$4.3-bn World Bank loan for India (Lead)

September 23rd, 2009 - 4:43 pm ICT by IANS  

New Delhi, Sep 23 (IANS) The World Bank has approved $4.3 billion in loans for India to help finance infrastructure projects and support its economic stimulus programme.
“This money will be directed towards four projects,” World Bank country director for India Roberto Zagha told reporters in a video conference Wednesday morning, adding: “This is a crucial time to support Indian economic recovery.”

Emphasising on infrastructure development, Zagha said: “Today’s support will help maintain credit growth and continued infrastructure investments. Supporting infrastructure is particularly important during the current crisis, not just to sustain the domestic economy at a time of reduced global demand, but even more to lay the foundations for stronger future growth.”

He said despite the uncertainty about the pace of the economic recovery, “current trends suggest that a growth rate of between 5.5 and 6.5 percent for 2009-10 is realistic”.

The bank also sanctioned $1.2 billion for the India Infrastructure Finance Co Ltd (IIFCL) for financing public-private partnerships in infrastructure and to stimulate the development of a long-term local currency debt financing market.

“This loan will help IIFCL increase the availability of long-term finance for infrastructure projects across a range of sectors including roads, power, airports, and ports,” said IIFCL chairman and managing director S.S. Kohli.

In addition, the World Bank sanctioned $1 billion to address India’s acute power shortages by assisting PowerGrid Corp, the national electricity distribution company, with its investment programme after a freeze in overseas lending.

The loan is expected to help PowerGrid strengthen five transmission systems in the northern, western and southern regions of the country. This will facilitate the transfer of power from energy surplus regions to towns and villages in under-served regions of the country.

“This loan will enable PowerGrid to strengthen the existing transmission system as well as expand the Indian national grid which will help the government of India achieve its objective of ‘Power for All by 2012′,” said PowerGrid chairman and managing director S.K. Chaturvedi.

The bank also provided $150 million to Andhra Pradesh to improve water supply and sanitation services for 2,600 villages across six districts to provide piped water to 2.1 million people and extend sanitation services to one million people.

The World Bank said it would also provide $2 billion to India’s banking sector to expand the volume of credit available to firms.

Zagha said that as a result of the global financial crisis, private and foreign banks have slowed lending and deposit taking, increasing 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 loans (banking sector and PowerGrid) from the International Bank for Reconstruction and Development (IBRD) have a 30-year maturity including a five-year grace period.

The IBRD loan to IIFCL has a 28-year maturity including a 7.5-year grace period.

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