The union cabinet approved a proposal to invest $4.3 billion in bonds of
International Bank for Reconstruction and Development (IBRD), an arm of
the World Bank, which will make India eligible for higher borrowing from
the multilateral lender.
The investment will
allow India to borrow $4.3 billion from the World Bank, over & above the
single borrower limit of $17.5 billion up to $ 21.8 billion.
The government said
that the additional borrowing space would help it complete its planned infrastructure
projects with the assistance of the International Bank for Reconstruction &
Development (IBRD).
Economist
Dharmakirti Joshi, from ratings agency Crisil, said, "This is a
confidence-enhancing measure. Keeping all funding sources accessible at a time
when government finances are tight is a good move."
Joshi added that the
move would increase supply of dollars and help in alleviating funding
constraints for large investment projects.
To fund the
government's proposed huge investment; the Reserve Bank of India (RBI) will use
the country's foreign exchange (forex) reserves, which stood at $275 billion at
the end of August this year.
