Here we come up with an another article in our days observance section. Because we don’t want you to miss any important topic which is related to our self not only in terms of exams but as a human being. So here we go –
International Bank for Reconstruction and Development (IBRD) and its associate institutions as a group are known as the World Bank. It is headquartered in Washington, D.C and presently 189 countries are the member of this organization. So basically we can say that the World Bank is an international financial institution that provides loans to developing countries for capital programs.
The World Bank was established in December 1945 with the IMF on the basis of the recommendation of the Bretton Wood Conference. That is the reason why IMF and World Bank are called ‘Bretton Wood Twins‘. The World Bank has 30 founder members who attained membership by December, 1945. India is also among the founder members.
The basic difference between World Bank and IMF is – that World Bank provided long term loans for promoting balanced economic development, while IMF provides short term loans to member countries for eliminating BOP (Balance of payments) disequilibrium. Both of these institution are complementary to each other.
The World bank aims to reduce poverty in middle income and credit worthy poorer countries but promoting sustainable development through loans, guarantees, risk management products and analytical and advisory services.
The World Bank is a component of the World Bank Group, which is part of the United Nations system. India is a member of 4 constituents of the World Bank group – IBRD (International Bank for Reconstruction and Development), IDA (International Development Association), IFC (International Finance Corporation) and MIGA (Multilateral Investment Guarantee Agency) but not of its 5th institute ICSID ( International centre for the settlement of investment disputes).
The parts of the World Bank Group :
The IBRD, the original arm of the WB, offers assistance to middle income and poor but credit worthy countries and it also works as an umbrella for more specialized bodies under the World Bank.
The IDA offers loans to the world’s poorest countries. These loans come in the form of “credits,” and are essentially interest-free. They offer a 10-year grace period and hold a maturity of 35 years to 40 years.
The IFC works to promote private sector investments by both foreign and local investors. It provides advice to investors and businesses and it offers normalized financial market information through its publications, which can be used to compare across markets. The IFC also acts as an investor in capital markets and will help governments privatize inefficient public enterprises.
The MIGA supports direct foreign investment into a country by offering security against the investment in the event of political turmoil. These guarantees come in the form of political risk insurance, meaning that MIGA offers insurance against the political risk that an investment in a developing country may bear.
The ICSID facilitates and works towards a settlement in the event of a dispute between a foreign investor and a local country.
World Bank & India :
India has been borrowing from the World Bank through IBRD and IDA for various development projects in the areas of poverty reduction, infrastructure, rural development etc. IDA funds mostly used in Social sector projects. IBRD funds are relatively costlier but cheaper than commercial external borrowings. The GOI utilized IBRD loans primarily for infrastructure projects.
Recent activity India related to World Bank :
- Government of India and World Bank Sign US$1.5 Billion Agreement to Support India’s Universal Sanitation Initiative.
- World Bank will work with Indian Railways for the Railway Development Fund.
- India signs financing agreement with World Bank for US$ 3OO million.
- India has signed $35 million loan agreement with the World Bank for MP project.