World Bank approves USD 4.3 bn aid to India

The World Bank has announced USD 4.3 billion financial aid to India through a new innovative and flexible financing arrangement to help the country fight poverty.This arrangement, while facilitating a USD 4.3 billion increase in support to India, is designed to maintain International Bank for Reconstruction and Development's (IBRD) - which is its lending arm - net exposure within the limit of USD 17.5 billion established by it.

In a statement, the World Bank said the new arrangement will allow for special bonds to be issued by the World Bank and purchased by India, to offset additional planned lending.

This will enable India to continue accessing long-term, low-interest IBRD finance for development projects aimed at improving the lives of its people, one third of whom are yet to make their way out of poverty.

"Without taking this action, it would have been difficult for the Bank to assist India meaningfully as it tackles the remaining large challenges of lifting some 300 million out of poverty," said WB vice president for South Asia Isabel Guerrero.

"This new arrangement will work towards supporting India's development needs, showing the Bank can be innovative, flexible and responsive to the differentiated needs of our client countries," she said in a statement in Washington on Wednesday.

The Bank said like other emerging economies, India is faced with the challenge of removing bottlenecks in infrastructure and human skill development that can constrain its ability to sustain non-inflationary, rapid and inclusive growth.

In line with its aim to support India's development goals, the World Bank has nearly 80 active projects in India, with several large projects in the critical area of infrastructure.

There are "growing demands for the Bank's low-cost financing and the institution has been exploring innovations to meet these calls for its services," the statement said.

"The new move is in line with previous commitments by the World Bank that the Bank strives to leverage its financial and knowledge resources to help India as it steps up its response to its development challenges," it said.

Funding for active World Bank Group projects includes USD 9.2 billion in interest-free credits from the Banks fund for the poorest, the International Development Association (IDA); USD14.6 billion from IBRD; and a committed portfolio of USD3.57 billion from the Banks private sector arm, the International Finance Corporation (IFC).

The World Bank Group in its last fiscal year (ending June 2011) made USD 6.32 billion available to India, including USD 2.07 billion from IDA, USD 3.47 billion from IBRD and USD 775 million from IFC.