The World Bank on Friday announced $1.73 billion in loans to India, including $1.5 billion to fund a state project to build 24,000 km of rural roads across seven states.

The funding that underscores the growing partnership between the multilateral lender and the world’s second fastest growing major economy, was announced as the World Bank attributed high inflation in India to supply bottlenecks.
The World Bank has offered to lend $1.5 billion to build and develop 24,000 kilometers of rural roads in India, poor quality of which are often blamed for hurting economic growth and adding to inflationary pressure on the country as fruits and vegetables rot on their way to markets.
Expensive food items pushed overall wholesale price inflation to 8.43 percent in December from 7.48 percent in the previous month.
“My own sense in the case of the Indian economy is that some of the inflationary pressures are more likely a function of some of the bottlenecks on the supply side than they are from the demand side,” World Bank President Robert B. Zoellick said at a joint press conference with Indian Finance Minister Pranab Mukherjee In New Delhi.
Zoellick said the World Bank would try to help India to overcome obstacles to improve agricultural productivity and production. “This will be very key priority over the next three years,” he added.
“The bank is pleased to support the government’s efforts not just with finance, but by offering the development experience and technical knowledge the World Bank has gained around the world,” Zoellick said as he concluded his five-day trip to India.
He was referring to various loans, including the latest road loan that was followed by $45 million in technical assistance provided by the World Bank last month to boost India’s national highways.
World Bank loans to India rose to $11 billion last year from an annual average of $3 billion in previous years.
Zoellick, praising India’s “prudent” handling of the fallout of the global crisis, said: “New Delhi is addressing how economic growth can be used to overcome poverty and meet the growing aspirations of its people.”
The World Bank recently pegged Indian economic growth to take over Chinese by 2012 on purchasing power parity basis. However, New Delhi on Friday played down the projection by the multi-lateral agency, saying the country is not in race with anyone.
In its latest report on Global Economic Prospects, the World Bank had projected Indian economy to grow by 8.7 percent in 2012, faster than 8.4 percent expected for China.
However, Mukherjee toned down the projections, saying: “India is trying (to achieve high growth rate), but I am not going to compete with anybody.” “We want to reach double-digit growth, at the same time having modest rate of inflation without indulging in fiscal profligacy, that means with prudent fiscal management,” Mukherjee said.
Separately, Mukherjee said the central bank — Reserve Bank of India — will take appropriate monetary action to stabilize prices.
“Whenever the appropriate adjustment of the crucial rates is called for in the larger interest of the economy, including the price stabilization, the RBI takes appropriate policy in consultation with the government,” said Mukherjee.
India’s central bank raised short term rates six times last year to check inflation before pressing a pause button in December.
(Source:arabnews.com)