India, the World Bank, and the IMF

India, the World Bank, and the IMF

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Throughout the short history of an independent India, they have relied upon loans to grow their economy. Due to their prior colonization by Great Britain, they received most of their economy from Britain and there was no true need to receive loans. Since the independence of India from its mother- country, India has strongly relied upon the IMF and World Bank to grow its economy to the booming status that it has today.
Until the middle of the 20th century, British investment and trade that was introduced by the British fueled India’s economy. When India gained its full independence in 1947, India was left to find their own means to financial stability. For this, India would have to turn to the World Bank to receive loans to build much-needed infrastructure, create viable international companies and fuel their industry. According to the IMF, India has the second largest labor force in the world with 486.6 million laborers. In order to reach this height, India had no choice but to ask for and receive loans from the World Bank. Since its independence, India has received hundreds of billions of dollars in loans and credit. Currently, India has about 26 billion dollars in loans and around 40 billion dollars in credit. Many of this loan money and credit has gone towards the infrastructure of India in order to begin construction of an economic stronghold within cities. In recent years, the money has gone towards agriculture, steel/ iron, railways and power. Many of the citizens within India do not even have the luxury of electricity due to the vast ruralness of India. Without the loans and credit of the World Bank, India would not be at its current economic level.
There are a multitude of circumstances that have led to the economic surge within India, but the main factor is loans and foreign investment. With the help of the international community, India has grown to the 11th largest economy in the world and the 3rd largest in Asia. Not only has India grown to become of the leading economies in the world, but also it is also the fastest growing. Due to its recent economic success, India has been able to pay back many of its previous loans. Until around 2010, India saw its economy grow at a rate of about 7-7.5% a year, but since then has settled. In 2014, it is expected that “the economy is to to expand by 5.

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3% this year, down from its earlier projection of 6.4%.” (BBC: Faster). After becoming the fastest growing economy, India has seen a settling which can be due to a couple factors. India in recent years is taking fewer loans from the World Bank and is attempting to become relatively independent of loans. With this data, the importance of the World Bank to the development of economies becomes noticeable.
The recent economic growth of India does not only benefit the country as a whole, but it also benefits the individual citizens. Before the countries economic success, India did not have the stability to allow many personal loans. Since the massive growth in their economy, their personal loan situation has become similar to any western country where the loans are essentially open to anyone, as long as they meet the criteria to receive loans. “In an effort to grow their lending book, many banks are now offering lower interest rate on personal loans.” (IndiaTimes: Banks). India has some of the lowest interest rates in the world and is encouraging people to get loans. Without the World Bank, India would not have the financial stability in place to allow such low loan rates.
Although India has received majority of its aid from the World Bank, India also relies upon Foreign Direct Investment; or FDI. The idea of FDI was not introduced in India until the early 1990’s. Since the introduction, it is believed that India has become one of the most valuable and important location to directly invest, only behind China. This FDI has allowed India to grow financially in a multitude of ways. The large scale of the FDI has ultimately led to large companies sprouting within India. Both the World Bank and FDI have led to the emergence of India’s economy.
With the oncoming of a powerful world economy, a countries social development and economic opportunity for the masses usually follows. With the ruralness of India, electricity is not something that many citizens are able to use. Recently, India has been attempting to get loans from the World Bank in order to fund the spread of electricity to ever corner of the country. The United Nations and India have been battling over this due to climate issues regarding Co2 emissions. Many rich countries with a much lower population than India tend to have a larger allotment of Co2 emissions. India is fighting to receive more carbon space to achieve this. The World Bank “has now backed the Indian stance that the high-income countries have contributed a disproportionate share of the world's carbon emissions and still continue to do so.” (IndiaTimes). Once India receives the green light to enlarge their carbon space, the World Bank is ready to distribute loan money to fund this project. This will ultimately lead to a better life for the citizens of India. Not only do they finally receive electricity, but also electricity will ultimately bring more technological advancements to the area.
Without the World Bank, it is unclear where India’s economic status would be today. India’s economy has been growing at unprecedented rates, and although they have slowed, will continue to grow at an unprecedented rate. If India continues to grow at the rate it does, it will surely surpass other countries to become a top 10 world economy. With the help of the World and foreign investment, India has been able to reach its economic prowess.

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