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WB may double funds to India

The World Bank may agree to India's plea for doubling its present annual loan of over one billion dollars.

This was indicated by the Indian delegation led by Reserve Bank Governor C Rangarajan, which met World Bank President James D Wolfensohn in Washington on Monday.

The four-member delegation -- comprising finance ministry's chief economic advisor Shankar Acharya, finance secretary M S Ahluwalia and joint secretary Govindarajan -- had also called on International Monetary Fund Managing Director Michel Camdessus.

Acharya said there was a possibility of doubling the World Bank's loan amount to India with ''a little effort from both sides.'' The bank would release funds if the Indian projects were good enough.

Earlier, Wolfensohn said the bank's income was set to halve over the next 10 years, limiting its ability to help poor countries and deal with emergencies.

If India's request is heeded, New Delhi's share in the WB's annual grant of loans would be over three billion dollars. This includes the one billion dollars which it gets from the International Development Association, the WB's concessionary lending agency.

Acharya said the bank had agreed increase funds for rural development. Rural lending was easier now as the government had deregulated the country's credit structure.

The delegation sought a greater involvement of the International Finance Corporation in India. The IFC is a WB agency which caters to the needs of the private sector in developing countries.

Acharya said the IFC lent only about 250 million dollars to the Indian companies in the last fiscal year. This, when compared to India's foreign direct investment and portfolio investment flow of five billion dollars, was too small an amount.

He said the disbursement rate of WB loans in India went up to 18 per cent in the last fiscal year from the 14 per cent of 1995-96.

The delegation had been authorised by the Cabinet to inform all concerned that the Gujral government would stick to the economic policies of the H D Deve Gowda government, Acharya added.

He said Camdessus welcomed India's new credit policy. The IMF chief did not raise the issue of capital account convertibility.

Earlier, speaking at the interim committee (the IMF's policy-making body) meeting, Rangarajan called for enhanced transfer of resources to developing countries on reasonable terms, and open access to markets of advanced nations for the developing world.

The meeting, which was attended by the finance ministers of 180 member countries, highlighted the importance of five measures to put developing countries on a sustainable higher growth path. These are: market-oriented reforms, sound macroeconomic policies, sound banking system, trade and investment liberalisation and good governance.

At WB's developing committee meeting, Ahluwalia urged the bank to find ways of expanding investment in infrastructure -- both in the private and the public sectors -- to remove a key constraint of growth. This, he said, would greatly help the developing nations whose budgets were under pressure from competing social sector needs.

At present, the bank provided less than 5 per cent of total infrastructure investments in developing countries

Ahluwalia quoted bank studies to drive home his point that even with a dramatic increase in private financing, governments continued to provide about 80 per cent of infrastructure finance.

The FDI flow had quadrupled between 1990 and 1996, but the bulk flew only to about a dozen countries. The flow should reach a broader range of countries, Ahluwalia said. UNI