The World Bank has approved loans amounting to more than $4.3 billion (nearly Rs 21,000 crore) to India in a bid to support its infrastructure expansion plan while enabling it bolster stimulus measures to revive high economic growth.
The amount includes $2 billion aimed at recapitalising the public sector banks in the country and would help the banks to maintain healthy credit growth.
Due to the global financial crisis, private and foreign banks have slowed their lending and deposit taking which has increased demand on public sector banks. This loan will help maintain credit growth levels, support social banking and employment growth, and help strengthen the economic recovery ahead, the Bank said in a statement on Wednesday.
After averaging a GDP growth rate of more than 8.5 per cent between 2004 and 2009, India’s growth rate fell to 6.7 per cent in 2008-09 and decelerated to 6.1 per cent in the April-June quarter in the current year.
“Although there is uncertainty about the pace of the economic recovery, current trends suggest that a growth rate of between 5.5 and 6.5 per cent for 2009-10 is realistic. This is a crucial time to support India,” said Roberto Zagha, World Bank Country Director for India.
India Infrastructure Finance Company Ltd (IIFCL) and Power Grid Corporation of India will get $1.2 billion and $1 billion respectively under the approvals.
The 28-year loan will help IIFCL in supporting private financing for public-private partnerships in (PPPs), while Power Grid could use the 30-year loan for the Fifth Power System Development Project, designed to address India’s power deficit, the World Bank said.
With the government’s focus on the development of infrastructure, there is a huge need for investments in the sector. Most infrastructure projects have long gestation periods and need low-interest loans to make them viable. The bank also approved $150 million for an Andhra Pradesh project.