The Indian Economy Overview

The World Bank and India

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The World Bank

The World Bank was originally set up as the International Bank for Reconstruction and Development (IBRD). Born in a conference held at Bretton Woods, New Hampshire, U.S.A. in July 1944, along with its twin the International Monetary Fund (IMF). Together they came to be known as the Bretton Woods sisters. The conference that brought forth the two sisters, was actually taking place at a very significant time, World War II had just ended.

IMF and World Bank
Though, they are different institutions, there are several reasons to believe that they are inseparable twins:
  • membership in IMF is a prerequisite for membership in WB;
  • annual meetings of IMF and WB are held jointly;
  • their governing structures are similar. In fact there are some overlapping in membership of the executive board;
  • these two institutions share the same perception and paradigm of development.

The Genesis

Europe was the major theater of war which had been devastated. In contrast, the United States of America was the only country at the end of the war that still had its productive capacity intact and could also compensate others lacking such capacities. Its economy and position was therefore, the strongest in the new dispensation. The founders envisioned two primary functions in the post-War era. The reconstruction of Europe and guaranteeing private banks' project loans to poorer countries. As an agent of reconstruction, the Bank was still born. What war shuttered Europe needed was not interest-bearing loans for projects but rapidly disbursing grants and concessional loans for balance of payment support and desperately needed imports to meet their basic needs. In all, the Bank advanced only four loans for reconstruction tolling US $497 million. It was the US-initiated Marshall Plan, not the Bank, that was the engine of European reconstruction, disbursing $41 billion by 1953.

The World Bank and the IMF were designed primarily by officials of the US government with inputs from the British delegation to the Bretton Woods Conference. The IBRD's headquarters was located in the USA because its charter specified that "the principal office of the Bank shall be located in the territory of the member holding the greatest number of shares". At the time of founding, USA was the largest shareholder (37%) among the member nations. Significantly, the choice of Washington D.C. over New York city to headquarters it was considered a victory for the US position that the World Bank and the IMF should be subject to close control by national governments over the argument by British economist Lord Keynes that the institutions should operate as autonomous institutions, divorced from the vicissitudes of national politics. Initially they had exclusive but closely related responsibilities. The IMF was supposed to provide short-term finance to countries facing a crisis of foreign exchange. The World Bank, however, was to rebuild the shattered economies by financing long-term and medium-term development by providing specific project loans for building highways, laying rail tracks, building power plants, etc.


For further details contact:PIRG (Public Interest Research Group) 142, Maitri Apt, Plot No 28, Indraprastha Extn. Delhi 110092. India. Ph: 2432054 Fax: 2224233 email: kaval@pirg.unv.ernet.in


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