'ADB to loan $1 bn to India for poor'
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'ADB to loan $1 bn to India for poor'

According to a report, this is the largest ever loan by the bank to a developing country to help alleviate rural poverty.

india Updated: Dec 09, 2006 10:18 IST

The Asian Development Bank is to loan India $1 billion, the largest ever advance by the bank to a developing country, to help alleviate rural poverty, the Financial Times reported on Saturday.

The development bank is expected to announce the loan on Monday amid concern that failure to broaden the base of India's blistering growth could lead to social conflict, capital flight, falling investment and an economic slowdown.

The package will be aimed at weaning the rural poor away from moneylenders by expanding access to formal finance, the newspaper said, marking a shift in emphasis towards the social sector for the ADB's Indian loans.

Until the end of 2005, nearly 90 per cent of the ADB's loans to India had been invested in infrastructure.

The funds, to be disbursed over three years and to be managed by the Finance Ministry, will boost lending by cooperative banks in five states; Andhra Pradesh, Madhya Pradesh, Maharashtra, Rajasthan and either Gujarat or Orissa.

Economists believe limited access to credit is a big factor behind slowing growth in the farm sector, which provides a livelihood for two-thirds of India's 1.1 billion population.

Reducing rural poverty has been the main policy platform of the Congress-led coalition, which returned to power in 2004 amid discontent at widening inequalities, falling rural incomes and a deepening debt crisis in the countries' 700,000 villages.

First Published: Dec 09, 2006 09:18 IST