The Indian Economy Overview

The World Bank and India

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Extended Arms of the World Bank
Like a Hindu god, the Bank has 4 arms—the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA).


Founded: 1944 Members: 176

Function : The International Bank for Reconstruction and Development (IBRD) lends money at near-market rates to developing countries. According to its own literature, it lends money "to help reduce poverty and to finance investments that contribute to economic growth." In 1993, the IBRD approved $16.9 billion in loans to 45 countries. Loans are divided between structural adjustment program loans, sector loans, and project loans. The payback period is 15 to 20 years.

All IBRD loans are guaranteed by creditor governments, through appropriations decided by their individual governments. Consequently, World Bank bonds enjoy the security of triple-A ratings, signaling very low risk. Most IBRD funds come directly from bond sales.

Activities in India: Nearly 51% of the total Bank lending to India is by IBRD loans. This includes various developmental projects like Nathpa Jhakri Project, National Dairy Project and Upper Krishna Irrigation II Project.


Founded: 1960 Members: 150

Purpose : Concessional loans to poor countries.

Function : Gives 90% loans to poorer countries in the field of agriculture and rural development. It generally finances a larger percentage of total project costs than the Bank. In 1988, IDA lent US $4.5 billion for 99 projects and adjustment programs, amounting about 23% of total Bank lending. The IDA requires frequent infusions of new contributions and is extremely vulnerable to shifts in the political climate for aid. The bank holds IDA replenishment discussions approximately every three years, with a round just completed, which is referred to as IDA 10. (IDA 9 was in 1989, and IDA 11 is expected to be held in 1996). IDA talks presently an opportunity to raise human rights concerns in the Bank in a bilateral context.

Activities in India : The structural adjustment program and Subarnarekha dam are examples of IDA credits in India.


Founded: 1956 Members: 153

Purpose : IFC backs loans for private sector investment in member countries without guarantees of repayment by the concerned member government. The IFC was established to assist the economic development of less developed countries by promoting growth in the private sector of their economies and helping to mobilize domestic and foreign capital for this purpose. Membership in the IBRD is a pre-requisite for membership in the IFC. Legally and financially, the IFC and the IBRD are separate entities. The IFC has its own operating and legal staff, but draws upon the Bank for administrative and other services.

Function : Bulk of its money comes from capital subscription of its members. It has the same directors as those from the Bank and operates on a weighted voting system. Most of the IFC's investment are in manufacturing followed by mining, energy, tourism and public utilities.

Activities in India : Since 1959, the IFC has invested about one billion dollars in 57 companies operating in India, in shipping, iron and steel, chemicals, fertilisers, building and industrial equipment, etc. The TISCO modernization plan and the Chandil Iron Project in Bihar are a few examples.


Founded: 1988 Members: 101

Purpose : To encourage the flow of private foreign investment to the developing countries by guaranteeing the investments of foreign cooperation against risks such as civil war, host government currency restrictions, nationalization, etc. MIGA also offers investors guarantees against non-commercial risks, advises developing member governments on the design and implementation of policies, programs and procedures related to foreign investments; and sponsors a dialogue between the international business community and host governments on investment issues.

Function : The President and Board of Directors of MIGA are the same as those of the World Bank.

Activities in India : In 1993, India became a member of the MIGA.

For further details contact:PIRG (Public Interest Research Group) 142, Maitri Apt, Plot No 28, Indraprastha Ext. Delhi 110092. India. Ph: 2432054 Fax: 2224233 email:

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