India’s economy has slowed substantially before and after the global financial crisis. The economy is in a weaker position than before the crisis. With investment particularly hard-hit, potential GDP is likely to be lower than estimated. Inflation is constraining the room for monetary policy easing. Banks’ capital ratios have fallen slightly, but asset quality is deteriorating considerably. The current account deficit registered a record high in 2011–12. Delivering on structural reforms, fiscal consolidation, and low inflation are critical for a sustained recovery.


India’s economy has slowed substantially before and after the global financial crisis. The economy is in a weaker position than before the crisis. With investment particularly hard-hit, potential GDP is likely to be lower than estimated. Inflation is constraining the room for monetary policy easing. Banks’ capital ratios have fallen slightly, but asset quality is deteriorating considerably. The current account deficit registered a record high in 2011–12. Delivering on structural reforms, fiscal consolidation, and low inflation are critical for a sustained recovery.

Annex I. Fund Relations

(As of November 30, 2012)

I. Membership Status:

Joined December 27, 1945; Article VIII.

II. General Resources Account

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III. SDR Department:

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IV. Outstanding Purchases and Loans: None

V. Financial Arrangements:

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VI. Projected Payments to Fund

(SDR million; based on existing use of resources and present holdings of SDRs):

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VII. Exchange Rate Arrangement:

As per the Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER), the exchange rate in India is classified as floating. The exchange rate of the rupee is determined in the interbank market, where the Reserve Bank of India (RBI) intervenes at times. The RBI’s role is to modulate excessive volatility so as to maintain orderly conditions. On August 20, 1994, India accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement. India maintains the following restrictions on the making of payments and transfers for current international transactions, which are subject to Fund approval under Article VIII, Section 2(a): restrictions related to the nontransferability of balances under the India-Russia debt agreement; restrictions arising from unsettled balances under inoperative bilateral payments arrangements with two Eastern European countries; and a restriction on the transfer of amortization payments on loans by non-resident relatives. The Executive Board has not approved these restrictions.

VIII. Article IV Consultation:

The previous Article IV consultation discussions were held in January 2012. The staff report (IMF Country Report No. 12/96) was discussed by the Executive Board on March 9, 2012.

IX. FSAP Participation and ROSCs:

FSSA/FSAP report was issued in January 2001; a fiscal transparency ROSC was issued in February 2001 (; the data model of the ROSC (Country Report No. 04/96) was issued in April 2004. The missions for the second FSAP took place in 2011, and the concluding meetings were held in Delhi and Mumbai in January 2012.

X. Technical Assistance:

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XI. Outreach and Other Activities:

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XII. Resident Representative:

A resident representative’s office was opened in November 1991. Mr. Thomas Richardson has been the Senior Resident Representative since August 2012.

Annex II. Relations with the World Bank Group

In Bank FY12 (July 1, 2011–June 30, 2012), IBRD/IDA lending in India totaled US$3.18 billion. IFC committed US$960 million in FY12. The World Bank Group’s (WBG) Country Strategy (CAS) for India for 2009–2012 focuses on helping India to fast-track the development of much-needed infrastructure and to support the low-income and special category states in achieving higher standards of living for their people. The strategy envisaged a total proposed IBRD lending program of US$11.6 billion for the four-year CAS period; in response to the financial crisis, the CAS envelope was widened by approximately US$3 billion in additional IBRD financing. Midway through the CAS implementation, the projected IBRD lending was revised upward to US$16 billion. India’s FY12–14 IDA 16 allocation is SDR 3,348.3 billion (US$5,309 billion equivalent). India is IFC’s second-largest country exposure in terms of disbursed and outstanding portfolio with commitments totaling US$4.2 billion for IFC’s own account and US$558 million for the account of participants (as of October 31, 2012).

In response to the financial crisis as well as increased Government demand for the Bank Group’s support, the pace of IBRD lending accelerated in FY10–12, bringing India closer to its Single Borrower Limit (SBL) of US$17.5 billion. To help maintain India’s IBRD net exposure within the SBL and ensure medium-term sustainability of the India program, the Reserve Bank of India (RBI, the central bank) has agreed in principle with the IBRD and the Bank for International Settlements to purchase up to US$4.3 billion in IBRD Special Private Placement Bonds.

The overarching objective of the current CAS is to scale up the development impact of Bank Group assistance to help India achieve rapid inclusive growth, sustainable development, and improved service delivery. It aims to do this while strengthening project implementation, improving the effectiveness of public spending, and achieving demonstrable results to scale up the impact of World Bank assistance. The diversity of India calls for a differentiated, tailored approach. In India’s low-income states and in lagging regions of more advanced states, the focus is on achieving the MDGs, relying primarily on IDA resources and non-lending technical assistance. In more advanced states and at the central level, the focus is on strengthening institutions so that they can deal with emerging middle income challenges, relying on IBRD lending and cutting-edge analytical work. In the context of WBG India CAS, IFC’s three strategic pillars are inclusive growth, climate change and regional and global integration. IFC is prioritizing support for the low-income and North East States in order to better promote inclusive growth.

The new India Country Program Strategy (CPS) for 2013–2016 is currently under preparation. The overarching objective of the new CPS will be to support India in lifting more people out of poverty, and ensuring that the new “non-poor” and their future generations have opportunities that would allow them to prosper. The Bank’s engagement will be guided by the Government’s vision of how best to use the financing and expertise from multi-lateral institutions to address India’s development challenges. The program will focus on projects that are transformational, innovative and/or those that leverage significant resources, both domestic and international sources and the private sector. The approach allows for the application of selectivity principles across the pipeline of projects and encourages scaling up efforts to leverage private finance with IBRD investments. IFC will continue to encourage private sector commercial investment through mobilization, by collaboration with leading banks and non-banking financial companies. It will support smaller entities through direct equity or debt investment, provide targeted technical assistance and facilitate global knowledge sharing. IFC advisory services will continue supporting investment climate reforms in low-income states, providing sustainable business advisory, improving access to finance and supporting public-private partnerships.

India: World Bank Financial Operations

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Source: World Bank.

On an Indian fiscal year basis beginning April 1.

April 1, 2011 through March 31, 2012.

Based on loan approval date.

Annex III. Relations with the Asian Development Bank

The Asian Development Bank (AsDB) operations in India began in 1986. Cumulative public sector loan commitments totaled $27.2 billion as of 31 December 2012 for 168 loans. With an additional $2.3 billion in private sector loans (the latter without government guarantee), total loan commitments on a cumulative basis amount to $29.5 billion. These funds have been provided from AsDB’s ordinary capital resources (OCR). Also, AsDB has approved equity investments amounting to $0.3 billion. AsDB’s lending and equity activities are summarized below.

India: Asian Development Bank Financial Operations (sovereign and non-sovereign)

(In millions of U.S. dollars, as of 31 December 2012)

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Source: Asian Development Bank.

As of 31 October 2012.

AsDB’s India Country Partnership Strategy (2009–2012) (CPS) is based on four strategic pillars: (i) Support for the process of inclusive and environmentally sustainable growth; (ii) Catalyzing investment through the use of innovative business and financing modalities; (iii) Strengthening the results orientation of project design and implementation and emphasizing knowledge solutions; and (iv) Support for regional cooperation. The CPS has been designed to support Government of India’s efforts in facilitating inclusive growth and speeding up the pace of poverty reduction and social development as emphasized in the Eleventh Five-Year Plan (2007–2012). It has been prepared within a results-based framework, and aims at significantly strengthening AsDB support for infrastructure development in the relatively poorer states of India, promoting public private partnerships in infrastructure, supporting climate change adaptation and mitigation, and encouraging the use of innovative financing modalities (non-sovereign loans and cofinancing) to enhance the leverage of AsDB operations.

Annex IV. Statistical Issues

1. Macroeconomic statistics are adequate for surveillance, but weaknesses remain in the timeliness and coverage of certain statistical series. India has an intricate system for compiling economic and financial statistics and produces a vast quantity of data covering most sectors of the economy. India subscribed to the Special Data Dissemination Standards (SDDS) on December 27, 1996 and started posting its metadata on the Dissemination Standards Bulletin Board on October 30, 1997. It is currently in observance of the SDDS, although it uses flexibility options for timeliness of data on general government operations and on the periodicity and timeliness of labor market data.

2. The data module of the Report on Observance of Standards and Codes (ROSC, IMF Country Report No. 04/96) was published in April 2004. It assesses India’s data dissemination practices against the SDDS requirements and assesses the quality of six datasets based on the Data Quality Assessment Framework (DQAF) developed by STA.

3. National accounts and employment statistics: The Central Statistical Organization (CSO) releases a new series of national accounts, with base year 2004–2005 with a dissemination lag for quarterly releases of two months. Large revisions to historical series and major discrepancies between supply and expenditure national accounts complicate analysis: these differences have become larger in recent quarters. Supply-side data remain of better quality than expenditure-side data. Estimates of value added in constant prices for public administration and defense may be biased upwards, as they are based on the government’s wage bill (with arrears counted in the year that they are paid) deflated by the Wholesale Price Index (WPI). There are long standing deficiencies in employment data: they are only available on an annual basis and with a substantial lag, and they only cover the formal sector, which accounts for a small segment of the labor market.

4. Price statistics: Since January 2006, the Labour Bureau has published a CPI for industrial workers with a 2001 base year. A revised all-India CPI with new weights was unveiled in early 2011. Presently, there are four CPIs, each based on the consumption basket of a narrow category of consumers (namely industrial workers, urban and non-manual employees, agricultural laborers, and rural laborers). The CPIs are published with a lag of about one month. With the exception of the industrial workers CPI, the other indices are based on weights that are over ten years. The WPI was also recently revised and has a 2004/05 base year. Data are also subject to frequent and large revision, usually upward. New RBI price series on residential real estate have helped surveillance in this area, though geographic coverage remains limited, and price data for commercial real estate are not available. The RBI has started producing a series covering rural wage data, which helps surveillance, but economy-wide wage data are scant.

5. External sector statistics: While the concepts and definitions used to compile balance of payments statistics are broadly in line with the sixth edition of the Balance of Payments Manual (BPM6). Furthermore, trade data have quality, valuation, timing, and coverage problems, and data on trade prices, volumes, and composition are not regularly available on a timely basis. Only trade credit extended for more than 180 days is included in the balance of payments (and the IIP and external debt data); trade credit is often less than 180 days in most countries. Bilateral data on services exports to the United States and other developed countries are manifold higher than counterpart services imports published by these same countries. External debt statistics are available on a quarterly basis with a one quarter lag. Estimates of short-term external debt are presented in the debt statistics on an original maturity basis. The short-term maturity attribution on a residual maturity basis is only available annually (and excludes residual maturity of medium- and long-term nonresident Indian accounts). The international investment position (IIP) statistics cover the sectors prescribed in the BPM6 and these data are disseminated within six months of the reference period in respect of annual data1. Coverage of direct investment positions data is hampered by the absence of appropriate legal or institutional authority. India began disseminating the Data Template on International Reserves and Foreign Currency Liquidity as prescribed under the SDDS in December 2001. The more up-to-date information on certain variables, such as total foreign reserves, foreign currency assets, gold, and SDRs, are available on a weekly basis and are disseminated as part of a weekly statistical supplement on the RBI web site.

6. Monetary and financial statistics: The RBI web site and the RBI Bulletin publish a wide array of monetary and financial statistics, including reserve money and its components, RBI’s survey, monetary survey, liquidity aggregates (outstanding amounts), interest rates, exchange rates, foreign reserves, and results of government securities auctions. In 2011, the RBI started publishing a weighted average lending interest rate and other lending rates at annual frequency. The frequency and quality of data dissemination have improved substantially in recent years.

7. Concepts and definitions used by the RBI to compile monetary statistics are in broad conformity with the guidelines provided in the Monetary and Financial Statistics Manual (MFSM). Nevertheless, the following concepts and principles deviate from the MFSM. First, the resident sector data do not provide sufficient information on the sectoral distribution of domestic credit. Specifically, under their present sectorization scheme, the authorities subdivide the resident nonbank sector data by (i) central government; (ii) state government; and (iii) the commercial sector (including other financial corporations, public and other nonfinancial corporations, and other resident sectors). Second, commercial banks add accrued interest to credit and deposit positions on a quarterly basis only (instead of the prescribed monthly basis).

8. The RBI reports monetary data for IFS on a regular basis. Since October 2006, the RBI has initiated the electronic reporting of monetary data, which is a major improvement from the previous paper-based reporting which was prone to errors and delays. India has also submitted to STA test data (starting from December 2001 data) on the Standardized Report Forms (SRFs) that have been developed to implement the methodology outlined in the MFSM. STA is working with the authorities in resolving the outstanding data issues on the development of the SRFs.

9. Government finance statistics: The Ministry of Finance (MoF) is responsible for compiling and disseminating the GFS. India reports the budgetary central government cash flow statement within one month after the reference month and stock of liabilities within one quarter after the reference quarter. With the agreement of the authorities, STA uses these data to compile a monthly cash flow statement for publication in the International Financial Statistics, following the GFSM 2001 presentation, with some missing breakdowns, particularly for expenditure. Data on fiscal performance at the state level are available only at annual frequency and with a considerable lag. Data on the functional and economic classification of expenditures are available with considerable lag. There is also scope to improve the analytical usefulness of the presentation of the fiscal accounts. For example, classification of government expenditure between developmental/nondevelopmental and plan/nonplan obscures the economic nature and impact of fiscal actions. The MoF reports central government data (on a cash basis) for publication in the Government Finance Statistics Yearbook (GFSY), the latest reported data corresponding to 2010. Two years after the reference year, the Ministry of Finance reports general government data to STA in the GFSM 1986 format, that staff reworks to the GFSM 2001 presentation for inclusion in the GFSY (latest reported data correspond to 2008). Data on the general government operations are not internationally comparable as they exclude data on the operations of the extra-budgetary funds, local governments, and social security funds. Under the SDDS, India disseminates annual general government data within 3 quarters after the reference year, using the timeliness flexibility option but meets the SDDS specifications for central government debt and operations.

India: Table of Common Indicators Required for Surveillance

As of December 6, 2012

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Daily (D), Weekly (W), Biweekly (BW), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA)

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state governments

Including currency and maturity composition


The IIP as published by the RBI values equity liabilities at acquisition cost, while the Fund uses market prices, resulting in substantial differences.