How India Helped Shape The Post-War International Monetary System At Bretton Woods

July marks the 80th anniversary of the Bretton Woods Conference, a landmark event where India's participation played a pivotal role in shaping the post-World War II global economic order. Held in 1944 in Bretton Woods, New Hampshire, U.S., the conference saw delegates from 44 countries come together to forge a new international monetary system.

But it was the Indian delegation that left its mark on the conference, punching far beyond its weight, as detailed by journalist and author Niranjan Rajadhyaksha in a post on X.

Dominated by John Maynard Keynes and Harry Dexter White, the conference resulted in the establishment of the International Monetary Fund and what would become the World Bank Group. The system of currency convertibility that emerged from Bretton Woods lasted until 1971.

India's delegation, led by Jeremy Raisman, included notable figures such as CD Deshmukh, AD Shroff, RK Shanmukham Chetty, BK Madan, and Theodore Gregory. Despite being a British colony, India's delegation made significant contributions to the conference. Deshmukh, in his autobiography, noted that Raisman handled India's case with "sympathy and loyalty,"  ensuring that India's voice was heard in the formation of the new international system, Rajadhyaksha said in his post.

The Bretton Woods Conference aimed to expand global trade and restore orderly exchange rates, addressing the issues of trade barriers, opportunistic devaluations, and volatile capital flows that had plagued the world economy during the Great Depression.

By avoiding policy mistakes made in the 1930s, the conference set the stage for a more stable and prosperous global economic landscape. India's involvement was thus instrumental in shaping the policies that would govern the postwar international order, the post said.

Raisman-led Indian delegation made its voice heard on five issues, Rajadhyaksha pointed out:

• Quotas: The delegation sought a higher quota for India, arguing that despite its small economy at the time, the country's sheer size and economic potential justified the request.

• Sterling balances: Indian trade surpluses during the war were locked in London because of strict capital controls in the U.K. This money was needed to finance postwar development, especially the import of essential capital goods for industrialisation.

• Economic development: The next focus was on maintaining an open trading system and financial stability. The Indian delegation strongly argued for greater emphasis on economic development, asserting that reducing poverty would strengthen the world economy.

• Balanced trade: Keynes was uncomfortable with large structural trade deficits or surpluses. Indians said it was not only a matter of financial balances. The export of primary products to purchase manufactured products was also a structural imbalance.

• Treatment of remittances: Remittances should be accounted for in the current rather than capital account, as the delegation had proposed. An open current account was a founding principle of the IMF, so this would aid capital inflows into a country like India with a large diaspora.