$3-4 bn WB loan in 2004-05

The World Bank is expected to significantly step up its funding activities in India to $3-4 billion during the financial year beginning July 2004, compared with $2 billion during the current year.

World Bank Executive Director CM Vasudev said of the $3-4 billion funding envisaged for the next financial year, nearly $2 billion would be earmarked for infrastructure projects such as rural roads and water schemes. The education sector would be another high priority area, he said.

The multilateral funding agency was also considering assistance to the urban infrastructure restructuring fund.

Vasudev outlined the need for developing infrastructure and ensuring education for all, as a prerequisite for sustaining high growth.

"The World Bank sees India and south Asia as the fastest growing regions. Prospects are good for India in the wake of a good growth in agriculture and exports and a swelling foreign exchange reserves," he said on the sidelines of a seminar on special economic zones.

Overall, the global economy was growing 4 per cent, the US economy was also doing well and there was bound to be a "pull effect" on the Indian economy as well, he said.

Asked whether the multilateral funding agency expected India would sustain an 8 per cent growth, he said, "It (growth) should be healthy in this fiscal. Whether it will be over 7 or 8 per cent, I can't say."

He said the new government should take tough measures and carry forward the reforms to sustain the momentum.

"In the World Bank, they often say the low-hanging fruits have been plucked," he said.

Vasudev, former economic affairs secretary, said the country would have to rely on foreign investment to ensure higher growth. "If India has to grow at 8 per cent, the gap between the investment rate of 30 per cent and savings rate of 26 per cent must be met through foreign investments, ECBs, multilateral funding," Vasudev said.

To reduce the financing costs, the World Bank was considering reducing the front-end fee from 1 per cent of the loan amount to 0.5 per cent.