June 23, 2010: The World Bank’s lending to India for fiscal year ending June 2010 will reach $9.3 billion; of this, $2.6 billion came as interest free credits from IDA (the International Development Association) and $6.7 billion was in the form of long-term, low-interest loans from IBRD (the International Bank for Reconstruction and Development).
Although this is a small sum for India’s $1.2 trillion economy, it represents a sharp increase from the $2.2 billion lent to India by the Bank last year (Bank lending to India has traditionally averaged about $2.5-3 billion a year).
The increased lending to India is the result of several forces at work. One is the guidance from the G 20 during its November 2008 summit when it directed the international financial institutions to step up their financial support to emerging economies. The Bank stepped up to the challenge and has made global commitments of $120 billion since July 2008. The increased lending to India thus forms part of a global trend.
Another factor relates to the huge demands of India’s fast-growing economy which needs sustained growth of 8-10% to lift some 400 million people out of poverty. For instance, the Government of India (GOI) estimates that it will need $500 million for building infrastructure alone during the current five year plan. Moreover, over the past few years, countries like China and India have increasingly voiced their demand for additional infrastructure lending, and the Bank has been making sustained efforts to respond to it.
The Bank is also pleased to have had the opportunity to deepen its association with India because it believes that the world has a tremendous amount to learn from the development solutions being forged in the country.
Key Areas of Lending to India
World Bank resources in India are always channeled in accordance with the Government of India’s (GOI) priorities laid out in the Five Year Plans and reflected in the Bank’s Country Strategies for India.
This year, in response to a specific request from the GOI, the Bank earmarked $3 billion to support India’s domestic response to the global financial crisis. This included a $2 billion package for GOI to enhance the capital of some of the public sector banks so they could maintain their credit expansion and prevent a shortfall of capital from affecting India’s economy.
Two of our largest loans this year support the development of vital infrastructure. One, a loan of $1.2 billion to the India Infrastructure Finance Company Limited (IIFCL) will help catalyze private financing for public-private partnerships across a range of sectors - roads, power, airports, and ports.
Another large loan of $1 billion will help the Powergrid Corporation of India, the country’s national electricity transmission company, strengthen its major transmission systems to facilitate the transfer of power from energy surplus regions to underserved areas.
Loans totaling $2.6 billion in interest-free credits will help the government improve the quality of public services, such as better schooling, irrigation, drinking water and sanitation. These include $750 million in additional financing for India’s flagship primary education program, the Sarva Shiksha Abhiyan, and $300 million to help India’s engineers develop the skills needed in a fast-changing labor market.
Other loans seek to demonstrate sustainable transport solutions in select Indian cities; protect the coastal areas while safeguarding the livelihoods of residents; build capacity for handling polluted industrial areas; mitigate the risk from cyclones; and promote energy efficiency in micro, small and medium enterprises.
Future Lending
Going forward, the Government of India has requested the World Bank’s engagement in some of its large transformative projects. Accordingly, the World Bank is currently working on several large projects in critical infrastructure areas. These include the Dedicated Freight Corridor (DFC) which will establish parallel freight tracks along India’s busy eastern corridor, as well as the program to clean and conserve the mighty Ganga. In Bihar, where floods regularly threaten the lives and livelihoods of millions of poor, the Bank will be helping the state government put into place a rehabilitation program for areas affected by the Kosi floods.
The Bank will also collaborate with the Government of India in some of its key strategic initiatives which have brought about dramatic improvements in the lives of the poor in India. This will include SHG-driven livelihoods programs such as the one in Andhra Pradesh which has moved over nine million poor women and their families out of poverty, and the rural roads project which has given far flung and poor human settlements across the country access to schools, health centers, markets and jobs.
The pipeline also includes a number of smaller projects that pilot new initiatives, such as improving the competitiveness of Maharashtra farmers by building better agriculture infrastructure, upgrading rural markets or haats and building farm-to-market roads. Another pilot will support the introduction of social security for the unorganized sector.
Development Impact
Ongoing World Bank projects have contributed towards development impact in a number of areas. Some of these results are enumerated below:
19 million out-of-school children have been enrolled in elementary school under the Sarva Shiksha Abhiyan.
12 million people in the villages of Maharashtra, Karnataka, and Uttarakhand now have clean and reliable drinking water.
Clean drinking water supply 24 hours a day, seven days a week is now available in parts of three water-stressed cities of North Karnataka (Hubli-Dharwad, Belgaum and Gulbarga).
More than 20,000 km of rural roads have been constructed in Andhra Pradesh, Assam, Bihar, Haryana, Himachal Pradesh, Jharkhand, Punjab, Rajasthan, Uttarakhand and Uttar Pradesh. Major bridges have been constructed in Assam, as well as foot bridges and tracks in the hill states.
Five Bank loans have helped Powergrid build 75,000 circuit kms of transmission lines that can carry power from energy-surplus regions to underserved areas. The Bank’s 15-year partnership with Powergrid has helped the utility transform into a global-level entity with world class engineering, power planning and implementations systems and one of the largest electricity transmission operators in the world.
Millions of villagers in Andhra Pradesh, Bihar, and Madhya Pradesh have increased their incomes through community efforts and self-help groups. In Andhra Pradesh alone, some 10 million people, mostly women, have formed nearly 850,000 self-help groups, which have generated savings of over $805 million. Funds have been used to set up small enterprises and provide better schooling, nutrition and healthcare to their children.
