India to Receive $4.3 Billion Loan from World Bank

The World Bank has approved a loan to India worth $4.3 billion that will help the country's economy recover from the global recession and encourage investment in the development of the infrastructure in the world's most populous democracy.

Of the $4.3 billion that has been approved, which the Times of India says will be available from January 1 2010 in either one lump sum payment or in installments, and is without conditions, $2 billion will go towards boosting the amount of capital India's state-owned banks have to lend to businesses. A further $1.2 billion will go to the India Infrastructure Finance Co Ltd (IIFCL), whose aim is, in the words of Reuters, to "spur private financing for public-private partnerships in infrastructure" and "stimulate the development of a long-term local currency debt financing market". The PowerGrid Corporation of India Limited (PGCIL), which reportedly transmits over 40 per cent of the country's power, has suffered from a lack of investment after overseas lending dried up once the recession began. With India suffering from severe power shortages $1 billion will go to the PGCIL to help it tackle that particular problem. Another $150 million will be allocated to Andhra Pradesh, a state in the Southeast of India which is home to some 76 million people, to help with improvements to the water supply and sanitation services in 2,600 villages. Reuters confirms that in the three years through 2012 India will receive a total of $14 billion in "crisis-related lending" from the World Bank, with the Times of India reporting that another loan is due to be considered in six or seven months time. World Bank Country Director for India, Roberto Zagha, described how, after past growth rates of 8 per cent, the country's growth rate for 2009/10 was likely to be between 5.5 percent and 6.5 percent, with a return to the former growth rates depending very much on a wider global recovery. He said of the loan his organization had made to India:

Today's support will help maintain credit growth and continued infrastructure investments. Supporting infrastructure is particularly important during the current crisis, not just to sustain the domestic economy at a time of reduced global demand, but even more to lay the foundations for stronger future growth