The Hindu Business Line : Additional World Bank loan of $1.5 b by March, says Chidambaram

New Delhi, Dec. 1 In view of the anticipated weakness in private capital flows, India has been obliged to go back to its old benefactor, the World Bank. It expects to get $1.5 billion out of the proposed additional $3 billion loan assistance from the World Bank by March 2009.

The other half will come by June next year, the outgoing Finance Minister, Mr P. Chidambaram, said here today.

More multilateral assistance is being pursued in the wake of the current global financial turmoil and its impact on the Indian economy, including slowdown in private capital flows. Portfolio investments by FIIs witnessed a net outflow of $6.4 billion in April-Sept 2008 compared with net inflow of $15.5 billion in corresponding period last year. Foreign Direct Investments, however, has been buoyant so far this year.

With the financial crisis threatening to shrink emerging markets’ access to trade and investment, India was looking to double the portfolio size for World Bank loan assistance from an annual $3 billion to $6 billion in the current World Bank financial year that ends on June 30, 2009.

“I have spoken to President Zoellick, Managing Director and also the Country Director of the World Bank. We have already sent a preliminary list of projects that we would like to bring forward both under the IBRD and IDA window. We have also asked for additional lending from the International Finance Corporation (IFC),” Mr Chidambaram told newspersons at North Block on Monday morning, hours before he took charge as Union Home Minister.

Mr Chidambaram said that the fifth year (2008) of the UPA Government had turned out to be the most eventful year of his ministerial career although he had expected it to be uneventful as the country was recording “reasonably satisfactory growth” rates in the first four years.

The first four months started with problems on the inflation front, followed by the next four months of impact of global financial meltdown and now his being elevated to the position of Home Minister. The last four months had turned out to be even more eventful, he noted.

“When the Prime Minister conveyed this decision to me, I would be less than honest if I do not say that I was disinclined. But in a situation like one we find ourselves, the final call is taken by the Party leader — in my case the Congress President (Ms Sonia Gandhi) and Prime Minister (Dr Manmohan Singh). I, therefore, answered the call of duty and I would move this afternoon to the Ministry of Home Affairs,” he said.

He also said that the Prime Minister was the most well equipped to handle the portfolio of finance, especially in a difficult year.

“The whole country is extremely reassured, speaking personally, I am reassured by the fact that PM has decided to keep the portfolio to himself, at least for the time being I am told.”

Assumes charge

The new Home Minister, Mr P Chidambaram, in his first interaction with the media after assuming office on Monday, said the Government would respond with “determination and resolve” to the “grave threats” posed to the country.

The 63-year-old Mr Chidambaram, who succeeded Mr Shivraj Patil and is back in the Ministry after two decades, said he would hold a full-fledged press conference before the weekend once he settles down. “I want to assure the people of India that we will respond with determination and resolve to the grave threats posed to the Indian nation,” he said.

He held meetings with Home Secretary Mr Madhukar Gupta and senior officials of the Ministry.

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