The World Bank said on Wednesday its annual assistance to India till June 2005 would be over $3.5 billion. It is also likely to extend $450 million to Tamil Nadu and Pondicherry for reconstruction work in tsunami affected areas by May.
"We began negotiations for the IDA credit with the Centre and state governments on Saturday. Our expectation is that the credit would be about $450 million," World Bank Country Director Michael Carter said while interacting with a forum of financial writers. An additional $60 million will be provided by re-allocation of existing loans, primarily in Andhra Pradesh.
The credit would go to the centre, but the bank would also enter into agreements with states on implementation, he said. The loans will carry an interest rate of 0.75 per cent and a tenure of 35 years, including a grace period of 10 years.
The relief for tsunami is part of a total $1.2 billion required by four states -- Tamil Nadu, Kerala, Andhra Pradesh and Pondicherry -- as estimated by the World Bank, the Asian Development Bank and the United Nations.
ADB may chip in with $ 200 million while the remaining $ 550 million will come from the Centre, states and non-governmental organisations.
Carter said the bank would be holding further talks with the government on the issue.
India gets about $1 billion in soft loans through IDA annually. World Bank also provides IBRD loans for various infrastructure projects. "Our assistance will mostly be for housing and livelihood, especially for fishermen," Carter said.
"The underlying trend of India's growth, which was assumed to be 5 to 6 per cent annually has gradually begun to accelerate and India has a potential for 8 per cent growth per annum," he said.
India would, however, have to focus on altering its investment climate, address the way its judicial system worked and the impact it had on the settlement of disputes and the quality of infrastructure, Carter said.
The government would also have to focus on overall fiscal management and increase the efficiency of expenditure. A majority of problems in India were in the political economy, he said.
The focus should be on growth, which would require empowering people, and on encouraging competition in the economy.
Carter also said the World Bank was working on India-specific reports on the impact of climate change and eventual disabilities.
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