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May 15, 1998


The projects India stand to lose because of sanctions...

Several industrial and social projects, sponsored by the World Bank, are likely to be severely affected by the economic sanctions imposed by the United States and other Western countries.

India, an original signatory to the Bretton Woods agreement of 1944, is among the oldest members of the World Bank and the International Monetary Fund. In absolute terms it is the single largest borrower, with a cumulative amount of more than US $ 44 billion as of April 1998. It is also the largest overall recipient of development credit from the International Development Association, the WB affiliate that provides interest-free loans at 30 to 40 years maturities to developing economies.

The country has, with immediate effect, lost US $ 300 million as aid from developed nations for various social development projects. It may also suffer setbacks in advance credit and guarantees from the WB and IMF, say experts.

According to a note circulated to the press during the visit of a WB official to India, the bank has extended about 186 loans and 273 development credits to India, totalling over US $ 19 billion and US $ 23 billion respectively, from 1949 to April 1998.

As of April 1998, the bank's lending portfolio of ongoing projects comprised 84 projects, amounting to about US $ 14.5 billion, of which 46.7 per cent is from the International Bank of Reconstruction and Development, and 53.3 per cent from the IDA.

For fiscal 1997 (July 1996 to June 1997), the total lending to India reached approximately US $ 1.5 billion for 10 projects, with IDA credits amounting to US $ 908 million. The remaining was IBRD loans.

This year, as per the Union government's request, the WB had decided to step up its lending assistance. Loans and credit was expected to reach close to US $ 3 billion -- the highest to any country in recent years.

The nuclear tests, however, has jeopardised all these.

Besides loans and credit, the bank and IFC, its private sector lending affiliate, were also developing state-level assistance programmes for various states. The bank has already undertaken some fiscal studies in this regard to initiate state-focussed lending.

However, the industry feel the sanctions imposed will not affect India's future. They say the volatility of the forex market and the stock exchanges were a temporary phenomenon, which would stabilise in the next few days.

All India Association of Industries president Vijay G Kalantri and his Indian Merchants's Chamber counterpart Y P Trivedi said there was no need for panic.

Among the beneficiaries of the WB projects, Maharashtra figures high on the list with 18 projects. These include the ambitious US $ 167 million sewage disposal project for Bombay and power projects ranging over US $ 400 million. A US $ 246 million project for relief and rehabilitation of the earthquake-affected Latur and Osmanabad was recently completed. If the loans are stopped, several multi-state projects would also be affected.

Several projects in Andhra Pradesh would also be affected in the wake of the sanctions. Among these are the US $ 350 million loan for the state highway project and the US $ 325 million irrigation project.

The WB-aided power sector projects all over the country is likely to be the worst affected. Though Orissa has completed a US $ 300 million power restructuring project, a similar project in Haryana may be affected.

In West Bengal, the US $ 85 million shrimp and fush culture project and vocation training and technical education programmes would be affected.

Some of the social-oriented projects which may face problems are the US $ 248.3 million reproductive and child health project, US $ 165 million malaria control project, US $ 142.4 million tuberculosis control project, US $ 19.5 million rural development project and the US $ 196 million national agriculture and technology project.

Though the list of the WB and allied agency funded projects are endless, reports indicate that following the sanction the US may also be affected. An industry source said that US may lose nearly $ 80 million as import duty from India.


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