Wednesday, June 23, 2010

Why borrow from the World Bank ?

Bloomberg quoting World Bank's country director Roberto Zagha reports that the Bank's lending to India will increase to USD 9.3 billion this year (to be disbursed over a period of time), as the Government has sought financial help to support the country's planned development investments - recapitalizing public sector banks, cleaning the Ganges , build roads and rehabilitate villages affected by floods.

I find this borrowing business rather strange.

We have been talking of cleaning the Ganges for ages now - and to my mind what holds up the effort is lack of will and willingness - not the lack of funds. There are several ways to fund road projects - which in any case is now mostly on BOOT basis ...and I am not sure if we are anticipating floods - or are we planning to rehabilitate people who were affected by last year's floods. I don't really see why we need to borrow from the Washington based lender to recapitalize our banks.(That component is just USD 1 Billion ).

While India's external debt is position is not alarming and there is nothing wrong in borrowing to invest per se - the quantum, stated purpose and timing - all appear perplexing, particularly after the Government raked in over Rs 1 lakh crores from 3G and broad band auctions and the additional money it can and will rake in with its planned 'increase in public shareholding' in PSUs.

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