The World Bank will extend a loan of $1.5 billion (about Rs 6,800 crore) to India for building 24,000 km of all-weather roads in the rural areas of seven economically poor and hilly states like Uttar Pradesh and Himachal Pradesh.
This is the largest rural road project the World Bank has ever approved.
The agreement to supplement the Pradhan Mantri Gram Sadak Yojna (PMGSY) was signed in the presence of World Bank Group President Robert B Zoellick and Finance Minister Pranab Mukherjee here today.
The funding will be used to build more than 24,000 km of roads in Himachal Pradesh, Jharkhand, Meghalaya, Punjab, Uttarakhand and Uttar Pradesh and any other state, which may join the programme at a later date over the next five years.
"Delivering much needed infrastructure will help India in its drive to ensure all people have opportunity," Zoellick said.
He said the bank's efforts are to bring the best development practices from around the globe to India and to share India's experience and expertise with others.
The construction and maintenance of these roads will create an estimated 300 million person-days of employment for the rural people. More than 20,000 engineers as well as many contractors and skilled and unskilled workforce will be trained in modern rural road engineering practices and business procedures.
Under the overall PMGSY programme, about 375,000 km of new roads are being constructed and another 372,000 km improved at an estimated cost of about $40 billion.
The World Bank and India also signed a $255 million agreement for phase one of the National Cyclone Risk Mitigation Project (I), to be implemented by the National Disaster Management Authority.
More than one million people living in the coastal areas of Orissa and Andhra Pradesh would benefit from the programme.
Close to 500 million people, or half of India's population, live in 13 cyclone-prone states and Union Territories, including Gujarat, West Bengal, Daman and Diu.
The World Bank President, who is visiting India, also met Prime Minister Manmohan Singh and Home Minister P Chidambaram.
Zoellick said that during his meetings with policymakers and government officials he learnt of how India was accelerating its response to these development challenges.
The government is especially focused on seeking the efficient translation of its programmes and policies into actionable results on the ground, he said.
"The Bank is pleased to support the governments efforts not just with finance, but by offering the development experience and technical knowledge the World Bank has gained around the world," he said.