Bush's WB plan will hit India

new delhi: if the world bank is to follow the bush plan and give grants instead of loans, india, home to every fourth poor person in the world, will be adversely affected. the good news, however, is the bush plan has very little chance of being adopted. it is bound to be shot down by the world bank's european and other influential shareholders. ``i am afraid the bush plan is not positive for india,'' said additional secretary in charge of the fund-bank division of the finance ministry.this is because the overall kitty of assistance is limited. india will not be eligible for grants which will go to countries not capable of repaying loans. india is the world bank's largest borrower with loans over $1 billion annually and a commulative portfolio of rs 50 billion. it gets loans both from the bank's highly concessional ida window as well as from the ibrd window where the interest rate is market-related. of later, india has come under pressure of being pushed out of the ida facility. china, the other large borrower from world bank, ``graduated'' out of the ida window last year and is now eligible to borrow only from the ibrd window at near market terms. india's credit worthiness - that is its capacity to repay world bank loans - has ironically been cited against it. the argument is india, being a middle-income country with per capita income of $840, can do without ida facility. india managed to ward off the pressure during the annual meeting of the international monetary fund and the world bank in april and got a reprieve for another three years, 2002-2005. the last word on it, however, is yet to be said. the final verdict is expected to come in geneva in november when the 13th round replenishment of the world bank is expected to be finalised. president bush, in an address to the world bank on tuesday, proposed that up to 50 per cent of funding provided by development banks to the poorest countries come in the form of grants, not loans, for education, health, nutrition, water supply, sanitation and other human needs. on the same day, us treasury secretary paul o'neill too wrote an article in new york times in which he suggested that banks must also adopt a bolder, more aggressive stance on the use of outright grants of money, as well as loans. he argued that during the past two decades, many of the poorest nations became so highly indebted that now they were unable to make payments on their current loans, let alone borrow and pay back more. loans should be made only when there is an expectation that principal and interest will be paid back in full and on time. in a way, this is not entirely a new proposal from the us. two years ago, neltzer commission appointed by the us congress made similar proposals, but these were not accepted by the world bank. essentially two factors will work against the us proposal. one, if it is to give grants instead of loans, then the banking character of the world bank will be lost. two, if grants are to be provided, the european and other shareholders of the world bank would prefer to extend those directly as official development assistance (oda) rather than giving it indirectly through a "faceless multilateral institution".