Announcement of World Bank Approves Three Hundred Million US Dollars Policy-Based Adjustment Loan to India on June 25, 1993

FROM (FRI)t6iA93 .17:30> / NO. 3000000262 P. I FOR RELEASE IN NEWSPAPERS HOLD FOR RELEASE MI AM 0. _A.M. MONDAY JUNE 28, 1993 -World Bank 1818 H Street, N.W., Washington. D.C. 20433, US.A.* Telephone: (202) 477-1234 IBRD Press Release No.93/111SAS Contact: Gautarn Adhikari (202) 458-1423 WORLD BANK APPROVES $300 MILLION POLICY-BASED ADJUSTMENT LOAN TO INDIA Loan will Help Liberalize Further India's External Trade and Investment Regime WASHINGTON, D.C., June 25, 1993 - The World Bank today announced the approval of a $300 million adjustment loan to India to support measures recently implemented by the Government to liberalize further the external trade and investment regime, as part of the country's broader ongoing reform program. The World Bank loan, approved by the Board of Directors on June 24, will support India's program to increase the competitiveness of its industrial sector and the export orientation of its economy. Specifically, the objectives of the $300 million loan are to support the measures introduced in the Government's 1993-94 budget, including actions recently taken by India to: . Reduce tariffs; * Liberalize domestic investment incentives; . Liberalize the foreign exchange market and unify the exchange rate regime; , Amend the Foreign Exchange Regulations Act of 1973; and . Initiate liberalization of consumer goods imports. This adjustment operation, which has received the ful support of the Bank's Board of Directors, is another step in the implementation of the Bank's country assistance strategy for India, which is to assist India's reform process - underway since mid-1991 - through policy-based adjustment lending for key structural reform measures. In announcing this loan, Joseph Wood, World Bank Regional Vice President for South Asia, noted that "in less than two. years the Government has not only overcome the balance of payments crisis of 1991 and reduced fiscal imbalances, but initiated a major change in the country's development strategy aimed at transforming India into an -internationally competitive economy"- The World Bank loan of $'300 million will help finance part of the transitional costs of adjustment, thus helping ensure that economic activity is not excessively dampened and that broad support for the reforms is maintained. India Is one of the few developing countries which has been able to undertake a major reform of the economy, and reduce macroeconomic imbalances significantly, without severely disrupting growth. Given the bigh incidence of poverty in India, and the vulnerability of the poor to declines in growth rates, it is imperative to maintain this record. The loan is repayable over 20 years, including a five-year grace period, at the Bank's standard variable interest rate.