India-World Bank: Loan comes with the condition of “Universal Eligibility” affects Make in India

Published: September 22, 2020

In May 2020, the World bank had sanctioned 1 billion USD of loan to India. This is the highest ever loan sanctioned by the bank to India.

About the loan

The loan was provided to help India prevent, detect and respond to COVID-19 crisis. The funds provided were exclusively for the India COVID-19 Emergency Response and Health Systems and Preparedness project. This project is to be implemented by the Railway Ministry. The loan was disbursed by the International Bank for Reconstruction and Development (IBRD).

The loan is to be funded under two phases. In the first phase 750 million USD is to be allocated for the fiscal year 2020. This is to be used to implement Pradhan Mantri Garib Kalyan Yojana. During the second phase, 250 million USD is to be made available for the year 2021.

 What is the issue?

The loan comes with the condition of Universal eligibility in procurements. This in simple terms means that the make in India initiative is to be affected greatly.

This is because by the terms of world bank loan, certain benefits to the local start-ups may not be applicable while implementing the national projects. The World Bank shall interfere in procurements being made in the country when the credit limit is greater than or equal to 1 billion USD.

What is Universal Eligibility?

It means that the preferential market access policies shall not be applicable on purchases made when implementing national projects. In simple terms, the local firms shall not enjoy concession benefits. They will have to be treated equally just like other universal (or foreign) firm.

This condition is applicable to Public Procurement (Preference to Make in India) order and the MSME policy as well.

Also, this is to affect the Railways as the Railway Board has to make procurements according to the guidelines provided by World Bank.

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