WORLD BANK

& ITS IMPACT ON INDIA

The World Bank is an international financial institution that provides leveraged loans to poorer countries for capital programs, tied to neoliberal market restructurings. The World Bank has a stated goal of reducing poverty. The World Bank differs from the World Bank Group, in that the World Bank comprises only two institutions:
International Bank for Reconstruction and Development (IBRD) International Development Association (IDA)

Whereas the latter incorporates these two in addition to three more:

International Finance Corporation (IFC) Multilateral Investment Guarantee Agency (MIGA) International Centre for Settlement of Investment Disputes (ICSID)

World Bank
Formation: 27 December 1945 Type: International organization Legal Status: Treaty Purpose/ focus: Crediting Membership: 186 countries President: Robert B. Zoellick Main Organ: Board of Directors Parent Organization: World Bank Group Website: http://www.worldbank.org/

CREATION
The Second World War damaged economies of the most of the countries, particularly of those who were directly involved in the war. The global war had completely dislocated the multilateral trade and had caused massive destruction of life and property. In 1945, it was realised to concentrate on reconstructing these war affected countries. Besides, it was also given a thought to develop underdeveloped economies in a planned way. IBRD was established in December 1945 alongwith the IMF on the basis of the recommendation of the Bretton Wood Conference. These two organizations are called Bretton Wood Twins. Delegates from a wide variety of countries attended the Bretton Woods Conference, but the most powerful countries in attendance, the United States and United Kingdom, mainly shaped negotiations. IBRD started functioning in June 1946. India is a member of four constituents of the World Bank Group i.e. IBRD, IDA, IFC and MIGA but not the fifth institute ICSID.

OBJECTIVES
1. To provide long term capital to member countries for economic reconstruction and development. World Bank provides capital mainly for the following purposes:
i. ii. iii. To rehabilitate war ruined economies (this objective is fully achieved). To finance productive efforts according to peace-time requirements To develop resources and production facilities in underdeveloped countries.

2. 3.

To induce long-run capital investment for assuring BOP equilibrium and balanced development of international trade. To promote capital investment in member countries by following ways:
i. To provide guarantee on private loans or capital investment.

ii.

If private capital is not available even after providing guarantee, then IBRD provides loans for productive activities on considerate conditions.

4. 5.

To provide guarantee for loans granted to small and large units and other projects of member countries. To ensure the implementation of development projects so as to bring about a smooth transference from a war-time to peace economy.

IMF vs. WORLD BANK

World Bank provides long-term loans for promoting balanced economic development, while IMF provides short-term loans to member countries for eliminating BOP disequilibrium.
Both these institutions are complementary to each other. Few economists have even suggested that the two organizations should be merged.

MEMBERSHIP
Generally every member country of the IMF automatically becomes the member of World Bank. Similarly, any country quitting IMF is automatically expelled from the World Banks membership. But, under a certain provision a country leaving the membership of IMF can continue its membership with World Bank if 75% members of the Bank give their vote in its favour. Any member country can quit the Bank simply by written notice to the Bank, but such country has to repay the granted loans on terms and conditions decided at the time of sanctioning the loan. Any country working against the guidelines of Bank can be debarred from membership by the Board of Governors. World Bank has two types of members: Founder members and General members. World Bank has 30 founder members. India is also one of the founding members. At present total membership is 186.

FUNCTIONS
Main role is of providing loans for development works to member countries, especially to underdeveloped countries. The Bank provides long-term loans for various development projects of 5 to 20 years duration. Besides, granting loans for reconstruction and development, Bank also provides various technical services to the member countries.

SUPPORT TO INDIA
India has been borrowing from the World Bank through IBRD and IDA for various development projects in the area of poverty alleviations, infrastructure, rural developments etc. IDA funds are one of the most concessional external loans for GoI and are used largely in social sector projects that contribute to the achievement of Millennium Development Goals. India has borrowed around US$ 65.8 billion from the World Bank so far. In 1958, the Bank played an important role in establishing India Aid Club for providing specific economic assistances to India. It has now been renamed as India Development Forum. International Development Association (IDA), an associate of World Bank is known as the soft loan window of the Bank and was established on September 24, 1960. During 1995-96 (July-June), India ranked first among the nations getting assistance from IDA.