India and Global Financial Institutions

India and Global Financial Institutions

International Fund for Agricultural Development (IFAD)

International Fund for Agricultural Development (IFAD) was set up in 1977 as the 13th specialized agency of the United Nations. It is dedicated to eradicating poverty.

176 countries are members of the IFAD, and these are grouped into three regions, comprising:

• List-A: Developed Countries

• List-B: Oil-Producing Countries

• List-C: Developing Countries

India is in List-C and one of the founder members of the International Fund for Agricultural Development (IFAD), and has so far contributed US$147.0 million towards IFAD’s resources.

International Monetary Fund (IMF)

• Indian is a founder member of the International Monetary Fund (IMF), which was established to promote a cooperative and stable global monetary framework.

• At present, 188 nations are members of the IMF.

• The Board of Governors of the IMF consists of one Governor and one alternate Governor from each member country.

• For India, the Finance Minister is the ex officio Governor on the Board of the Governors of the IMF.

• There are three other countries in India's constituency at the IMF, viz., Bangladesh, Bhutan, and Sri Lanka.

• Governor, Reserve Bank of India (RBI) is India's alternate Governor. 

[Source: INDI 2024]

World Bank

International Bank for Reconstruction and Development (IBRD)

• India is a founder member of the International Bank for Reconstruction and Development (IBRD), which, along with the International Development Association (IDA), is referred to as the World Bank.

• IBRD has 189 member countries.

• It provides loans, guarantees, risk management products, and advisory services to middle-income and creditworthy low-income countries, as well as coordinates responses to regional and global challenges.

International Development Association (IDA)

• IDA has 173 member countries and helps the world's poorest countries.

• IDA provides loans (called "credits") and grants for programmes that boost economic growth, reduce inequalities, and improve people's living conditions.

India and the World Bank

• India borrows from the World Bank for various development projects in areas of poverty reduction, infrastructure, disaster mitigation, rural development, etc.

[Source: INDIA 2024]

Asian Development Bank (ADB)

India is a founding member of the Asian Development Bank (ADB), which was established in 1966. ADB has 67 members (including 48 regional and 19 non-regional members), with its headquarters in Manila, Philippines.

• India is holding 6.32% of shares, totaling 6,72,030 shares in ADB as on 31st December 2021, with 5.35% voting rights.

• The Bank is engaged in promoting the economic and social progress of its developing member countries (DMCs) in the Asia Pacific Region.

• India borrows from ADB within the overall external debt management policy pursued by the Government, which focuses on raising funds on concessional terms from less expensive sources with longer maturities.

• India started borrowing from ADB in 1986. 

[Source: ADB]

Insurance

Concept of Insurance

• The basic concept of insurance is of spreading the loss of a few over many.

• The insurance industry includes two sectors:

  • Life Insurance

  • General Insurance

History of Life Insurance in India

• Life Insurance in India was introduced by the British.

• A British firm 1818 established the Oriental Life Insurance Company at Calcutta (now Kolkata).

Life Insurance Corporation (LIC)

• Life Insurance Corporation (LIC) of India was established in September 1956.

General Insurance Corporation (GIC)

• General Insurance Corporation (GIC) was established in November 1972.

Issues in The Indian Insurance Sector

• Indian Insurance sector has low penetration, particularly in rural areas.

• It also has low turnover and profitability despite a high premium rate.

Insurance Sector Reforms

• The committee on Insurance Sector Reforms was set up in 1993 under the chairmanship of R.N. Malhotra, which submitted its report in 1994.

• The insurance sector was opened up for private participation with the enactment of the Insurance Regulatory and Development Authority Act, 1999 (IRDA).

• The headquarters of IRDA is in Hyderabad.

LIC Infrastructure

According to INDIA 2022, Life Insurance Corporation has its Central Office in Mumbai, 8 Zonal Offices at Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Kanpur, Bhopal and Patna, 113 Divisional Offices, 73 Customer Zones, 2048 Branch Offices, 1401 Satellite Offices and 1240 mini offices as on 21 September, 2022, spreads the message of Insurance the length and breadth of India.

LIC International Operations

• At present, LIC is operating internationally (in 14 countries) through:

  • Branch Offices in Fiji, Mauritius, and the U.K.

  • Joint Venture Companies in Bahrain, Nepal, Sri Lanka, Kenya, and Saudi Arabia.

  • A wholly owned subsidiary, LIC (Singapore) established in April 2012.

Growth of the Indian Insurance Industry

• According to INDIA 2024, the Indian insurance industry has registered a growth rate of approximately 11% CAGR in the last five years.

• It generated a total premium of approximately ₹ 9 lakh crore in the FY 2021-22, with the total Assets Under Management of approximately ₹ 54 lakh crore as on 31st March, 2022.

Final Thoughts

India plays an active role in several global financial and development institutions. It is a founder member of the International Fund for Agricultural Development (IFAD), which works to reduce poverty in developing countries. India is also among the founding members of the International Monetary Fund (IMF) and the World Bank, contributing to global monetary stability and borrowing for development projects in infrastructure, poverty reduction, and disaster mitigation.

In the Asia-Pacific region, India is a founding member of the Asian Development Bank (ADB), where it holds a significant shareholding and has been borrowing since 1986 for long-term development needs.

On the domestic front, the insurance sector in India has evolved from its early days under British rule to the establishment of LIC in 1956 and GIC in 1972. Reforms such as the IRDA Act, 1999, opened the industry to private participation. Today, LIC not only operates across India but also has a growing international presence, while the sector continues to expand at double-digit growth rates.