5.3. Conditionalities Imposed by IMF and World Bank

In view of the foreign exchange crisis, the Government of India was pushed to the wall. Therefore, it had to approach the IMF and the World Bank to tide over the crisis. These institutes provided the much-needed foreign exchange, but on their own terms and conditions.

As a part of these conditions, India was required to cut down fiscal deficit and the rate of growth of money supply so as to liberalise the domestic economy and to relax restrictions on international flow of goods, services, capital and technology. Therefore, under pressure from the IMF-World Bank, the Indian policy-makers were almost pressurised to make several changes in the policy before they could obtain fresh credit from the IMF and the World Bank to tide over the crisis.