World Bank supports India's development agenda through record annual lending of $9.3 billion

June 23, 2010

New Delhi, June 23, 2010:  The World Bank’s support to India’s development agenda will reach a total commitment of $9.3 billion by the end of June this year*. Spread across 25 new projects, these loans are aimed at helping India sustain the high growth needed to lift millions out of poverty

The total expected lending this year includes $2.6 billion as interest-free credits from the International Development Association (IDA) and $6.7 billion in the form of long term, low interest loans from International Bank of Reconstruction and Development (IBRD).

Part of this lending is in support of the Government of India’s (GOI) response to the global financial crisis.  Another significant portion is aimed at helping the country remove infrastructure constraints to high growth and to expand the delivery of essential social services like better schools, roads and electricity to the people. “The Government of India is accelerating its response to its development challenges and so are we,” said Roberto Zagha, World Bank Country Director in India.

The needs of India’s fast growing economy are huge. The Planning Commission, for instance, has estimated the country requires $500 billion for infrastructure investments alone during the current Five Year Plan.  The demand for additional Bank support for infrastructure development has been increasingly voiced by countries like India and China over the last few years, and the Bank has been making sustained efforts to respond to it.  “While our annual lending this year represents a significant contribution for the Bank Group, it accounts for less than 1% of India’s GDP, and is a modest sum given India’s vast needs”, said Zagha.

The increase in Bank commitments is also in line with guidance from the G-20, which had, during the summit of November 2008, directed international financial institutions like the World Bank to step up lending to the emerging economies – to sustain their growth and thus help global recovery.  The Bank has made global commitments of $120 billion since July 2008 – which is a record sum for the institution. “India has played a crucial role in kick-starting the global economy by maintaining high levels of growth and it is important for the Bank to have been able to respond to India’s request for additional support,” added Zagha.
Highlights of lending 2010:

The Bank has a current portfolio of 65 active projects with a combined total commitment of just under $19 billion.  The projects have been disbursing at a steady rate of 24% this past fiscal year, which indicates that implementation is moving at a steady pace. In fact, over the course of the past fiscal year, $4 billion has already been utilized on the ground. The Bank portfolio includes several national, multi-state projects and state specific ones in Andhra Pradesh, Haryana, Tamil Nadu, Karnataka, Rajasthan, Maharashtra, West Bengal and Uttarakhand.

This year the Bank had earmarked $3 billion to support India’s domestic response to the global financial crisis. This included a $2.0 billion package for GOI to provide capital to some of the public sector banks so that they could maintain their credit expansion and prevent a shortfall of capital from affecting India’s economy in the wake of the global economic crisis. In September 2009 the Bank also enhanced the lending amounts for two significant infrastructure projects that were being finalized, providing an additional $ 400 million to Powergrid and $600 million to the Indian Infrastructure Finance Corporation Ltd. (IIFCL) to help them maintain their planned investments during the financial slowdown.

Lending to infrastructure sectors like energy and transport accounted for 21 % of the Bank’s total commitments to India this year.  In the power sector, for instance, the Bank will help the power-deficit state of Haryana strengthen its transmission and distribution systems in order to bring reliable power supply to consumers.  The Bank has also worked with Powergrid since its inception 15 years ago during which the institution has built 75,000 km of transmission lines to reach underserved areas of the country. The loan to IIFCL (total $1.2 billion) will help catalyze private financing for public-private partnerships across a range of infrastructure sectors – roads, power, airports, and ports.

A significant portion of this year’s resources (11%) was directed at helping the government improve the quality of public services like schooling, irrigation, drinking water and sanitation. Over the years, the Bank has supported the Government of India’s flagship primary education program, the Sarva Shikhsa Abhiyan (SSA) with two IDA credits totaling $1.1 billion. This year’s $750 million additional finance to SSA, is the largest single IDA loan to any country in one fiscal year. The program has already helped more than 19 million out-of-school children get enrolled in elementary school. An additional $300 million was committed by the Bank to help India’s engineers develop the skills needed in a fast-changing labor market.

The Government of India is increasingly committed to evolving an environment strategy for 21st century-India, which seeks to integrate environmental and ecological goals into the growth agenda. In support of the government’s objectives, the Bank this year approved new loans to demonstrate sustainable transport solutions in select Indian cities; to protect the coastal areas while safeguarding the livelihoods of people living there; to build capacity for handling polluted industrial areas; to mitigate the risk from cyclones; and to promote energy efficiency in micro, small and medium enterprises.

Looking Ahead

Over the coming years the Government of India has asked the Bank to focus its support in three strategic areas. Below are some examples of proposed projects which are yet to be appraised, negotiated and presented to the World Bank’s Board of Directors for approval

1) Transformative Projects:

The Dedicated Freight Corridor (DFC): This will establish 1,130 km of parallel freight tracks along India’s busy eastern railway corridor to help ease the movement of goods and materials from the hinterland to India’s eastern ports.  The project will be implemented in three phases. In the first phase, the Bank has been asked to provide $1.0 billion for the construction of a 343 km double track electrified railway link from Khurja to Kanpur.

Cleaning and conserving the river Ganga: The Bank has plans to provide support of $1 billion to the Government’s program to clean and conserve the mighty Ganga, as well as improve the basin-level management of this river that supports more than 400 million people in India.

Emergency Kosi Flood Recovery Project: In Bihar, where floods regularly threaten the lives and livelihoods of millions of poor, the Bank will initially extend a $200 million IDA credit to help the state government rehabilitate areas affected by the Kosi floods.

2) Collaborate in leveraging knowledge and experience for GoI’s strategic initiatives:

The Bank will also collaborate with the Government of India in some of its strategic initiatives which have brought about dramatic improvements in the lives of the poor in India. These include:

• The Self Help Group (SHG)-driven livelihoods program implemented in several states is now being adopted by the Government as a national program.  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. They have used the funds to set up small enterprises to supplement their household incomes and give their children better schooling, nutrition and healthcare.

Rural Roads: Over the years, several IDA-supported rural roads projects have helped build more than 20,000 km of all-weather roads connecting remote and far-flung habitations and villages to schools, hospitals, markets and jobs.

Urban water: An urban water supply pilot project in parts of three water-stressed cities of North Karnataka (Hubli-Dharwad, Belgaum and Gulbarga) is bringing clean drinking water into people’s homes 24 hours a day, seven days a week – something not seen in other Indian cities.  The Government of Karnataka is now keen to replicate the project so that it can provide clean and reliable water to more of its urban citizens.

3) Pilot Initiatives:

The Bank will also look to support pilot 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 project will support the introduction of social security for the unorganized sector.

Please note: As of date, projects (both IBRD and IDA) with a total new commitment of US$ 8.3 billion have already been approved by the Bank’s Board of Executive Directors; the remaining projects worth US$ 1 billion will be presented before the Bank’s Board over the next few days.

*From financial year July 2009 to June 2010

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