Annual Report — https://www.imf.org/en/About
- World Bank Group, ADB, AIIB and NDB founding agreements and member lists; Fortaleza Declaration (2014) — https://www.worldbank.org/en/about
- World Trade Organization: GATT 1947, Marrakesh Agreement (1994) and annexed agreements; ministerial decisions from Doha (2001) to Abu Dhabi (2024) — https://www.wto.org/english/docs_e/legal_e/legal_e.htm
- The Patents Act, 1970, as amended in 2005 (section 3(d)) — https://www.indiacode.nic.in