Crucial aid: World Bank President, Robert B Zoellick (C) on a visit to a World Bank funded-project in Mumbai
THE WORLD Bank yesterday announced $4.3bn (£2.6bn) in loans to India, including $2bn (£1.2bn) for the banking sector, to help strengthen its economy amid the global economic crisis.
The World Bank said its executive board approved loans for projects in five countries, with the loans for India by far the largest.
The four projects worth $4.3bn to India are “designed to support the government’s infrastructure agenda and bolster its economic stimulus programme”, the Washington-based development lender said.
The bank noted that after a period of high economic growth - which reached 9.7 per cent in 2006-07 - the onset of the global financial crisis in 2008 saw a decline in India’s growth rate to about five to six per cent in the fourth quarter of 2008-2009.
The bank projected a “realistic” growth rate of between 5.5 and 6.5 per cent for 2009-2010 for Asia's third-largest economy, after Japan and China.
“This is a crucial time to support India,” Roberto Zagha, World Bank country director for India, said in a statement.
“While the worst of the crisis seems to be behind us, doubts linger about the strength of the comeback, partly because the strength of the global recovery is uncertain. Today's support will help maintain credit growth and continued infrastructure investments,” he said.
Zagha said supporting infrastructure development was crucial to “lay the foundations for stronger future growth.”
The World Bank said it had extended a $2bn loan to support the banking sector, in response to a request from the Indian government to support stimulus measures to counter the worst global downturn in six decades.
“This will help maintain the confidence of the public in the banking sector, prevent shortages of capital from leading to a slowdown in credit growth, and provide a capital buffer to public sector banks to absorb the possible increase in non-performing assets resulting from the global financial crisis and its impact on India's economy,” it said.
The loan is for 30 years and includes a five-year grace period in which India is exempt from repayments.
A 28-year loan of $1.195bn (£72mn) was aimed at increasing the availability of long-term financing for the India Infrastructure Finance Company to provide public-private financing of infrastructure projects.
The “pipeline” of projects under consideration “includes selected power, roads, and ports projects,” it said.
A loan of $1bn (£60m), maturing in nearly 30 years, would support the Fifth Power System Development Project aimed at strengthening India's electricity transmission system.
The three loans will be provided by the International Bank for Reconstruction and Development (IBRD), the bank's institution that aims to reduce poverty in middle-income and creditworthy poorer countries by promoting sustainable development.
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