World Bank to lend $ 3 billion to India

The World Bank has agreed to help India with $3 billion of increased investment as the global financial crisis undermines private
financing for the country's much-needed infrastructure agenda, the bank announced on Thursday.

"Part of the additional financing include a line of credit to the India Infrastructure Finance Company Limited (IIFCL) to help finance private-public partnerships in infrastructure; funding for the Small Industries Development Bank of India (SIDBI) to provide credit to small and medium enterprises, and assistance to PowerGrid to expand its transmission network," the World Bank said in a written statement.

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The development institution has provisioned this additional amount as part of the total financing envelope of $14 billion proposed in the India Country Strategy over 2009-2011.

India had requested an additional $5.6 billion over the next two years. Having provisioned the $3 billion, the World Bank said it would need to examine the balance $2.6 billion and work with the Indian government over the coming weeks to clarify details.

The strategy, which is geared to help India propel infrastructure development, support the country's seven poorest states, and respond to the financial crisis, was discussed by the World Bank board last week in Washington DC.

"Other areas which could receive support from additional financing include the National Housing Bank and the recapitalisation of state banks, the details of which are yet to be discussed with the government of India," the statement said.

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The statement said that India was the largest borrower from the World Bank's International Development Association (IDA) and second largest borrower from its International Bank for Reconstruction and Development (IBRD) in fiscal 2008.

The World Bank's $15.1 billion-portfolio in the country covers 61 active investment projects.

In the current financial year, the World Bank's oard approved $2.7 billion in funding for nine new projects for India spanning a range of sectors including infrastructure, education, health and rural development. Of this, $1.3 billion came from IBRD and $1.4 billion came as interest-free credits from IDA.

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Economies | Countries hit by recession 2008

1. Denmark - Denmark becomes the first European economy to confirm it is in recession since the global credit crunch began. Its GDP shrinks 0.6 percent in the first quarter after an 0.2 percent contraction in the fourth quarter of 2007.

2. ESTONIA - The Baltic state slides into recession with a 0.9 percent fall in second-quarter GDP after a drop of 0.5 percent in the first quarter.

3. LATVIA - Latvia joins its northern neighbor Estonia in recession as GDP falls 0.2 percent in the second quarter from the first quarter, when it fell 0.3 percent. Property markets and construction have suffered in both Baltic states.

4. IRELAND - The "Celtic Tiger" becomes the first country in the euro zone to slide into recession, with a 0.5 percent fall in second quarter GDP, following a 0.3 percent decline in the first quarter. Its last recession in 1983 saw thousands of people leave Ireland to seek work overseas.

5. NEW ZEALAND - New Zealand falls into a recession for the first time in more than a decade, with a 0.2 percent fall in seasonally adjusted GDP for the second quarter. First-quarter GDP dropped 0.3 percent.

6. SINGAPORE - First Asian country to slip into a recession since the credit crisis began. Singapore's export-dependent economy shrinks annualized rate of 6.8 percent in the third quarter after a 6.0 percent contraction in the second quarter, its first recession since 2002.

7. GERMANY - Europe's largest economy contracted by 0.5 percent in the third quarter after GDP fell 0.4 percent in the second quarter, putting it in recession for the first time in five years.

8. HONG KONG - Hong Kong becomes the second Asian economy to tip into recession, it's exports hit by weakening global demand. Third-quarter GDP drops a seasonally adjusted 0.5 percent after a 1.4 percent fall in the previous quarter.

9. ITALY - Italy plunges into recession, its first since the start of 2005, after GDP contracts a steeper-than-expected 0.5 percent in the third quarter. Second quarter GDP dropped 0.3 percent.

10. EURO COUNTRIES - The 15-country euro zone officially slips under, pushed down by recessions in Germany and Italy for its first recession since its creation in 1999.

11. JAPAN - World's second largest economy also went into recession due to dwindling sales in USA

12. SWEDEN - The Nordic nation announces it is in recession after GDP shrinks 0.1 percent in both the second and third quarters.

14. RUSSIA - Russia has also declared that it's economy is already into recession

13. USA - United States of America is already into recession from december 2007 , what looked like just mortagage crises broadened and engulfed all the above economies into it and still is in growing phase and will continue for another year 2009 for sure.

RBI - Finances to deteriorate further

With the government coming out with financial incentives for the industry, the Reserve Bank has said central finances will further deteriorate during the second-half of the year on account of the impact of financial turmoil on the Indian economy.

"While expenditure is slated to increase in the coming months, growth of tax revenue is likely to decelerate with the expected moderation in real economic activities following the global financial meltdown," RBI said in its monthly bulletin.

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"Finances in the first-half indicate deterioration in all key deficit indicators, both in the absolute term as well as per centage of GDP," it said, adding the "pressure" on deficit indicators would continue during the remaining part of 2008-09.

The government has come out with a fiscal stimulus package of over Rs 30,000 crore which will have an adverse bearing on central finances. This will be an addition to over Rs 1 lakh crore the government has sought during the first batch of supplementary demands for grants raising the government expenditures.

With the industrial production as well as exports recording a negative growth of 0.4 per cent and 12.1 per cent respectively in October, the government may come out with the second stimulus package increasing further pressure on finances.

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Referring to the performance of the first half, the RBI report said, "As per cent of the Budget estimates, both revenue deficits and fiscal deficits were higher mainly due to rise in revenue expenditure, both non-plan and plan."

RBI has already indicated that it would review the economic growth estimate at its quarterly monetary policy to be announced on January 27.

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with extracts from www.economictimes.com