Why is it in the news?

• India’s economic growth for 2017 and 2018 will be slower than earlier projected, the International Monetary Fund (IMF) said in its latest World Economic Outlook.

Reasons given by IMF

• The report cited “lingering impact” of demonetization and the Goods and Services Tax for the expected slowdown during the current and the next year.

IMF projections

• The IMF projected India to grow at 6.7% in 2017 and 7.4% in 2018, which are 0.5 and 0.3 percentage points lower than the projections earlier this year, respectively.
• India’s slowdown is happening even as the world economy is picking up steam.
• The IMF has revised upwards “global growth projections to 3.6% for this year and 3.7% for the next.”

On Climate Change

• The IMF’s latest World Economic Outlook (WEO), has dedicated an entire chapter to the impact of weather shocks and climate change in global economic activity.
• IMF tells rich nations that greater urgency needed on climate change.
• It warns coping with climate change will be one of the “fundamental challenges” of the 21st century, and it calls on the global community to mitigate greenhouse gas emissions before they create “more irreversible damage”, saying richer countries must help low-income economies adapt to rapidly increasing temperatures.
• Advanced and emerging market economies have contributed the lion’s share to actual and projected climate change
• Helping low-income developing countries cope with the consequences of climate change is both a humanitarian imperative and sound global economic policy that helps offset countries’ failure to fully internalize the costs of greenhouse gas emissions.
• Since the turn of the 20th century, the Earth’s average surface temperature has increased significantly. Sizeable swings in global temperatures used to happen over long periods, such as fluctuations in and out of the Ice Ages. However, the speed at which the climate has changed over the past 30-40 years appears to be unprecedented in the past 20,000 years.
• Climate change is a negative global externality of potentially catastrophic proportions, and only collective action and multilateral cooperation can effectively address its causes and consequences.”
• Fund’s latest World Economic Outlook also cautions global economic recovery may stall because of poor wages growth.

IMF

• The International Monetary Fund (IMF) is an international organization created to standardize global financial relations and exchange rates.
• The IMF monitors the global economy, and its core goal is to strengthen its member countries economically.
•  Objectives of IMF:

1. Promoting global monetary and exchange stability.

2. Facilitating the expansion and balanced growth of international trade.

3. Assisting in the establishment of a multilateral system of payments for current transactions.

IMF Quota & Voting Rights

• Quotas was assigned to member countries reflecting their relative economic power & credit deposit to IMF
• Subscription was to be paid 25% in gold or currency convertible into gold (effectively the dollar, which was the only currency then, still directly gold convertible for central banks) and 75% in the member’s currency
• Members were provided voting rights in proportion to their quota. Hence member countries with higher quota have a higher say at IMF