The role of world bank in India/In less developed countries.
The World Bank was established in 1946 as a twin institution the IMF (International Monetary Fund) as a result of the Bretton Woods Conference. It assists reconstruction and development of the needy countries through long and medium term loans. It pays special attention to the development of under-developed countries.
It not only grants loans out of its own funds, but it also assists private foreign investment by guaranteeing or participating in loans and investments made by private investors and co-ordinates the lending activities of the rich countries at a governmental level. It has thus helped in raising productivity and the living standards in developing countries.
The World Bank advances loans to the developing countries subject to the following conditions
(a) The overall economy of the borrowing country is soundly operated.
(b) If the overall economic plans would reinforce the basic soundness of economy, and
(c) The projects which the bank is asked to finance have been carefully
prepared and are economically and financially justified. In order to obtain IBRD loans it is necessary for a developing country to keep a constantly critical eye on the soundless of its budget structure, on healthy relationship between wages and prices, on the effective utilisation of its available productive resources, on the flow of goods within its borders and the volume and character of its imports and exports; and on all the diverse aspects of national life which reflect the health of its economy.
The Bank charter provides that its loans must be for productive purposes and meant to finance foreign exchange requirements of specific projects. Before a loan is granted the merits of the projects to be financed are carefully studied and it is ensured that only the most urgent and useful projects are taken up first. Also, before making or guaranteeing any loan, the Bank must satisfy itself that the borrowing country cannot obtain the loans from private sources at reasonable terms.
The Bank makes prudent assessment of the projects to make sure that the loans will be repaid. The broad aim is to help strengthening the economy of the borrowing country and stimulate production activity in general rather than help the production of particular goods. It does not engage in equity financing.
The World Bank has become a part of a broadening stream of financial and technical assistance to the less developed countries. Although now other sources and institutions have also joined in the task which the Bank poineered with such imagination and purposiveness, it has not detracted from the importance of the part which the Bank is playing in mobilizing international assistance to developing countries.
However, there is a definite limit to the amounts that the Bank can lend.
Its entire subscribed capital is not really available for lending. Additional funds are raised by issuing bonds and here also there is a limit to the total amount that the Bank can raise by issuing bonds. The capacity of the developing countries to absorb capital for really productive purposes also imposes a limit. The Bank has repeatedly made it clear that the main burden of
international finance must fall on private investors or on loans at nominal interest or outright grants by rich countries. It cannot be expected to meet capital requirements of the developing countries in their entirety.
There is thus need for other sources or organisations to undertake this all important task. The Bank can render a useful service by providing techincal assistance in preparing development plans and by supplying relevant information to the other lenders. Above all, it can serve as a negotiation forum and provide mediation.
The World Bank has given a large financial assistance to India for economic development. Special mention may be made of the assistance World Bank has given to India in the development of infrastruture such as electric power, transport, communication, irrigation projects, steel industry. For a long period, India was the singal largest borrower from the World Bank. At present India is the third largest borrower of funds from the World Bank. Till June, 1999 India got, 172 loans amounting to 26 billion US dollars from World Bank.
