World Bank to provide aid to India

Category: International Finance Sub-category: International Finance
Document type: news

20-Mar-2012 | 12:17 IST | Edited by: Sharmila maitra.

The World Bank has announced that it will give $4.3 billion financial aid to India through a new innovative and flexible financing arrangement to help the country fight poverty.

This arrangement has been designed to maintain International Bank for Reconstruction and Development's (IBRD) - which is its lending arm - net exposure within the limit of $ 17.5 billion established by it.

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

This will enable India to continue attaining long-term, low-interest IBRD finance for development projects which is aimed at improving the standard of living of Indian people.

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

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

According to the statement, 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.

It is also said that 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.

Funding for active World Bank Group projects includes $ 9.2 billion in interest-free credits from the Bank' s fund for the poorest, the International Development Association (IDA), $14.6 billion from IBRD; and a committed portfolio of $3.57 billion from the Bank s private sector arm, the International Finance Corporation (IFC).

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

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World Bank is an international financial institution that provides loans to developing countries for capital programs. The World Bank's official goal is the reduction of poverty. 

World Bank Group (WBG) is a family of five international organizations that makes leveraged loans, generally to poor countries. Those five agencies are International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA) and International Centre for Settlement of Investment Disputes (ICSID) respectively.

International Bank for Reconstruction and Development (IBRD) is one of five institutions that compose the World Bank Group. It came into existence on December 27, 1945. The IBRD is an international organization whose original mission was to finance the reconstruction of nations devastated by World War II.

International Development Association (IDA) was created on September 24, 1960 and is the part of the World Bank that helps the world's poorest countries. It complements the World Bank's other lending arm - the International Bank for Reconstruction and Development (IBRD) - which serves middle-income countries with capital investment and advisory services.