Changed face of India
Since 1950, the trade deficits of India were increasing in magnitude which kept on increasing till 1960. The budget deficit problem of India increased to such an extent that it could not borrow money from abroad. The government of India issued bonds to the RBI, which increased the money supply in the economy but led to inflation.
In 1966, India got foreign aid, which helped in preventing devaluation of money and save the economy. Later the aid was stopped and India was told to liberalize its restrictions on trade before foreign aid would again be available. The step was not taken by the country which led to the devaluation of the rupee and disruption of the economy.
The Indo-Pakistani War of 1965 further necessitated devaluation. The defense spending in the year 1965-1966 was 24.06% of total expenditure. This was the highest in the period from 1965 to 1989. And the drought of 1965-1966 also led to a severe devaluation of the rupee.
The current GDP per capita grew 33% in the 1960s. This reached a peak growth of 142% in the 1970s but it decreased sharply to 41% in the 1980s and 20% in the 1990s.In 1975 the size of GDP was $545 billion for India, $1561 billion for the USSR, $1266 billion for Japan, and $3517 billion for the US.
From 1951 to 1979, the economy grew at an average rate of about 3.1 percent a year. The industrial growth was at an average rate of 4.5 percent a year, and the annual average of 3.0 percent for agriculture during the period of 1951 to 1979.
At present, India is the World’s 4th largest economy with 1.2 billion people. Since independence, the country has transformed in a major way from being dependent on the imported grains to being a major exporter of a lot of commodities. Today India is the fastest growing economy in the World. The Indian economy is growing at the rate of 7.5 per cent that is a good sign. According to the World Bank, India will be the fastest-growing economy for the next three years and will outpace China.
World Bank Group
It is made up of five international organizations which provide loans to developing countries. It is the largest bank in the world. The bank mission is to achieve the goals of ending extreme poverty and building shared prosperity. The five organizations which constitute the World Bank Group are:
- International Bank for Reconstruction and Development (IBRD)
- International Development Association (IDA)
- International Finance Corporation (IFC)
- Multilateral Investment Guarantee Agency (MIGA)
- International Centre for Settlement of Investment Disputes (ICSID)
World Bank in Relation to India
India is the largest recipient of loans from the World Bank till date. The loans amount to $102.1 billion, between 1945 and July 21, 2015. Out of these, the International Bank for Reconstruction and Development (IBRD) gave $52.7 billion, and the International Development Association (IDA) has loaned $49.4 billion to India in the last 70 years.
The loans are approved by the World Bank Group on certain conditions laid down for the country. They decide on whether the amount of the loan will be used for which purpose. They force the country to follow a specific path of development. On studying the economy of the country they decide whether the money should be used for development of the specific industry or any other purpose. Here is the list of purposes for which loans have been disbursed to India:
India received $102.1 billion from the World Bank. The money has been used for:
- Water, sanitation and Flood Projects (27%),
- Finance (19%),
- Transportation (18%),
- Education (11%),
- Public administration and law (10%),
- Agriculture (8%),
- Health and Social Service (4%),
- Information and Communication (2%), and
- Energy and Mining (1%).
Looking at the overall development of the country, the banks decide whether to give a loan or not. The purpose of the loan is examined and the loan is disbursed if it will be used for the growth where it is needed. The purpose should be aligned with the mission of the World Bank of ending extreme poverty.
The World Bank and the Government of India signed a $50-million credit line for Nai Manzil, on December 30, 2015. Nai Manzil is an educational and skills training programme for minorities. The project amounts to $100 million, the half of which will come from theInternational Development Association IDA and the half from the union budget.
The World Bank approved a loan of USD 1.5 billion for the clean India campaign. This will support the government to ensure access to improved sanitation and end the practice of open defecation in rural areas by 2019.
These loans help shape the economy of the country for the long times to come. The loans have definitely helped India to be the fastest-growing country in the World. We live in a country where the economy is in a growing stage. And according to some estimates, India will remain the fastest growing country in the next 3 years.
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