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World Bank puts India's growth rate at 5.8 pc

C K Arora in Washington

The World Bank, in its Annual Report, has acknowledged that the imposition of nuclear-related sanctions affected the bank group's fiscal 1999 lending programmes for India and Pakistan which had an impact on their growth prospects.

The report also says that its executive directors postponed consideration of several loans of International Bank of Reconstruction and Development (another name for the World Bank) and the International Finance Corporation to India, ''deemed not to address basic human needs".

The bank, in pursuance of the sanctions by the United States and seven other countries, virtually stopped loans for India's infrastructural projects, drastically reducing its funding to the country.

The bank, which sanctioned to India $ 2.1 billion in 1998, reduced it to $ 1.05 billion in fiscal 1999 which ended in June 30 last. Pakistan's funding was cut down from $ 808 million in 1998 to $ 440 million this year.

It, however, says diplomatic progress combined with Pakistan's precarious financial situation and its commitment to serious reform paved the way for approval of a structural adjustment loan in January last.

The bank document notes that India's growth was now 5.8 per cent, compared with some seven per cent in the mid-1990s. Pakistan achieved 3 per cent growth, a figure reduced by a foreign exchange and debt crisis provoked by the sanctions, which may have prevented some trade and temporarily halted most foreign capital inflows.

It says political instability in India has contributed to a slowdown in national-level reforms. The imposition of sanctions on India and Pakistan and the armed conflict in Kashmir have been harmful to both countries.

The report says fighting poverty is central to the bank's country assistance strategies in South Asia, which is home to 40 per cent of the world's poor. One reason for the situation is that the region continues to underinvest in human capital. Another is its least integration with the world economy.

The region accounts for only one per cent of world trade and receives just 3.6 per cent of net private long-term private capital flows to developing countries. The medium-term outlook has been further clouded by a wavering of reform. Fiscal deficits are now among the highest in the world, progress towards privatisation is slow and the momentum to liberalise the trade has largely been lost.

Another factor that continues to impede economic progress and deter foreign private investment and external aid is widespread civil conflict and political unrest.

With some exceptions, poverty is both a cause and consequence of the region's low level of human development and low status of south Asia's women, it remarks.

In case of India, the bank's strategy explicitly seeks partnership with reforming states through comprehensive multi-sector state reform programme. The bank is already helping Andhra Pradesh forge ahead with its economic restructuring programme, while it is engaged in exploratory discussions with several others.

UNI

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