The World Bank approved a record $3.8bn in lending to India, including $2.3bn in concessional loans, in the financial year to June 30, figures to be released later this month will show.
The 170 per cent increase in funding came as the bank and the Indian authorities patched up their differences following a dispute triggered by former president Paul Wolfowitz’s decision to suspend funding for a health programme on corruption grounds.
That decision so enraged Palaniappan Chidambaram, finance minister, that he considered cutting ties with the bank, Indian officials say. However, the health programme is now on track following a long investigation by the bank’s internal anti-corruption watchdog.
The funding approved in the year to June 30 included $600m (€440m, £300m) for rural credit co-operatives, $280m for vocational training and $225m for irrigation programmes in Orissa in eastern India, as well as increased money for an anti-tuberculosis programme and healthcare for women and children.
“This is the largest delivery we have ever done,” says Praful Patel, World Bank vice-president for south Asia. “It is the biggest in the history of India.”
He says the bank is largely supporting Indian-led initiatives. “We are not designing programmes. We are putting money into well-designed programmes.”
Yet not everyone is happy with the ramping up of bank operations, with local NGOs remaining suspicious. “Many of us feel it is clearly promoting a neo-liberal agenda both politically and economically,” says Amitabh Behar, director of the National Centre for Advocacy Studies in Pune.
Some economists, meanwhile, question the bank’s role in providing finance to a country that has access to global capital markets.
“India has, like China, a huge capital influx and is accumulating foreign exchange reserves so it really doesn’t need any World Bank assistance,” says Allan Meltzer of Carnegie Mellon University.
Ken Rogoff, a professor at Harvard, says “bank credibility, bank technical assistance, bank support – these things are all potentially important. But loans are, if anything, counter-productive”.
The World Bank is encouraging India to set aside some reserves to help fund infrastructure development. But officials say this is not a panacea for the country’s funding needs.
As for access to private capital, Dhanendra Kumar, India’s representative on the bank’s board, says “private capital does not get attracted to the pro-poor programmes”.
He says that “while we are all together in supporting sub-Saharan Africa as priority number one, the fact remains that the number of poor living below $1 a day in India is almost equal to the number in sub-saharan Africa – 300m”.
In some districts in India, he adds, infant mortality rates exceed the average in sub-saharan Africa.
“When you are targeting the alleviation of poverty from the globe you can’t just wish away the Indian poor.”
Prof Meltzer believes one of the reasons why the bank likes to lend to India and China is because “its record of success in loans in Africa is not very good”.
The Indian government, he says, is creditworthy, and if it promises to do something “it actually does it”.
Mr Patel believes “that is putting it a little too harshly”, but admits that one of the best reasons for the bank continuing to finance programmes in India is its confidence that the capacity exists to absorb extra money and that New Delhi will use it effectively.
“In south Asia there is not this issue of capacity,” he says. “We have reached the stage where money is indeed the constraint.”
