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WORLD BANK

&ITS IMPACT ON INDIA


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The World Bank is an international financial institution thatprovides leveraged loans to poorer countries for capital

programs, tied to neoliberal market restructurings. TheWorld Bank has a stated goal of reducing poverty.

The World Bank differs from the World Bank Group, in thatthe 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 tothree more:

International Finance Corporation (IFC)

Multilateral Investment Guarantee Agency (MIGA)

International Centre for Settlement of Investment Disputes (ICSID)


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World BankFormation: 27 December 1945

Type: International organization

Legal Status: Treaty

Purpose/ focus: Crediting

Membership: 186 countries

President: Robert B. Zoellick

Main Organ: Board of DirectorsParent Organization: World Bank Group

Website: http://www.worldbank.org/


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CREATIONThe 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 causedmassive destruction of life and property.

In 1945, it was realised to concentrate on reconstructing these war affectedcountries. Besides, it was also given a thought to develop underdevelopedeconomies in a planned way.

IBRD was established in December 1945 alongwith the IMF on the basis of therecommendation of the Bretton Wood Conference. These two organizations arecalled 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, IFCand MIGA but not the fifth institute ICSID.


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OBJECTIVES1. To provide long term capital to member countries for economic

reconstruction and development. World Bank provides capital mainly for

the following purposes:i. To rehabilitate war ruined economies (this objective is fully achieved).ii. To finance productive efforts according to peace-time requirementsiii. To develop resources and production facilities in underdeveloped countries.

2. To induce long-run capital investment for assuring BOP equilibrium andbalanced development of international trade.

3. 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 IBRDprovides loans for productive activities on considerate conditions.

4. To provide guarantee for loans granted to small and large units and

other projects of member countries.

5. To ensure the implementation of development projects so as to bringabout a smooth transference from a war-time to peace economy.


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IMF vs . WORLD BANK

World Bank provides long-term loans for promotingbalanced economic development, while IMFprovides short-term loans to member countries foreliminating BOP disequilibrium.

Both these institutions are complementary to each

other. Few economists have even suggested thatthe two organizations should be merged.


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MEMBERSHIP

Generally every member country of the IMF automatically becomes the member of WorldBank. Similarly, any country quitting IMF is automatically expelled from the World Banksmembership.

But, under a certain provision a country leaving the membership of IMF can continue itsmembership 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 suchcountry has to repay the granted loans on terms and conditions decided at the time ofsanctioning the loan.

Any country working against the guidelines of Bank can be debarred from membership bythe 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.


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FUNCTIONS

Main role is of providing loans for developmentworks to member countries, especially to under-developed countries.

The Bank provides long-term loans for variousdevelopment projects of 5 to 20 years duration.

Besides, granting loans for reconstruction anddevelopment, Bank also provides various technicalservices to the member countries.


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SUPPORT TO INDIA

India has been borrowing from the World Bank through IBRD and IDA for variousdevelopment projects in the area of poverty alleviations, infrastructure, ruraldevelopments etc.

IDA funds are one of the most concessional external loans for GoI and are used largely insocial sector projects that contribute to the achievement of Millennium DevelopmentGoals.

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 providingspecific economic assistances to India. It has now been renamed as India DevelopmentForum.

International Development Association (IDA), an associate of World Bank is known as thesoft 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 fromIDA.


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