Donors Pledge $6.7bn Aid

International donors have pledged to lend India $6.7 billion in what is interpreted as a show of support for the governments economic reforms.

The two-day India Development Forum (IDF) meetings in Paris, which concluded yesterday, decided to keep official aid at about the same level as last year. Last year, the IDF pledged $6.6 billion as aid to India.

Indian officials said the aid figures were in line with expectations. Union finance secretary Montek Singh Ahluwalia, who led the Indian delegation to Paris, told international donors that India is attacking poverty and its growth rate will accelerate to 8 per cent by the end of the decade. Ahluwalia said economic growth, combined with a slowing down of population growth, would help India to overcome its age-old burden of poverty in the early years of the next century.

 

The government is likely to revise downward in July the GDP growth estimates for 1996-97 from 6.8 per cent to around 6.2-6.3 per cent, chief economic advisor Shankar Acharya has said.

Acharya said the GDP growth for 1997-98 was expected to be in the region of 6.5 per cent to 7 per cent. Assuming a normal monsoon, we should see growth in the order of 6.5 per cent to 7 per cent, he said

After the meeting, Ahluwalia said, The governments efforts to continue the economic reform process have been well received.

The IDF meet focused on how to ensure that anti-poverty programmes reach the people they are intended for. Says Ahluwalia: Some Scandinavian donors wanted to link assistance with inputs on poverty.

Ahluwalia told the annual meet that India would need a whopping $400 billion over the next 10 years to build up the infrastructure sector. The bulk of the investment will have to be made by the public sector, he said.

The finance secretary also predicted that the Indian economy would move back into the fast lane in the second half of this year. He said his optimistic forecast was based on indicators like the rise in non-petroleum imports and a pick-up in credit growth. Taken together, the two factors indicate that economic growth will speed up in the coming months.

We believe the feel good index is up again, the animal spirits of the Indian and international investor vis-a-vis India have revived and a growth recovery is imminent, Ahluwalia said, striking a bullish note to international donors.

The finance secretary also said inflation is gradually being contained and the government is keeping a close watch on prices to ensure that they dont get out of control. He said the government is trying to keep a tight hold on money supply to ensure that it stays around 15 per cent

Ahluwalia claimed that government statistics indicate that there is clear evidence of a steady decline in poverty and an improvement in other social indicators, but the pace of progress is slow.

The finance secretary said the government is trying its best to ensure that aid is disbursed in as efficient a fashion as possible. He said government figures indicate an improvement in aid disbursement.

Finance ministry officials admit that the tone and nature of the annual Paris meetings have changed now that India has a comfortable foreign exchange reserves position. Aid is becoming less and less important from the balance-of-payments angle. But every little bit helps. We need more supplementary revenues for poverty alleviation programmes, said one official.