India to receive $407m loan from World Bank

The World Bank will loan India a total of $407 million to expand microfinance services to unbanked areas and strengthen the capacity of its national statistical system, according to two agreements signed in New Delhi on Friday, reported the Press Trust of India.

Of this total, the ‘Scaling up Sustainable and Responsible Microfinance Project’, to be implemented by the Small Industries Development Bank of India (SIDBI) over five years, will receive $300 million.

According to the agreement, the project aims to “scale up access to sustainable microfinance services to the financially excluded, particularly in under-served areas.” The loan will be used to fund on-lending to micro-finance institutions, thereby enabling them to leverage private commercial funds to on-lend larger amounts to the under-served.

The second project, the ‘India Statistical Strengthening Project’, receiving the remaining $107 million will be implemented as a centrally sponsored scheme through the Ministry of Statistics and Programme Implementation (MoSPI).

This project aims to strengthen institutions of leadership, coordination of the national statistical system and increase the support provided the central government and MoSPI to state and union statistical systems.

“A renewed and modernized statistical system has become essential in order to measure rapid and economic and social change, monitor the effects of reform, and to calibrate policy change both in the states and at the centre,” said World Bank senior economist Farah Zahir.

India to grow at 9.5 per cent
this year

The International Monetary Fund has projected India will grow at 9.5 per cent in 2010, reported IANS. This projection is more than double the world’s growth rate of 4.6 per cent. India’s projection is second only to China’s 10.5 per cent.

The Reserve Bank of India has estimated the growth rate to be 8 per cent and this higher projector “reflects the economy’s resilience,” said D K Joshi, principal economist, CRISIL. “Though the job market may not look up immediately, the high growth will surely act as a magnet for investors.”

More jobs, higher returns on investment, healthy corporate profits and increasing consumer demand have contributed to the growth. Industrial output grew by about 17.6 per cent and consumer durables output have grown by over 30 per cent for the last six months reflecting higher purchase of products such as televisions and refrigerators. But, local inflation and uncertain economic conditions abroad may put a damp on the growth. The inflation rate was 10.6 per cent in May, prompting RBI to raise key interest rates in an effort to control prices.

“While we remain cautiously optimistic about the pace of recovery, there are dangers ahead,” said Olivier Blanchard, the IMF’s chief economist. “How Europe deals with fiscal and financial problems, how advanced countries proceed with fiscal consolidation, and how emerging market countries rebalance their economies, will determine the outcome.”

Published in The Express Tribune, July 10^th, 2010.