NEW DELHI: In a major setback to the country’s economic reforms program the Government has failed to clinch the deal with the World Bank for $400 million (Rs 1000 crore) loan committed by the International Development Agency (IDA) the soft-lending window of the Bank for the National Renewal Fund (NRF).

A high-level World Bank team which was here recently to study the “situation on the ground” before releasing the funds has returned with the impression that the Indian Government has not been able to properly synthesize the various components of the NRF in a manner that a comprehensive social security net could be provided to the surplus labor.

It is expected that the Indian Government will make another determined effort in the near future to convince the World Bank of its genuine intentions of launching a “purposeful” NRF. The new date for the next round of talks between the Indian Government and the World Bank has not been fixed so far.

The World Bank team is understood to have gained the impression that the Government is interested only in providing the retrenchment benefits to the surplus labor and has not drawn up any worthwhile program for their retraining and redeployment.

Moreover the team was not convinced that the Government was doing anything in the sectors like health family welfare education women and child welfare which form a part of the social security net.

Earlier also the World Bank had refused to extend any loan to India for the NRF arguing that the proposed corpus of Rs 2200 crore was not sufficient to provide the required social security net.

It had even proposed to double its own contribution from $400 million to $800 million to enlarge the scope of the NRF.

The purpose behind the NRF according to the World Bank was not only to provide retrenchment benefits to the surplus labor but to ensure that the impact of structural adjustment and stabilization of the economy did not fall on sectors like health education women and child welfare.

India’s reluctance to accept the World Bank offer to double its contribution stems from the heavy repayment burden the loan will involve.

Moreover the Government is of the view that the NRF should first be allowed to become operational and that the Bank offer should be an “open one” so that India could draw on it as and when required

Article extracted from this publication >> November 6, 1992