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World Bank to lend $14 billion to fight poverty in India

By From A Correspondent in New Delhi
December 12, 2008 19:10 IST
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The World Bank on Friday announced a massive lending of $14 billion (approximately Rs 7,000 crore) to India for the next three years.

The loans, under two separate schemes for seven poorest states and seven middle-income states, will benefit the poor as the funds will be utilized to put infrastructure development on the fast track leading to job-creation and stability.

The support is to provide better living standards to some 30 crore (300 million) citizens who live in dire poverty. The World Bank board in Washington approved the bank's new country strategy for India, said Sudip Mozumder, a spokesperson for the bank in Delhi, in a media release.

The media note said that sharply different levels of development in the states were  taken into account while finalising a differential approach to the low-income and middle-income states.

Rajasthan, Madhya Pradesh, Chhattisgarh, Orissa, Bihar, Jharkhand and Uttar Pradesh were categorised as the low-income states, where the World Bank's focus will be on poverty-reduction and helping these states achieve the Millennium Development Goals.

Support to middle-income states, on the other hand, will be on two fronts: fighting poverty in the areas that lag behind in these states; and addressing the challenges emerging from rapid growth, compounded by the current global economic downturn.

The states identified for this kind of support are Andhra Pradesh, Maharashtra, Gujarat, Tamil Nadu, Karnataka, Punjab and Haryana.

Andhra scheme: The spokesman said the World Bank funding will help the states explore and share innovative approaches to reduce poverty. One such example is the Andhra Pradesh's Indira Kranti Patham, which empowers millions of poor women through self-help groups, he said.

The assistance envisages working with the private sector. This will be coordinated by the World Bank's private sector affiliate, International Finance Corporation, which has an extensive programme to address poverty in India through investment and advisory work on economic inclusion, regional integration, rural development and India's low income states.

The World Bank and IFC are collaborating to bring cutting-edge expertise for Public-Private Partnerships (PPPs), tailored to India's needs. While such support has been most visible in infrastructure -- power transmission, roads, irrigation and rural infrastructure -- it is being extended for the first time to health and education, agri-business, and renewable energy, the spokesman said.

"IFC's programme in India -- including support for the infrastructure sector, climate change initiatives and in scaling up access to finance for the under-served -- is providing critical aid to the private sector, particularly in these difficult times," said Paolo Martelli, IFC's director for South Asia.

Sustainable: The bank's strategy is guided by the priorities of the Government of India as expressed in the 11th Five-Year Plan. A related challenge is to ensure that development is sustainable, meaning that the environment is cared for in the process.

"India's rapid growth will not be sustainable if it does not include the 300 million citizens who live below the official poverty line, nearly 60 per cent of whom reside in the country's seven poorest states," said World Bank economic adviser Giovanna Prennushi.

This strategy is designed not only to boost support to the poorest states, but also to the poorest people in India's middle income states. "The challenge is to target poverty where we can help make the difference," Prennushi said.

Project choice: Strengthening project-implementation is at the core of the new strategy, by closely examining risks and ways of reducing the impact of potential risks on project outcomes.

"At a time when India has experienced rapid growth, choosing activities carefully is crucial if the World Bank is to make the most of its limited resources.  The World Bank and the government will jointly implement a more rigorous project selection process than in the past," said Rachid Benmessaoud, World Bank Acting Country Director for India.

He said the World Bank will also support analysis of important issues confronting policymakers, including poverty and exclusion, skills and job-creation, low carbon growth, the challenges of rapid urbanisation, and the management and development of water resources.

Infrastructure deficit: To boost growth and bridge the gap between the rich and the poor, it is critical to address India's vast infrastructure deficits, Prennushi said. She noted that no Indian city provides water 24 hours a day, 7 days a week; only half the population has access to safe drinking water; and 40 per cent of India's 600,000 villages are not connected to a motorable road.

She said the World Bank will continue to support policy and institutional changes in the central government and the expansion of national programmes. One such example is the support for India's public education system, the Sarva Siksha Abhiyan (SSA).

'Schools are now accessible and the programme has achieved gender equity. Under the next phase, the World Bank support will focus on the quality of education.

Another example is the bank's continued support to PowerGrid, a leading electric transmission network in India,' the media release added.

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From A Correspondent in New Delhi
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