Financial Daily from THE HINDU group of publications
Thursday, May 19, 2005
Financial Daily from THE HINDU group of publications Thursday, May 19, 2005 |
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Industry & Economy
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Economy World Bank to back investment lending in Tamil Nadu Our Bureau
Mr Michael F Carter
Chennai , May 18 THE World Bank is of the view that it would support investment lending in Tamil Nadu rather than providing budget support, according to Mr Michael F. Carter, Country Director-India, World Bank. Speaking to journalists from The Hindu group here on Wednesday, Mr Carter said that the fiscal management being strong in the State the World Bank was continuing with assisting the State on investment projects though a structural adjustment loan fell through after the Government back-tracked on some reform measures, particularly the supply of free power to agriculture. However, fiscal management in Tamil Nadu has been strong and there has been a forward momentum, which has prompted World Bank to continue with the investment lending. For 2005-06, the July-June fiscal that World Bank follows, it will assist in the Tamil Nadu Health Systems Project ($111 million; Rs 483 crore), Tamil Nadu Urban Development Project-III ($300 million; Rs 1,305 crore) and Tamil Nadu Empowerment and Poverty Reduction Project ($180 million; Rs 783 crore). For 2007-08 it will consider assisting the State in strengthening and modernising its irrigation systems. Though the size of the project is yet to be finalised, going by the assistance given to Maharashtra and Madhya Pradesh for similar projects, it could be about Rs 300 crore, he said. To a query on whether the State's stand on free power to agriculture would have any impact on sanctioning of the project, Mr Carter said that it was unlikely unless free power supply has a direct impact on sustaining irrigation systems. It did not have an impact in the case of Maharashtra, which till recently supplied free power to farmers, he said. The World Bank was of the view that free power to the farmers could only be under specific circumstances and targeting the really needy. For instance, the targeted and metered system being followed in Andhra Pradesh represents a good balance between cost efficiency and support. On fiscal reforms, he said that though the World Bank was not directly concerned about the fiscal deficit of States, it has to be realised that bringing deficit down and restructuring public finances to bring down revenue deficit should be an important goal for them. It is an `essential ingredient' for economic growth. To increase public investments in infrastructure, which is essential for growth it is important. Also, such restructure would make space for expenditure in education and health. India's expenditure in these areas as a share of GDP was significantly below levels that it should be achieving. Introduction of the Value Added Tax system in India had been a significant step and Tamil Nadu too should have switched over to the new system. He hoped that the State adopts VAT, he said. "I certainly would have preferred it in the first group (of States that switched over to VAT)," Mr Carter said.
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