The IMF Conditionality: Theory and Application in India

Abstract

The major objective of paper is to analyse the analytics of IMF conditionality, and its application with India time series data for the period of 41 years ie 1971-2012. It also takes into account its relevance in the rapidly growing economies. IMF has changed its major Financial programming in the light of changing requirements of developing member countries. It now takes in to account four types of conditionalities such as macro, micro, growth and cross conditionality. We have also tested empirically the stabilization and structural adjustment programme in Indian financial sector with the help Johansion Co-integration technique. Results show that Indian economy stabilised her economic fundamentals which paved the way for further economic growth India achieved during last two decade. Indian financial sector has become sound enough which protected Indian economy from recent global external shocks. However, for the success of adjustment programme IMF model, needs some changes. Of the two alternatives either establishment of new ILLR or strengthening the existing IMF model, a more compelling case is second one. One is tempted to suggest that IMF should concentrate more on Macro policy rather than deviating to words Micro policy, which is the basic task of World Bank.