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World Bank to liberalise lending: pro-reforms states to benefit

R C Murthy in Washington

The World Bank will concentrate its aid in India on states that are committed to all-round reforms.

This new strategy, involving some liberalised lending, was announced by World Bank President James Wolfensohn on Saturday.

Liberalisation in lending by World Bank is the next logical step, following the decision of the International Finance Corporatiion, a World Bank affiliate, to resume lending to India after a 16-month suspension.

India's Finance Minister Yashwant Sinha urged the World Bank to exempt road and power projects from sanctions imposed by the G-7 industrial nations and approve them under the "basic human needs" criteria.

Sinha met Wolfensohn on Saturday and had bilateral discusssions with finance ministers of several countries, including China and Russia. Sinha emphasised that road and power projects had a direct link with poverty alleviation and such projects pending with the World Bank might be cleared under BHN criteria.

Apparently, Wolfensohn did not react. Any change would await the installation of a new government in New Delhi.

Wolfensohn lauded India's "consistent growth irrespective of many adverse factors. But for India and China's growth, poverty at the global level would have increased substantially. He commended that the development history of last 20 years could be considered as "history of India and China". The trend would continue in the coming decades also.

Sinha mentioned India's growth was six per cent last fiscal (April to March) mainly due to the agriculture sector and the momentum would continue this year also.

Inflation was down to two per cent, a historic low, "the current account deficit is under control", according to Sinha. Industrial production was picking up and the stock market had firmed up.

Regarding the financial sector, Sinha also told the President that steps had alreaady been taken to strengthen the capital adequacy of a number of public sector banks and the Reserve Bank of India was satisfied with this performance. However, structural reforms would take place at "the appropriate time" with the consensus and support of employees.

Wolfensohn has accepted Sinha's invitation to visit India. The dates are yet to be fixed.

Later, at a meeting with the Chinese Finance Minister, it was decided to enhance interaction between finance ministries of the two countries and hold discussions on issues relating to international financial institutions. A Chinese finance ministry delegation will arive at New Delhi in November to learn about India's budget-making process.

Sinha held discussions with the Russian Finance Minister and decided to coordinate their policies with regard to multilateral financial institutions since the views of the two countries were similar.

Sinha emphasised at every forum here that industrial nations should not divert funds from the IMF and the World Bank for funding the debt relief of poor countries and rich nations should mobilise additional resources for enhanced debt funding. Nor the World Bank should raise its lending rates which will hit other developing countries.

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