Posted in Indian Economy

World Bank

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updated on April 27th, 2019

World Bank

The World Bank (WB) Group today consists of five closely associated institutions propitiating the role of development in the member nations in different areas. A brief account is as follows:

IBRD

The International Bank for Reconstruction and Development is the oldest of the WB institutions which started functioning (1945) in the area of reconstruction of the war-ravaged regions (World War II) and later for the development of the middle-income and credit-worthy poorer economies of the world. Human development was the main focus of the developmental lending with a very low-interest rate (1.55 percent per annum)—the areas of focus being agriculture, irrigation, urban development, healthcare, family welfare, dairy development, etc. It commenced lending for India in 1949.

After the process of reforms started in the World Bank in 2010, India was allocated additional shares in IBRD (now holds 56,739 shares accounting to the US $ 6,844.7 million). With this India emerged as the 7th largest shareholder (up from the 11th position) in IBRD with voting power of 2.91 percent (up from 2.77 percent).

IDA

The International Development Agency (IDA) which is also known as the soft window of the WB was set up in 1960 with the basic aim of developing infrastructural support among the member nations, long-term lending for the development of economic services. Its loans, known as credits are extended mainly to economies with less than $895 per capita income. The credits are for a period of 35–40 years, interest-free, except for a small charge to cover administrative costs. Repayment begins after a 10-year grace period. There was no human angle to its lending. But now there remain no hard and fast differences between the purposes for the IBRD and IDA lending.

Every year developing nations make enough diplomatic attempts to carve out maximum loan disbursal for themselves. India had been the biggest beneficiary of the IDA support. The total support (IBRD + IDA) for India had been $ 91.81 billion till date.

IFC

The International Finance Corporation (IFC) was set up in 1956 which is also known as the private arm of the WB. It lends money to private sector companies of its member nations. The interest rate charged is commercial but comparatively low. There are many attractive features of IFC’s lending. It finances and provides advice for private-public ventures and projects in partnership with private investors and, through its advisory work, helps governments of the member nations to create conditions that stimulate the flow of both domestic and foreign private savings and investment.

It focuses on promoting economic development by encouraging the growth of productive enterprises and efficient capital markets in its member countries. It participates in investment only when it can make a special contribution that complements the role of market investors (as a foreign financial investor (FFI). It also plays a catalytic role, stimulating and mobilising private investment in the developing world by demonstrating that investments there too can be profitable.

We have seen a great upsurge in the IFC investments in India which have undoubtedly strengthened the foreign investors’ confidence in the Indian economy.

MIGA

The Multilateral Investment Guarantee Agency (MIGA), set up in 1988 encourages foreign investment in developing economies by offering insurance (guarantees) to foreign private investors against loss caused by non-commercial (i.e., political) risks, such as currency transfer, expropriation, war, and civil disturbance. It also provides technical assistance to help countries disseminate information on investment opportunities.

ICSID

The International Centre for Settlement of Investment Disputes (ICSID), set up in 1966 is an investment dispute settlement body whose decisions are binding on the parties. It was established under the 1966 Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Though recourse to the centre centenary, once the parties have agreed to arbitration, they cannot withdraw their consent unilaterally. It settles the investment disputes arising between the investing foreign companies and the host countries where the investments have been done.

India is not its member (that is why the Enron issue was out of its preview). It is believed that being the signatory to it encourages the foreign investment flows into an economy, but risks independent sovereign decisions, too.

IndIa’S BIPA

As part of the Economic Reforms Programme initiated in 1991, the foreign investment policy of the Government of India was liberalized and negotiations were undertaken with a number of countries to enter into Bilateral Investment Promotion & Protection Agreement (BIPA) in order to promote and protect on reciprocal basis investment of the investors. The government of India has, so far, (as by July 2012) signed BIPAs with 82 countries out of which 72 BIPAs have already come into force and the remaining agreements are in the process of being enforced. In addition, agreements have also been finalized and/or being negotiated with a number of other countries.

The objective of the BIPA is to promote and protect the interests of investors of either country in the territory of another country. Such agreements increase the comfort level of the investors by assuring a minimum standard of treatment in all matters and provides for the justifiability of disputes with the host country (it should be noted here that India is not a member of the World Bank group’s body, the ICSID, serving the same purpose. BIPA is India’s version. While the former is a multilateral body, the latter is a bilateral one).

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World Bank Initiatives in India

Neeranchal

Neeranchal is a World Bank assisted National Watershed Management Project. Neeranchal is designed to further strengthen and provide technical assistance to the Watershed Component of PMKSY, in particular, and all components of PMKSY, in general, to enhance its delivery capacity. The programme is being implemented in nine participating states – Andhra Pradesh, Chattisgarh, Gujarat, Jharkhand, Madhya Pradesh, Maharashtra, Odisha, Rajasthan and Telangana.

For achieving the major objectives of the Watershed Component of the Pradhan Mantri Krishi Sinchayi Yojana (PMKSY) and for ensuring access to irrigation to every farm (Har Khet Ko Pani) and efficient use of water (Per Drop More Crop), Neeranchal is primarily designed to address the following concerns:

  • bring about institutional changes in watershed and rainfed agricultural management practices in India
  • build systems that ensure watershed programmes and rainfed irrigation management practices are better focussed, and more coordinated, and have quantifiable results
  • devise   strategies   for   the   sustainability   of   improved   watershed. management practices in programme areas, even after the withdrawal of project support
  • through   the  watershed   plus   approach,   support   improved   equity, livelihoods, and incomes through forward linkages, on a platform of inclusiveness and local participation.

PS : How to prepare Indian Economy for UPSC ?

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