Loans from International Organisations

13/09/2009

There is news that the Government of India is seeking a loan of US$3 billion or Rs.15,000 crores from World Bank for converting about 6,000 kilometers of single-lane national highways into two-lane highways.

For road works foreign exchange is not required too much. If the government wants money in Rupees, it can raise loans in India itself. If it difficult to raise loans from the public, it can borrow from Reserve Bank of India (RBI). If RBI has any difficulty, it can create a special purpose fund by printing currency and lending to the government. The amount can be recouped over a period of time, say 10 or 15 years.

If the government wants some quantum of foreign exchange, it can withdraw from the country’s foreign exchange reserves. These reserves are over $260 billion and have been deposited in foreign government bonds and in foreign banks yielding very low interest.

Thus, there is no need to seek loan from World Bank or any other international organizations.

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