At a time when India is struggling to manage its Current Account Deficit (CAD) and also fall in rupee value vis-à-vis dollar, the government intends to borrow $ 4.3 billion over and above the single-borrow limit from World Bank’s lending arm International Bank for reconstruction and Development (IBRD) through special private placement bonds.
A proposal to this effect is high on the agenda of the meeting of Union Cabinet for its consideration, which will meet on Thursday.
Revealing this, sources in the government said the meeting of the Union Cabinet, which will be chaired by Prime Minister Manmohan Singh, is likely to approve a proposal from the finance ministry to go in for an additional loan of $ 4.3 billion from IBRD through “Special Private Placement Bonds (SPPBs) arrangement”. They said, “This arrangement is being offered to India by the IBRD keeping in view its credit worthiness, as this will allow India to have a borrowing space over and above the single borrower limit of US $ 1 billion in an year.”
Sources said the SPPBs worth $ 4.3 billion would be given to India in a span of next three years.
“The fund is intended to help India finance critical infrastructure and other human development projects without inflicting any inflationary pressure.”
According to an estimate, it is said, that without the special bond issue, World Bank’s lending to India would have declined from around $4bn a year to around $1bn a year, which will affect the country’s ability to continue “critical” projects. There are currently 80 active World Bank projects in India, including several large projects in the “critical” area of infrastructure. They range from supporting efforts to eliminate leprosy to helping to finance improvements in Mumbai’s rail and road infrastructure.