IMF loan and India's economic future

The 5-billion SDR loan to India is unique in a number of respects. This the biggest nominal loan from the Fund to any member, it is the biggest single loan negotiated by the Government of India: it vir tually underwrites the ex ante exchange gap in the Sixth Plan; and it provides a unique opportunity for the Indian economy to wipe out the scourge of inflation. However, one Governm has of ficially chastised the Government of India for taking the loan. The In dian public came to know of the Government's decision to approach the IMF for a loan under the Extended Facility, when a statement was issued by the 23 "chosen" economists, who had assembled in Calcutta in August last year in response to an invitation from the West Bengal Government. Subsequently, Shri N. Ram, in his despatches from Washington to The Hindu of Madras, brought to light the Letter of Intent from our Finance Minister and the Memorandum submitted by the Government of India to the Fund in support of its application.

The IMF approved the loan in November last year; and the Finance Minister gave more details about it to the Parliament when the matter came up for discussion before it early in the following month. After some heated discussions in both Houses, and in the light of the speeches of the Finance Minister and the Prime Minister, a majority of the members gave their general support to the loan-in spite of the strong attack mounted against it by the West Bengal Government in its White Paper titled. The IMF Loan-Facts and Issues, which contained an Introduction by Dr Ashok Mitra, West Bengal's Finance Minister, who appealed to the people and the Parliament to annul the Loan Agreement. The White Paper contains a number of commissioned articles by a group of picked economists supporting this standpoint.