India extends credit scheme to developing nations again

The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved extending the Indian Development and Economic Assistance Scheme (Ideas) to developing countries for another five years from 2015-16.

"As the objectives of the scheme continue to be relevant, the CCEA has decided to give second extension to the scheme by five years to 2019-20," an official statement said here.

The first extension for credit to African and other developing countries was given in 2009-10 up to 2015-16 after the scheme came into being in fiscal 2005-06.

As the extension will result in additional interest payment of $589.34 million to the lending bank from this fiscal (2015-16), the economic affairs department will make budgetary provision for Rs.3,771.77 crore at the rate of Rs.64 per US dollar.

The department will continue to implement the scheme with modifications and amendments.

The external affairs ministry will select projects after a standing committee of the departments of public administration, economic affairs and external affairs will scrutinise and recommend them for sanctioning the line of credit.

State-run Export-Import Bank of India (Exim) or banks approved by the finance ministry will operate the lines of credit after raising funds from the market.

"The borrowing country will provide sovereign guarantee to the lending bank, while the Indian government will pay interest on credit," the statement noted.

Lines of credit form an important component of the diplomatic strategy and have been useful in generating goodwill and building long-term partnerships.

"The scheme also attempts to promote India's strategic political and economic interests by positioning it as an emerging economic power, investor country and partner for developing countries," the statement added.