National Stock Exchange

The National Stock Exchange of India is a stock Exchange that is located in Mumbai, Maharashtra. The National Stock Exchange basically function in three market sections, that is, (CM) the Capital Market Section); F&Q (The Future and Options Market Sections) and WDM (Wholesale Debt Market Segment).  It is important place where the trading of shares, debt etc takes place.
It was in year 1992 that the National stock Exchange was for the first time incorporated in India. It was not regarded as a stock exchange at once. Rather, the national Stock exchange was incorporated as a tax paying company and had got the recognition of a stock exchange only in year 1993 the recognition was given under the provisions of the Securities Contracts (Regulation) Act, 1956.
The National Stock exchange is highly active in the field of market capitalization and thus aiming it the ninth largest stock exchange in the said field. Similarly, the trading of the stock exchange in equities and derivatives is so high that it has resulted in high turnovers and thus making it the largest stock exchange in India.
It is the stock exchange wherein there is the facility of electronic exchange offering investors. This facility is available in almost types of equitable transactions such as equities, debentures, etc. it is also the largest stock exchange if calculated in the terms of traded values.

Origin and History of the National Stock Exchange

The National Stock exchange was incorporated for the first time in November, 1992. The national stock exchange was not incorporated as the national stock exchange; rather, it had got the recognition of the recognized stock exchange in April, 1993. The National stock Exchange has increased its trading facilities in June 1994 when the WDM (Wholesale Debt Market Segment) was gone live. It is basically one of the three market segments in which the national stock Exchange works. In the same year, 1994 November, the Capital Market (CM) segment of the stock exchange goes live through VSAT.
The National Stock Exchange has become the first Clearing Corporation in India by the introduction of NSCCL in April 1995. In the same year, 1995 July, it has introduced the Investor protection fund which is a very important function introduced by the national Stock Exchange.
The National stock Exchange had grown with leaps and bounds and had shown tremendous growth mainly in all the fields and thus making it the largest stock exchange of India by October, 1995.
The concept of NSCCL was extended by the introduction of clearing and settlement with the help of NSCCL in year 1996. The National stock Exchange has introduced its Index for the first time in year April 1996. The index was known as the S&P CNX Nifty Index. In year June 1996, it has introduced the Settlement Guarantee Fund. The National Securities Depositor Fund was launched by the National Stock exchange in year 1996, November, and thus making it the first stock exchange who becomes the first depository in India.
Because of the efforts and introduction of new concept in the field of trading, the National stock Exchange has received the BEST IT USAGE award by the computer Society of India in the year November, 1996. It has also received an award for the TOP IT USER in the name of “Dataquest award” in year December, 1996.
The National stock exchange has also introduced another index in year December 1996 in the name of CNX Nifty Junior in year 1996.  It had again received an award for the BEST IT USAGE award by the computer Society of India in the year December, 1996. In May, 1998 it had launched its first website. Further in October 1999, it had launched the NSE.IT LTD. Further in year October, 2002, it had launched the Government securities index.
The growth of the National Stock Exchange has been tremendous in every field. It had introduced several programmes and has achieved various achievements and awards while working best in the field in which it is working. The efforts and hard work that is contributed by the National Stock exchange has been tremendous and thus making an important and unique stock exchange in India.

NSE & BSE:
The economic and capital market in a country cannot exist without a stock exchange. The Indian capital market is guided by the two pillars viz. Bombay Stock Exchange and the National Stock Exchange. All the major transactions take place here though there are about 20 other stock exchanges in different cities of India. Both these stock exchanges are situated in Bombay [presently Mumbai]. The Bombay stock exchange [BSE] is located at the Dalal Street and was established in the year 1875. The national stock exchange [NSE] is located at Bandra (east) and was founded in the year 1992.
The indices NIFTY for NSE and SENSEX for BSE are displayed in all major portals, newspapers and financial magazines.
BSE has BSE small cap, BSE Mid cap and BSE500 as indices to take care of the medium and small companies while India index services & Products Limited [IISL] was launched to have indices like S&P CNX Nifty, CNX Nifty Junior, CNX 100, S&P CNX 500 and CNX Mid cap.
BSE and NSE have changed the meaning of trading in the share market in India giving the investors the confidence and endeavour to invest and make big money. BSE replaced the open cry system with automated trading  BSE online trading [BOLT] system was established in the year 1995 and expanded to the other exchanges in 1997 by NSE there by giving the investors wider and easier trading options. Both the BSE and NSE have embraced the latest and sophisticated technology for smoother and better trading operations which has re affirmed the investor’s faith in the Indian stock market. There came a period when people were losing faith in the stock market because of the heavy rush, physical presence requirement, filling forms and the other paper work, lack of proper and timely news. But the computerisation and online trading has again changed the views of the people as trading became easier, simpler and faster.
Many time-consuming tasks have become simplified. The technological revolution that has been taking place has not only made trading easy in India but has changed the world markets too. One just requires an online trading account to operate in BSE or NSE and then they can do their trading business within the trading hours from anywhere in the world. All they would need is a computer with a broadband connection.  Earlier transactions used to take a long time but now everything is done in a few minutes. There are no forms to be filled, registers to be maintained as they are all done electronically. One can view the stock market live once they are online.
The national stock exchange has been in the forefront of online stock trading in the country. Soon the online trading spread to the other exchanges in the country. The development in information technology has attracted the investors to trade in any of the BSE and NSE stock. This development in technology has seen the NSE facilitate easy and convenient trading among the investors. Satellite communication technology has been used to connect with the major cities and towns all over India. The necessary software and hardware is being upgraded regularly to keep up with the trends and development. As of this day the NSE can handle more than 15 million trades every day in the stock market.
The NSE has made a name for itself in the global market too. This included signing of a memorandum of understanding with the Singapore stock exchange for development of a market for Indian products to be listed in the Singapore exchange. Many license agreements have been made between Indian companies and benchmark indexes of US.  Many foreign investors have been attracted by both BSE and NSE. There are many firsts to its credit by the Bombay stock exchange. It introduced free floating index, equity derivatives, launched its website Hindi and Gujarat. It obtained the 1st iso certification for having an exchange and starting exchange enabled internet trading platform The NSE too not to be left behind, has strongly made its name in the world market.

National Investment Fund

On 27 January 2005, the Government had decided to constitute a 'National Investment Fund' (NIF) into which the realization from sale of minority shareholding of the Government in profitable CPSEs would be channelised. The Fund would be maintained outside the Consolidated Fund of India. The income from the Fund would be used for the following broad investment objectives:-

	(a)	Investment in social sector projects which promote education, health care and employment;
	(b)	Capital investment in selected profitable and revivable Public Sector Enterprises that yield adequate returns in order to enlarge their capital base to finance expansion/ diversification

Salient features of NIF:

	(i)	The proceeds from disinvestment of CPSEs will be channelised into the National Investment Fund which is to be maintained outside the Consolidated Fund of India
	(ii)	The corpus of the National Investment Fund will be of a permanent nature
	(iii)	The Fund will be professionally managed to provide sustainable returns to the Government, without depleting the corpus. Selected Public Sector Mutual Funds will be entrusted with the management of the corpus of the Fund
	(iv)	75% of the annual income of the Fund will be used to finance selected social sector schemes, which promote education, health and employment. The residual 25% of the annual income of the Fund will be used to meet the capital investment requirements of profitable and revivable CPSEs that yield adequate returns, in order to enlarge their capital base to finance expansion/ diversification

Fund Managers of NIF

The following Public Sector Mutual Funds have been appointed initially as Fund Managers to manage the funds of NIF under the ‘discretionary mode’ of the Portfolio Management Scheme which is governed by SEBI guidelines.

	i)	UTI Asset Management Company Ltd.
	ii)	SBI Funds Management Company (Pvt.) Ltd.
	iii)	LIC Mutual Fund Asset Management Company Ltd.

  
Corpus of NIF

The corpus of the Fund is Rs.1814.45 crore being the proceeds from the disinvestment in Power Grid Corporation and Rural Electrification Corporation. The pay out on NIF was Rs.84.81 crore in the year 2008-09, Rs.248.98 crore in the year 2009-10, Rs.107.32 crore in 2010-11 and Rs. 163.19 crores in 2011-12.

Use of Disinvestment Proceeds

The income from the Fund is to be used for the following broad investment objectives:

	(a)	75% to finance selected social sector schemes, which promote education, health and employment
	(b)	25% to meet the capital investment requirements of profitable and revivable CPSEs that yield adequate returns, in order to enlarge their capital base to finance expansion/diversification

However, in view of the difficult economic situation caused by the global slowdown of 2008-09 and a severe drought that was likely to adversely affect the 11th Plan growth performance, the Government, in November 2009, decided to give a one-time exemption to utilization of proceeds from disinvestment of CPSEs for a period of three years – from April 2009 to March 2012 – i.e. disinvestment proceeds during this period would be available in full for meeting the capital expenditure requirements of selected social sector programmes decided by the Planning Commission/Department of Expenditure. Now as the Country is facing very difficult economic conditions due to Continued financial/economic problems in Europe, impacting the economic growth in India, higher subsidy burden relating to petroleum, food and fertilizers, high Interest rate impacting the manufacturing sector, affecting excise collection, falling revenue collection, the exemption cited above has been extended upto March 2013.
 
Accordingly, from April 2009, the disinvestment proceeds are being routed through NIF to be used in full for funding capital expenditure under the social sector programmes of the Government, namely:-

	(i)	Mahatma Gandhi National Rural Employment Guarantee Scheme
	(ii)	Indira Awas Yojana
	(iii)	Rajiv Gandhi Gramin Vidyutikaran Yojana
	(iv)	Jawaharlal Nehru National Urban Renewal Mission
	(v)	Accelerated Irrigation Benefits Programme
	(vi)	Accelerated Power Development Reform Programme

India set to join talks for world’s largest trade bloc

India is set to join talks for creating the world's largest trade bloc, the Regional Comprehensive Economic Partnership or RCEP, comprising Asean members and three manufacturing giants — China , Japan and South Korea — after a committee headed by Prime Minister Manmohan Singh endorsed the move.

The 16 members who will launch talks in Phnom Penh later this month account for over a quarter of the world economy.

Trade & Economic Relations Committee (TERC) signals the government's intent to drive down import duties further in the coming years, a proposal that may not get too much support from the domestic industry.

In return, the government is hoping to get a sweeter deal for Indian nurses, teachers and auditors who want to work in any of the 16 initial members of the proposed RCEP, which will also have Australia and New Zealand. Of course, this will come with the promise of allowing overseas companies easier access by giving them more flexibility in FDI rules.

The biggest concern, however , is the China factor as the Indian government has so far hesitated in entering into any sort of a trade arrangement with Beijing, fearing that the market would be flooded with cheap imports and make the trade deficit look even grimmer . But TERC is learnt to have taken the view that it would be imprudent to ignore RCEP as India was taking a 'Look East' view of the world.

Besides, it is seen as the trading region of the future, with trade expanding rapidly. The fear in government circles is that entering the bloc late would entail higher commitments , including a steeper reduction in import tariffs.

RCEP is seen as a counter to the Trans-Pacific Partnership, which had Asean members such as Singapore and Malaysia apart from New Zealand as a founding member, but the agenda is now largely driven by the US, backed by Canada and Mexico.

SEBI

To reform the financial services sector especially the securities market, the Securities and Exchange Board of India (SEBI) was established by the Government of India in 1988 through an executive resolution, and was subsequently upgraded as fully autonomous body (a statutory board) in the year 1992 with the passing of the Securities and Exchange Board of India Act (SEBI Act) on 30th January 1992.

The Securities and Exchange Board of India is the sole regulator for the securities market in India.

The SEBI is managed by six members, i.e. by the chairman who is nominated by central government & two members, i.e. officers of central ministry, one member from the RBI & the remaining two are nominated by the central government.

SEBI is headquartered in Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmedabad.

The basic objectives of the Board were identified as: 

• to protect the interests of investors in securities;
• to promote the development of Securities Market;
• to regulate the securities market and
• for matters connected therewith or incidental thereto.

SEBI has to be responsive to the needs of three groups, which constitute:

• the issuers of securities
• the investors
• the market intermediaries.

To the investors, the SEBI strives to assure that their rights are protected; they are enabled to make informed choices and decisions in financial dealings.

To the issuer, the SEBI strives to provide a transparent and efficient market where they are able to raise resources but meet regulatory obligations.

To the intermediaries, the SEBI strives to render a market in which they can compete freely and operate in a manner which gives the investors and market participants that the market is efficient, orderly and fair.

Functions and responsibilities

The main functions of Security and Exchange Board of India is to introduce some important regulatory measures, market registration norms with eligibility criteria, code of conduct for intermediaries such as issue bankers, merchant bankers, brokers, sub-brokers, registrars, portfolio managers, credit rating agencies and others connected to securities market.

In order to make the securities market safe and transparent to investors SEBI has also introduced the comprehensive regulatory measures, prescribed registration norms, the eligibility criteria, the code of obligations and the code of conduct for different intermediaries like, bankers to issue, merchant bankers, brokers and sub-brokers, registrars, portfolio managers, credit rating agencies, underwriters and others. It has framed bye-laws, risk identification and risk management systems for Clearing houses of stock exchanges, surveillance system etc.

Thus salient functions are summed as:

REGULATORY FUNCTIONS: 

a) Registration of brokers and sub-brokers and other players in the market.
b) Registration of collective investments schemes and Mutual Funds.
c) Regulation of stock exchanges and other self-regulatory organisations (SRO) merchant banks etc
d) Prohibition of all fraudulent and unfair trade practices
e) Controlling Insider Trading and take over bids and imposing penalties for such practices

DEVELOPMENT FUNCTIONS:

a) Investor education
b) Training of intermediaries.
c) Promotion of fair practices and Code of conduct.
d) Conducting Research and Publishing information useful to all market participants.

SEBI Complaints Redress System

SCORES is a web based centralized grievance redress system of SEBI. SCORES enables investors to lodge and follow up their complaints and track the status of redressal of such complaints online from the above website from anywhere. This enables the market intermediaries and listed companies to receive the complaints online from investors, redress such complaints and report redressal online.

Rating Agencies

Presently, six credit rating agencies (CRAs) are registered with SEBI, namely: 

1. CRISIL Limited 

2. Fitch Ratings India Private Ltd. 

3. ICRA Limited 

4. Credit Analysis & Research Ltd. (CARE) 

5. Brickwork Ratings India Pvt. Ltd. 

6. SME Rating Agency of India Ltd. (SMERA) 

SEBI (Credit Rating Agencies) Regulations, 1999 have prescribed a comprehensive Code of Conduct to be followed by all SEBI registered CRAs which, inter alia, states that a CRA shall at all times exercise due diligence, ensure proper care and exercise independent professional judgment in order to achieve and maintain objectivity and independence in the rating process. 

SEBI has mandated a half yearly internal audit for credit rating agencies which covers all aspects of CRA operations and procedures, including investor grievance redressal mechanism and compliance with the provisions of the securities laws. The Board of Directors of CRAs is required to consider the report and take appropriate measures to rectify the deficiencies and the CRAs send the Action Taken Report to SEBI. 

SEBI has prescribed various transparency and disclosure requirements for CRAs. These provide the various disclosures like rating procedure, default studies, income from rating services and non-rating services, measures to deal with conflict of interest, obligations in respect of rating of structured products, unsolicited credit ratings, etc. SEBI has also standardized rating symbols and definitions to be followed uniformly by the CRAs. 

National Sample Survey Office

The National Sample Survey Office (NSSO) under the Ministry of Statistics & Programme Implementation was established in 1950, with the objective of obtaining comprehensive and continuing information relating to social, economic, demographic, industrial and agricultural statistics through sample surveys on countrywide basis.  It has been, therefore, instrumental in developing a strong database that has helped the Central as well as State Governments in development planning and policy formulations.

The NSSO has four Divisions namely, Survey Design & Research Division (SDRD), Data Processing Division (DPD), Field Operations Division (FOD) and Coordination & Publication Division (CPD) to carry out different responsibilities.  Each of these Divisions, except the CPD, is headed by Additional Director General.  All these four Divisions function under the guidance of Director-General & Chief Executive Officer (DG&CEO).  SDRD located at Kolkata is responsible for planning of the survey, finalization of sample design, schedules, instructions and tabulation programme, report writing, etc.  DPD with its headquarters at Kolkata process the data collected through socio-economic surveys through its six Data Processing Centres across the country.  The Field Operations Division (FOD) is responsible for collection of data from the field on various surveys of the NSSO.  The FOD with head quarters at New Delhi functions through a network of 6 Zonal Offices, 49 Regional Offices and 116 Sub-Regional Offices spread throughout the length and breadth of the country. CPD coordinates the activities of all the Divisions.

The National Sample Survey Office (NSSO) functions under the overall direction of National Statistical Commission (NSC). The National Statistical Commission has the requisite independence and autonomy of decision making in the collection; processing and the publication of NSS data. The autonomy includes the choice of subjects or items on which data have to be collected in a given field of investigation or in a given period, the frequency with which the data on any item are to be collected, the preparatory or pilot work to be undertaken on different subjects, the sample design to be adopted, the tabulation to be prepared, the form in which the data are to be collected and processed and the analysis and publication of results.

Every year NSSO conducts not only large-scale sample surveys in the form of NSS Rounds covering a variety of socio-economic topics, but also other important surveys in the field of Industrial Statistics (Annual Survey of Industries), Agricultural Statistics and Retail Prices.

SEBI

The government of India created the Securities and Exchange Board of India (SEBI) with a view to control and regulate the foreign investment in the capital markets, new issues of capital brought out by the companies and grievances of the companies and the investors. In addition, SEBI has been created with the broader aim of protecting the interests of the investors in securities and promoting and regulating the securities markets in the country. 

 

Based in Mumbai, SEBI has eight divisions and departments which look after several functions to achieve the above mentioned broad objective. The Depositors and Custodians Division looks after the work of registration of depository participants/custodians, as well as their renewal of registration or cancellation of registration. Foreign Institutional Investors Division, on the other hand, deals with registration/renewal of registration of such investors. FII Division looks after the FIPB proposals and the government correspondence connecting with this function.

 

While Collective Investment Schemes Division deals with registration and renewal of the registration for collective investment schemes, Secondary Market Department is the major department of SEBI which carries out the functions like registration and renewal of registration of the credit rating agencies in the country, in addition to the registration of the brokers and sub-brokers, registration under the Stock Lending Scheme and deposit of various fees by the brokers and refund of fees to them.

 

With a view to protect the interests of the investors, Investors Grievances and Guidance Division has been set up which carries out the registration of the Investors’ Associations, looks into the grievances of such associations and other investors and carries out the tasks of guiding the investors through the registered Associations or otherwise.

 

Mutual Fund and Venture Capital Division of the SEBI looks into the tasks like registration of trustees for Mutual Funds, processes the applications for foreign securities, ADRs/GDRs, allow changes from closed ended to open ended schemes, observations on offer documents etc. Primary Market Department is also an important department of SEBI and deals with the matters like fresh registration/cancellation of intermediaries, observations on the offer documents and list-related matters pertaining to the new issues.

 

The complete control and regulation by the SEBI has enhanced the confidence of the general public in the securities market of the country.

United Nations Conference on Trade and Development (UNCTAD)

 

 

UNO declared 1960-70 as the development decade. In 1961 UNO attempted to increase the income of developing countries with the growth rate of 5% p.a. during that development decade. In July 1960 a conference of developing countries was held at Cairo which resolved to convene a world conference for this purpose. Economic and Social Council of UNO organise a World Trade and Development Conference from March 31, 1964 to July 16, 1964. A worldwide International Trade Policy was determined in this conference. Various issues related to extension of international trade of developing countries were also discussed in that conference. The conference came to be known as UNCTAD-I.

Presently, UNCTAD has become a permanent organisation for promoting international trade with its head quarter at Geneva (Switzerland), Mr. Allec Irwin is its present Chairman. Generally, UNCTAD has its session after four years. IMF has got the permanent representation in all its bodies. This is reason why IMF includes all UNCTAD proposals in its policies. UNCTAD recommendations are only suggestions and no country can be compelled to accept them.

 

The details of various UNCTAD are as follows:

UNCTAD I	Cairo	Mar 31 - June 16, 1964
UNCTAD II	New Delhi	Feb - March 1968
UNCTAD III	Santiago (Chile)	April - May 1972
UNCTAD IV	Nairobi (Africa)	May 1976
UNCTAD V	Manila (Philippines)	May 7 - June 2, 1979
UNCTAD VI	Belgrade (Yugoslavia)	June 6 - July 3, 1983
UNCTAD VII	Geneva (Switzerland)	1987
UNCTAD VIII	Cartegina DE Indias (Columbia)	1992
UNCTAD IX	Midrand (Africa)	April 27 - May 11, 1996
UNCTAD X	Bangkok (Thailand)	Feb 12 - Feb 19, 2000
UNCTAD XI	Sao-Paulo (Brazil)	June 13 - June 18, 2004
UNCTAD XII	Accra (Ghana)	April 20 - April 25, 2008

Objectives of UNCTAD

1. To promote international trade specially with the view to accelerating the economic development of underdeveloped countries.
2. To determine policies and principles for international trade and economic development.
3. To propose the strategy for implementing pre-approved principles and policies.
4. To assist Economic and Social Council of the UNO.
5. To provide a suitable platform for trade dialogues.

Members of UNCTAD

Though UNCTAD is functioning as a permanent agency of the UNO, but its membership is fully optional. Any country may join or quit UNCTAD. 

The functioning of UNCTAD on democratic principles every member has only one voting right. For general disputes, simple majority among present members but two third majority is needed for important issues.

Reserve Bank of India

 

 

It is the Central Bank of the country. The Reserve Bank of India was established in 1935 with a capital of Rs. 5 crore. This capital of Rs. 5 crore was divided into 5 lakh equity shares of 100 each. In the beginning the ownership of almost all the share capital was with the non-government share holders. In order to prevent the centralisation of equity shares in hand of a few people The Reserve Bank of India was nationalised on January 1, 1949.

The general administration and direction of RBI is managed by a Central Board of Directors consiting of 20 members which includes one Governor, four Deputy Governors, one Government Official appointed by the Union Government of India to give representation to important strata in economic life of the country besides four directors are nominated by the Union Government to represent local boards. Apart from the central board there are four local boards also and their head offices are situated in Mumbai, Chennai, Kolkata and New Delhi. Five members of local boards are appointed by the Union Government for a period of four years. The local boards work according to the instructions and orders given by Board of Directors, and from time to time they also tender useful advice on important matter. The office of RBI is in Mumbai. At present Dr. D. Subbarao is the Governor of Reserve Bank of India.

Functions of Reserve Bank of India

1. Issue of Notes - The Reserve Bank has the monopoly of note issue in the country it has the sole right to issue currency notes of various denominations except one rupees notes. The Reserve Bank act as a only source of legal tender money because the one rupee note issued by the Ministry of Finance are also circulated through it. The Reserve Bank has adopted the Minimum Reserve System for note issue. Since 1957, it maintains the gold and foreign reserve of Rs. 200 crore, of which at least Rs. 115 crore should be in gold.
2. Banker to the Government - The second important function of the Reserve Bank of India is to act as the banker, agent, and adviser to the Government. It performs all the banking functions of the State and the Central Government and it also tenders useful advice to the Government on matters related to economic and monetary policy. It also manages the public debt for the Government.
3. Bankers' Bank - The Reserve Bank performs the same function for the other banks ordinarily perform for their customers. It is not only banker to the commercial bank, but it is the lender of the last resort.
4. Controller of Credit - The Reserve Bank undertakes the responsibility of controlling credit created by the commercial banks. To achieve this objective it makes extensive use of quantitative and qualitative techniques to control and regulate the credit effectively in the country.
5. Custodian of Foreign Reserves - For the purpose of keeping the foreign exchange rates stable the Reserve Bank buy and sells the foreign currencies and also protect the country's foreign exchange funds.
6. Other Functions - The bank performs a number of other developmental works. These works include the function of clearing house arranging  credit for agriculture (which has been transferred to NABARD), collecting and publishing the economic data, buying and selling of Government Securities and Trade Bill, giving loans to the Government, buying and selling of valuable commodities etc. It also act as representative of Government in IMF and represents the membership of India.

International Monetary Fund

 

IMF is an international monetary organisation. It was established on December 27, 1945 in Washington on the recommendations of Bretton Woods Conference. But it started it's operation on March 1, 1947. At present 184 nations are members of the IMF. East Timor became the newest member in July 2002.

In place of Dominique Strauss-Kahn, Christine Lagard has been made as new Managing Director of IMF on July 5, 2011. She is serving as 11th MD of IMF.

Objective of IMF

According to Article of Agreement of the IMF, its main objectives are as follows:

1. To promote international monetary co-operation
2. To ensure balanced international trade
3. To ensure exchange rate stability
4. To eliminate or to minimize exchange restrictions by promoting the system of multilateral payments
5. To grant economic assistance to member countries for eliminating the adverse imbalance in balance payments.
6. To minimize imbalance in quantum and duration of international trade

Constitution, Membership and Capital of IMF

IMF is controlled and managed by a board of Governors. Each member country nominates a Governor. All the nominated Governors make a board of governors. Each country also nominates an alternate Governor who casts his vote in absence of the Governor. Each Governor is allotted a number of votes which is determined by the quota allotted to respective country in the capital of IMF. Each Governor has got the right of 250 votes on the basis of membership and one additional vote for each SDR 1,00,000 of quota. The additional of these two types of votes becomes the actual voting right of the member country. For example, India's voting right is 250 + 30555 = 30805 because India's quota is SDR 30555 lakh. It clearly indicates that the voting right depends on the quantum of quota of a particular country with IMF. This is the reason why the rich and industrialised countries got the higher voting rights due to their higher quotas. with the IMF.

The main source of IMF resources is the quota allotted to the member countries. Till 1971, all the amounts of quotas and the assistance provided were denominated in US dollar, but since December 1971, all the quotas and transactions are expressed in SDR (Special Drawing Right) which is also known as Paper Gold. In 1971, one SDR was assumed equivalent to 1 dollar but due to subsequent decline in dollar value  SDR 1 became equivalent to $1.585 by the end of April 1995. Since January 1, 1981 the value of SDR is being determined by the basket  of currency of 5 largest exporting member countries: US dollar, Deutsche Mark, Yen, Franc, and Pound Sterling.
In 1991, the weight to these 5 currencies in SDR price determination was as follows:

American Dollar	40 %
German Franc	21 %
Japanese Yen	17 %
British Pound	11 %
French Franc	11 %

The currency value of SDR is determined by the IMF each day by summarising the value in US dollars, based on the market exchange rates of a basket of fine currencies.

The IMF's financial year is from 1 May to 30 April. IMF lends to various member countries in the form of various facilities (Extended Fund Facility, Standby Facility, Contingent Credit Lines, Compensatory Facility etc.) designed to serve specific purpose, but essentially aimed at balance of payments stabilisation or meeting the emergent foreign exchange needs. The poor countries are also helped by funding from Poverty Reduction and Growth Facility. As on June 2004, the IMF was lending to 13 members in the from of standby facility, to two members under Extended Arrangements and 38 poor countries under poverty Reduction and Growth Facility.

The quota allotted by the IMF to each member has to be deposited partly in their own currency and remainder in form of foreign exchange.

India's 11th Place in IMF General Quota

After the review of IMF's General Quota, India's quota has been raised to 582.15 crore SDR from the existing level of 415.82 crore SDR. (at the time of increase time 1 SDR = $ 1.54 = Rs 69.48). This quota hike has raised India's vote share from 1.91% to 2.44%.

India has been placed at 11th place in IMF's General Quota. USA remains in biggest quota holder despite its quota share coming down to 17.09%.

Country Quota USA 17.09% Japan 6.13% Germany 5.99% UK 4.94% France 4.94% China 3.72%

Country Quota Italy 3.25% Saudi Arabia 3.21% Canada 2.93% Russia 2.74% India 2.44% - -

India and IMF

IMF has played an important role in Indian economy. IMF has provided economic assistance from time to time to India and has also provided appropriate consultancy in determination of various policies in the country. India is the founder member of IMF. The finance minster is ex-officio governor in IMF board of Governors. Till 1970, India was among the first five nation highest quota with IMF and due to this status India was allotted a permanent Place in executive Board of Directors.

India participate in FTP of the IMF from 2002. 43 countries, including India now participate in FTP. By participation in FTP India is allowing IMF to encash its rupee holding as a part of our quota contribution for hard currency which is then lent to other member countries who are debtors to the IMF. From 2002 to Feb 2006, India has made purchases transactions of SDRs 493.23 million and four repurchase transaction amounting to SDRs 466.474 million.

In July India and IMF joint training program at the National Institution of Bank Management, Pune was established. The training program will provide policy oriented training in economics and related operational fields to Indian officials and officials of countries in South Asia and East Africa. The first training program was held during July 2006. The RBI is a nodal body to co-ordinate the training program with the IMF.

Enhanced Structural Adjustment Facility (ESAF) was established in 1987 with an amount of SDR 6 billion to help the low income countries with heavy debt burdens in difficult external environment and implement comprehensive  macro-economic and structural policy program aiming at strengthening their balance of payments position and fostering growth. India contributes as donations to Subsidy Account and made a commitment to provide grant contribution to the extent of US $ 1 million per year over 15 years for a total of US $ 15 million.

World Trade Organisation

 

The Uruguay round of GATT (1986-93) gave birth to World Trade Organisation. The members of the GATT signed on an agreement of Uruguay round in April 1994 in Morocco for establishing a new organisation named WTO. It was officially constituted on January 1, 1995 which took the place of GATT as an effective formal organisation. GATT was an informal organisation which regulated world trade since 1948. Like GATT, the headquarter of WTO is also in Geneva.

Contrary to the temporary nature of GATT, WTO is a permanent organisation which has been established on the basis of an international treaty approved by participating countries. It achieved the international status like IMF and IBRD but it is not an agency of UNO.

WTO has a General Council for its administration which includes one permanent representative of each member nation. Generally, it has one meeting per month which is held in Geneva.

The highest authority of policy making is WTO's Ministerial Conference which is held after every two years.

The present strength of WTO membership is 151. this includes China and Nepal whose accession was approved by the WTO Ministerial  Conference held in Doha and Cancun in November 2001 and September 2003 respectively. There are presently 30 countries in the process of accession to the WTO. Vietnam joined WTO as 150th member. Tonga is the 151st member of WTO.

There are number of important committees for administration of WTO, out of which two committees play the pivotal role in WTO. They are :

1. Dispute Settlement Body (DSB)
2. Trade Policy Review Body (TRRB)

DSP considers the complaints of member countries against violation of rules by any member country. This body appoints a group of experts to investigate into such complaints. This body meets twice a month for such cases.
TPRB reviews the trade policy of member countries. The trade policy of all big trade powers of the world are reviewed after every 2 years. All the members of WTO are the members of TRPB.
Other important bodies of WTO are:

1. Council for Trade in Goods
2. Council for Trade in Services
3. Council for Trade related aspects of Intellectual Property Rights

Objectives of WTO

1. To improve standard of living of people in the member countries.
2. To ensure full employment and broad increase in effective demand.
3. To enlarge production and trade of goods.
   The above three objectives were also included in GATT, but WTO also included some other objectives which are :
4. To enlarge production and trade of services.
5. To ensure optimum utilisation of world resources.
6. To accept the concept of sustainable development.
7. To protect environment.

Functions of WTO

1. To provide facilities for implementation, administration and operation of multilateral and bilateral agreements of the world trade.
2. To provide a platform to member countries to decide future strategies related to trade and tariff.
3. To administer the rules and processes related to dispute settlement.
4. To implement rules and provisions related to trade policy review mechanism.
5. To assist IMF and IBRD for establishment coherence in universal economic policy determination.

ECONOMIC ORGANISATIONS

INSURANCE REGULATORY AUTHORITY:
On the recommendations of the Malhotra Committee, Government has set up an interim Insurance Regulatory Authority (IRA), with a view to activate an insurance regulatory apparatus essential for proper monitoring and control of the insurance industry. The IRA is headed by a Chairman who is also Controller of Insurance and Chairman of TBC. The other Members of the IRA, not exceeding seven in number of whom not more than three shall serve full time, shall be nominated by the Central government.

GENERAL INSURANCE CORPORATION OF INDIA:  
The general insurance industry in India was nationalised and a government company known as General Insurance Corporation of India (GIC) was formed by the Central Government in November 1972. With effect from 1 January 1973 the erstwhile 107 Indian and foreign insurers which were operating in the country prior to nationalisation, were grouped into four operating companies, namely, (i) National Insurance Company Limited; (ii) New India Assurance Company Limited; (iii) Oriental Insurance Company Finance Limited; and (iv) United India Insurance Company Limited.

LIFE INSURANCE CORPORATION OF INDIA:
Life Insurance Corporation of India (LIC) was established on 1 September 1956 to spread the message of life insurance in the country and mobilise people’s savings for nation-building activities. The life insurance Corporation of India (LIC) with its central office in Mumbai and 7 zonal offices at Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Kanpur and Bhopal operates through 106 divisional offices including one salary savings scheme Divsion at Mumbai 2,048 branch offices and 323 Satellite offices. As on 31st March 2006, LIC has 10,52,283 agents spread all over the country. For the year ended 31st March 2008, business under group schemes, both new and renewed, was to the tune of Rs.3,06,711.77 crore providing cover to 494.83 lakh lives during the preceding year.

INVESTMENT COMMISSION:

The Finance Minister  has announced in the budget speech 2004-05 for setting up an investment in India attractive for investors. Accordingly, Investment Commission has since been set up in December 2004. The commission will have the authority of government to engage, discuss with and invite domestic and foreign business to invest in India. 

Industrial Development Bank of India (IDBI):

Industrial Development Bank of India (IDBI), established under the Industrial Development Bank of India Act, 1964, is the principal financial institution for providing credit and other facilities for development of industry, coordinating working of institutions engaged in financing, promoting or developing industries and assisting the development of such institutions. IDBI has been providing direct financial assistance to large industrial concerns and also helping small and medium industrial concerns through banks and state-level financial institutions. The IDBI was transformed into IDBI Ltd. On 1 October 2004, a company under the companies Act, 1956 and a schedule Bank (on 11 October 2004) under the RBI Act) 1934.

Industrial Credit and Investment Corporation of India Limited (ICICI):

Industrial Credit and Investment Corporation of India Limited (ICICI) was established in 1955 as public limited company to encourage and assist industrial units in the country. Its objectives, inter alia, include providing assistance in the creation, expansion and modernisation of industrial enterprises, encouraging and promoting participation of private capital both internal and external, in such enterprises, encouraging and promoting industrial development and helping development of capital markets.It provides term loans in Indian and foreign currencies, underwrites issues of shares and debentures, makes direct subscriptions to these issues and guarantees payment of credit made by others.

WORLD BANK

The World Bank Group constitutes the following Institutions :

• International Bank for Reconstruction and Development (IBRD)
• International Development Association (IDA)
• International Finance Commission (IFC)
• Multilateral Investment Guarantee Agency (MIGA)
• International Centre for Settlement of Investment Disputes (ICSID)
• The IDA and the IBRD constitute the World Bank. Robert Zoellick is its present head.

1. International Bank for Re – Construction and Development (IBRD)

• IBRD was established in December 1945 with the IMF on the basis of the recommendations of the Bretton Woods Conference. That is why IMF and IBRD are called Bretton Wood Twins. Its head – quarter is at Washington D.C.
• At present, 186 nations are members of the IBRD.
• Objective is of assisting of member nations in the economic re – construction and development of their territories.
• The bank makes its loans on terms that are reasonable but at the same time sufficient to earn a profit in the form of interest and commission fees. The loans are long – term, generally repaid in the currencies loaned over 20 Years, with a five – year grace period.
• May also guarantee loans by private investors.
• The loans may be made to member countries, to their political sub – divisions or to private business enterprises in their territories. If the borrower is not a government guarantee of the member – government concerned is required.

Difference between IBRD and IMF

• The banks lends while funds sells i.e., it makes available the necessary currency of a particular country in case of a shortage.
• The bank assists by advancing long – term credits for development and re – construction, whereas IMF facilitates the balanced growth of international trade by short – term credit.

2. International Development Association (IDA) India

• IDA is an associate institution of IBRD and is known as the Soft Loan Window of World Bank.
• It was established on September 24, 1960.
• It provides loans to its member countries and no interest is charged on these long – term loans (but there is a 0.75 per cent annual service charge on disbursed credits). Most IDA commitments are made to countries with annual per capita incomes less than $785. Credits are extended for terms of 40 Years for least developed countries and 35 Years for other countries.
• As an affiliate of IBRD, its directors, officers and staff are those of the IBRD.

3. International Finance Corporation (IFC)

• Established in 1955, the IFC became a UN specialized agency in 1957.
• It provides loans to private industries of developing nations without any government guarantee and also promotes the additional capital investment in these countries.

International Monetary Fund (IMF)

• Established on December 27, 1945 in Washington D.C. on the recommendations of Bretton Woods Conference. But it started its operations on March 1, 1947.
• At present 185 nations are members of the IMF. Dominique Strauss Kahn is the present MD of IMF.

Objectives of IMF

• To promote international monetary co – operation.
• To ensure balanced international trade.
• To ensure exchange rate stability.
• To eliminate or to minimize exchange restrictions by promoting the system of multilateral payments.
• To grant economic assistance to member countries for eliminating the adverse imbalances in balance of payments.
• Main function is to stabilize exchange.
• Offers facilities to the member nations for the expansion of international trade, the control of international exchange and to avoid competitive exchange depreciation.
• The capital resources of the IMF comprise Special Drawing Rights (SDRs) and currencies that members pay under quotas calculated for them when they join the IMF.
• Every IMF member is required to subscribe to the IMF an amount equal to its quota. The quota of a member is largely determined by its economic conditions relative to other members. An amount, not exceeding 25 per cent of the quota, is to be paid in reserve assets, the balance in member’s own currency.
• The quota determines both the amount of foreign exchange a member may borrow from the Fund and its voting power on IMF policy matters. The members with the largest quotas are USA, Japan and Germany in first, second and third spots. India is placed at the thirteenth spot (1961 per cent share in total quota).
• The IMF makes its resources available to its members to meet their short – term or medium – term payment difficulties, subject to established limits and conditions with respect to the amount of its drawing rights.
• Member – countries are given borrowing or drawing rights with the fund which they can use, together with their own nationally held international reserves, to finance the balance of payments deficits.