Economy
External Sector and International Economic Bodies
IMF and World Bank (Bretton Woods Institutions)
IMF and World Bank Group for CGPSC: Bretton Woods, quotas, SDR basket, the five WBG bodies, India's role, AIIB, NDB and World Bank projects in Chhattisgarh.
Prerequisites
- Balance of Payments, Forex Reserves and Exchange Rate — SDRs and the Reserve Tranche Position are parts of India’s reserves; the 1991 crisis brought India to the IMF.
- Economic Planning and NITI Aayog — World Bank loans financed railways, dams and power in the plan era.
The Hook: A Tribal Farm in Bastar and a Hotel in New Hampshire
Connect
In December 2020 the World Bank approved a $100 million project, CHIRAAG (Chhattisgarh Inclusive Rural and Accelerated Agriculture Growth), to help tribal households in southern Chhattisgarh grow diverse, nutritious food all year round.
The bank that approved it was designed in July 1944 at a hotel in Bretton Woods, New Hampshire (USA), by 44 Allied nations planning the post-war economy. The same conference created the International Monetary Fund, the body India turned to in the 1991 crisis. What do these two “Bretton Woods twins” do, how are they run, and why does India keep asking for a bigger voice in them?
Why it matters: Prelims loves the five World Bank Group institutions (and the one India has not joined), the SDR basket, IMF reports and headquarters. Mains GS-V lists “international bodies” explicitly, and GS-III asks about IMF conditionality and the reform of global financial institutions.
Scope of this page
This page covers the economic and financial bodies. The United Nations system and regional groupings such as SAARC, BRICS and SCO are covered in International Organisations and Events.
The Bretton Woods System
| Fact | Detail |
|---|---|
| Conference | United Nations Monetary and Financial Conference, Bretton Woods, New Hampshire, USA, July 1944 |
| Participants | 44 Allied nations, including (British) India |
| Key architects | John Maynard Keynes (UK) and Harry Dexter White (USA) |
| Institutions created | IMF and IBRD (the “Bretton Woods twins”) |
| Came into existence | December 1945, when the Articles of Agreement entered into force; the IMF began financial operations in March 1947 |
| India | A founding member of both |
The exchange-rate system: currencies were pegged to the US dollar, and the dollar was convertible into gold at $35 an ounce. This “gold-exchange standard” ended when the US suspended dollar–gold convertibility in August 1971 (the “Nixon shock”). Major currencies were floating by 1973.
International Monetary Fund (अंतर्राष्ट्रीय मुद्रा कोष)
IMF at a glance (as of 2026)
- Headquarters: Washington, D.C.
- Members: 191 (Liechtenstein became the 191st in October 2024).
- Managing Director: Kristalina Georgieva (Bulgaria), since October 2019, in her second five-year term from 1 October 2024. By convention the IMF head is a European and the World Bank head an American.
- Role: guardian of the international monetary system — surveillance, lending for balance of payments problems, and capacity development.
Governance and quotas
- Board of Governors: one Governor per member, usually the finance minister or central bank governor. India’s Governor is the Union Finance Minister.
- Executive Board: 25 Executive Directors handle daily business. India’s Executive Director represents a constituency of India, Bangladesh, Bhutan and Sri Lanka.
- Quota (कोटा): each member’s quota, expressed in SDRs, decides its subscription, voting power, access to IMF loans and share of SDR allocations.
- India’s quota share: about 2.75% with a voting share of about 2.63%, making it the 8th-largest quota holder (since the 14th General Review, effective 2016).
- US veto: the United States holds over 15% of votes, so it can block decisions that need an 85% majority (such as quota changes).
- 16th General Review of Quotas (approved December 2023): a 50% across-the-board increase in quotas without changing members’ relative shares. India and other emerging economies argue that shares should be realigned to reflect their larger weight in the world economy.
Special Drawing Rights (SDR, विशेष आहरण अधिकार)
| Fact | Detail |
|---|---|
| Created | 1969, as a supplementary international reserve asset |
| Nature | Not a currency; a potential claim on the freely usable currencies of IMF members |
| Valuation basket | Five currencies: US dollar, euro, Chinese renminbi (yuan), Japanese yen, British pound |
| Renminbi added | With effect from 1 October 2016 (the first emerging-market currency in the basket) |
| Basket review | Normally every five years |
| Largest allocation | About $650 billion equivalent in August 2021, to help members during the COVID-19 crisis |
Mnemonic for the basket: “D-E-R-Y-P”, “Dollar, Euro, Renminbi, Yen, Pound”.
Lending and surveillance
| Instrument | Use |
|---|---|
| Stand-By Arrangement (SBA) | Short-term balance of payments problems (India used one in 1991) |
| Extended Fund Facility (EFF) | Medium-term problems needing structural reform (India arranged one in 1981) |
| Rapid Financing Instrument (RFI) | Quick help in emergencies such as natural disasters or pandemics |
| Poverty Reduction and Growth Trust (PRGT) | Concessional loans to low-income countries |
| Resilience and Sustainability Trust (RST) | Longer-term finance for climate and pandemic preparedness (from 2022) |
- IMF loans come with conditionality: policy changes such as fiscal tightening, subsidy cuts or exchange-rate reform.
- Article IV consultations: regular (usually annual) health checks of each member’s economy.
- Flagship reports: World Economic Outlook (WEO), Global Financial Stability Report (GFSR), Fiscal Monitor, External Sector Report.
India and the IMF: India drew IMF support in 1981 and again in 1991, and had repaid all its IMF loans by 2000. Since then India has not borrowed from the IMF and has instead contributed to its resources.
World Bank Group (विश्व बैंक समूह)
“World Bank” means only IBRD + IDA. The “World Bank Group” has five institutions, all headquartered in Washington, D.C.
| Institution | Year | Role | India a member? |
|---|---|---|---|
| IBRD — International Bank for Reconstruction and Development | 1944 (Bretton Woods) | Loans to middle-income and creditworthy low-income governments | Yes (founding member) |
| IFC — International Finance Corporation | 1956 | Invests in and lends to the private sector | Yes |
| IDA — International Development Association | 1960 | Concessional loans and grants to the poorest countries (“soft-loan window”) | Yes |
| ICSID — International Centre for Settlement of Investment Disputes | 1966 | Arbitration of disputes between foreign investors and states | No |
| MIGA — Multilateral Investment Guarantee Agency | 1988 | Insurance (guarantees) to foreign investors against political risk | Yes |
- President: Ajay Banga, since June 2023 (as of 2026).
- India and IDA: India was historically one of IDA’s largest borrowers and graduated from IDA lending in 2014; it now borrows from IBRD.
- Reports and indices: World Development Report, Global Economic Prospects, Human Capital Index, Logistics Performance Index. The Ease of Doing Business report was discontinued in 2021 after data irregularities and replaced by Business Ready (B-READY), first published in 2024.
World Bank in Chhattisgarh (examples)
| Project | Fact |
|---|---|
| CHIRAAG | $100 million, approved 15 December 2020; nutrition-supportive, climate-resilient farming for about 1.8 lakh tribal households in about 1,000 villages of eight southern districts |
| Public Financial Management and Accountability Program | Approved in 2019 to strengthen the state’s budgeting, revenue and spending systems |
| School education | A project of about ₹2,460 crore to improve school education quality was approved in 2023 |
Other Multilateral Development Banks
| Bank | Fact |
|---|---|
| Asian Development Bank (ADB) | Founded 1966; HQ Manila; India a founding member and a major borrower |
| Asian Infrastructure Investment Bank (AIIB) | Proposed by China; began operations in January 2016; HQ Beijing; India is the second-largest shareholder after China and a major borrower. Zou Jiayi became president on 16 January 2026 |
| New Development Bank (NDB) | Set up by BRICS under the Fortaleza (Brazil) agreement of 2014; HQ Shanghai; first president K.V. Kamath of India; the five founders hold equal shares |
| Bank for International Settlements (BIS) | Founded 1930; HQ Basel; “the central bank for central banks”; the RBI is a member. Hosts the Basel Committee whose Basel norms govern bank capital |
Analysis for Mains: Reforming the Bretton Woods Institutions
Criticisms:
- Unequal voice: quotas lag behind economic weight; the US has an effective veto, and the heads are chosen by a US–Europe convention.
- Conditionality (the “Washington Consensus” of the 1980s–90s): austerity and rapid liberalisation were blamed for social hardship in borrowing countries.
- Slow, inadequate finance for climate change and debt distress in poor countries.
- Rise of alternatives: AIIB, NDB and bilateral lenders show dissatisfaction with the old order.
India’s position: India argues for quota realignment, a stronger voice for emerging economies, more climate finance, and debt relief through the G20 Common Framework. India’s G20 presidency (2023) pushed for stronger and better MDBs.
Balanced view: The IMF acted as a lender of last resort in crises from 1991 India to Sri Lanka in 2023; the World Bank has financed schools, roads and farming, including in Chhattisgarh. Reform, not replacement, is the realistic path.
Memory Tricks
World Bank Group in date order: 'I-I-I-I-M'
IBRD 1944 → IFC 1956 → IDA 1960 → ICSID 1966 → MIGA 1988.
India is in all except ICSID: “India settles its own disputes.”
Headquarters pairs
Washington: IMF + World Bank Group. Geneva: WTO. Manila: ADB. Beijing: AIIB. Shanghai: NDB. Basel: BIS.
Don’t Confuse
| This | vs | That |
|---|---|---|
| IMF: short- to medium-term balance of payments support; monetary stability | vs | World Bank: long-term development project and policy loans |
| IMF head: European by convention | vs | World Bank head: American by convention |
| World Bank = IBRD + IDA | vs | World Bank Group = 5 institutions |
| IBRD: middle-income countries, near-market terms | vs | IDA: poorest countries, concessional |
| IFC: private-sector investment | vs | MIGA: political-risk insurance |
| NDB: BRICS, Shanghai, equal shares | vs | AIIB: China-led, Beijing, India second-largest shareholder |
Common Mistakes
MCQ traps
- “India is a member of all five World Bank Group institutions.” Wrong. India is not a member of ICSID.
- “The Indian rupee is in the SDR basket.” Wrong. The basket is dollar, euro, renminbi, yen and pound.
- “The World Development Report is published by the IMF.” It is a World Bank report. The World Economic Outlook is the IMF’s.
- “The IMF and World Bank are headquartered in New York / Geneva.” Both are in Washington, D.C.
- “The Ease of Doing Business report is still published.” It was discontinued in 2021; B-READY replaced it.
- “NDB is headquartered in New Delhi.” It is in Shanghai; India supplied its first president.
Practice
All questions below are original practice questions written in CGPSC style. They are not previous-year questions.
Level 1: Foundation
- The Bretton Woods Conference was held in the year ______.
- Name the World Bank Group institution of which India is not a member.
- The Chinese renminbi was added to the SDR basket with effect from ______.
Answers
- 1944 (July).
- ICSID (International Centre for Settlement of Investment Disputes).
- 1 October 2016.
Level 2: Prelims MCQs
Q1. Consider the following statements about the International Monetary Fund:
- A member’s quota determines its voting power and access to IMF financing.
- The World Economic Outlook is a flagship publication of the IMF.
- India has borrowed from the IMF every year since 1991.
Which of the statements given above is/are correct?
- (a) 1 only
- (b) 1 and 2 only
- (c) 2 and 3 only
- (d) 1, 2 and 3
Answer and explanation
(b) 1 and 2 only. Quotas decide subscriptions, votes, access to financing and SDR allocations. The WEO is the IMF’s flagship report (along with the GFSR and Fiscal Monitor). Statement 3 is wrong: India repaid all its IMF loans by 2000 and has not borrowed since.
Q2. Match List I (Institution) with List II (Year of establishment):
| List I | List II |
|---|---|
| A. International Finance Corporation | 1. 1988 |
| B. International Development Association | 2. 1966 |
| C. ICSID | 3. 1956 |
| D. MIGA | 4. 1960 |
- (a) A-3, B-4, C-2, D-1
- (b) A-4, B-3, C-2, D-1
- (c) A-3, B-4, C-1, D-2
- (d) A-3, B-2, C-4, D-1
Answer and explanation
(a) A-3, B-4, C-2, D-1. IFC 1956, IDA 1960, ICSID 1966, MIGA 1988. Remember the order I-I-I-I-M after IBRD (1944).
Q3. Which one of the following currencies is not included in the basket that values the SDR?
- (a) Japanese yen
- (b) Chinese renminbi
- (c) Swiss franc
- (d) British pound
Answer and explanation
(c) Swiss franc. The SDR basket has five currencies: US dollar, euro, Chinese renminbi, Japanese yen and British pound. The renminbi joined in 2016.
Q4. The World Bank-supported CHIRAAG project in Chhattisgarh mainly aims at:
- (a) building a new steel plant in Bastar
- (b) nutrition-supportive, climate-resilient agriculture for tribal households
- (c) electrification of railway lines in north Chhattisgarh
- (d) strengthening the state’s public financial management
Answer and explanation
(b). CHIRAAG ($100 million, approved December 2020) helps tribal households in southern Chhattisgarh grow diverse, nutritious food all year round. Public financial management (option d) was the subject of a separate 2019 World Bank programme.
Q5. Consider the following pairs:
| Institution | Headquarters |
|---|---|
| 1. Asian Infrastructure Investment Bank | Beijing |
| 2. New Development Bank | Shanghai |
| 3. Asian Development Bank | Tokyo |
Which of the pairs given above is/are correctly matched?
- (a) 1 only
- (b) 1 and 2 only
- (c) 2 and 3 only
- (d) 1, 2 and 3
Answer and explanation
(b) 1 and 2 only. The ADB is headquartered in Manila, Philippines, not Tokyo (Japan is, however, one of its largest shareholders). AIIB is in Beijing and the BRICS-founded NDB in Shanghai.
Level 3: Mains Answer Writing
Q1. (150–200 words) “The Bretton Woods institutions need reform to stay relevant in the 21st century.” Discuss with reference to India’s position.
Model answer outline
- Intro: The IMF and IBRD were created at Bretton Woods (1944) for a world dominated by the US and Europe.
- Need for reform:
- Quotas and votes lag behind the weight of emerging economies; India holds about 2.75% of IMF quotas while being one of the largest economies.
- The US effective veto and the US–Europe convention on leadership.
- Conditionality and austerity critiques.
- Inadequate finance for climate change and debt distress.
- India’s position: quota realignment (beyond the equiproportional 16th Review), a stronger voice for the Global South, more and cheaper climate finance, MDB reform pushed during India’s G20 presidency (2023).
- Counterpoint: the institutions remain lenders of last resort (India 1991, Sri Lanka 2023) and major development financiers (CHIRAAG in Chhattisgarh).
- Conclusion: Reform from within, complemented by AIIB and NDB, is more realistic than replacement.
Q2. (60 words) Distinguish between the IMF and the World Bank.
Model answer outline
- IMF: monetary cooperation and exchange stability; surveillance and short- to medium-term balance of payments loans with conditionality; head is European by convention.
- World Bank (IBRD + IDA): long-term development finance for projects and policy reform; head is American by convention.
- Common: both created at Bretton Woods (1944), headquartered in Washington, D.C.; India is a founding member of both.
Quick Revision Table
| Fact | Detail |
|---|---|
| Bretton Woods | July 1944, New Hampshire, USA; 44 nations; Keynes and White |
| IMF | Washington, D.C.; 191 members; MD Kristalina Georgieva (second term from Oct 2024) |
| India at IMF | Quota about 2.75%, votes about 2.63%, 8th largest; constituency with Bangladesh, Bhutan, Sri Lanka |
| SDR | Created 1969; USD, EUR, CNY (from 1 Oct 2016), JPY, GBP; ~$650 bn allocation Aug 2021 |
| IMF reports | WEO, GFSR, Fiscal Monitor, External Sector Report |
| World Bank Group | IBRD 1944, IFC 1956, IDA 1960, ICSID 1966, MIGA 1988 |
| India not in | ICSID |
| WB president | Ajay Banga (since June 2023) |
| WB reports | World Development Report, Global Economic Prospects; Doing Business ended 2021, B-READY from 2024 |
| CHIRAAG | $100 m, Dec 2020, tribal southern Chhattisgarh |
| ADB / AIIB / NDB / BIS | Manila 1966 / Beijing 2016 / Shanghai 2014 / Basel 1930 |
Key Takeaways
Key Takeaways
- The IMF handles monetary stability and balance of payments support; the World Bank handles long-term development finance. Both date from Bretton Woods (1944).
- Quotas drive IMF votes and access; India is the 8th-largest quota holder and wants a bigger share.
- The SDR is a reserve asset valued on five currencies; the renminbi joined in 2016.
- The World Bank Group has five bodies; India is in all except ICSID.
- New lenders (AIIB, NDB) and reform demands reflect the rising weight of emerging economies like India.
What’s Next
- WTO: Agreements, Principles and India — the third pillar of the post-war economic order
- International Organisations and Events — the UN system, BRICS, SCO and other groupings
- Economy, Budget and State Schemes of Chhattisgarh — where externally aided projects fit in the state budget
- External Sector — Quick Revision
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