This was the first multilateral loan cleared by the World Bank after India conducted five nuclear explosions at Pohkaran in May. The United States, along with G-8, decided to oppose sanctions on non-humanitarian loans at the board level. Earlier, the United States managed to get the meeting of the World Bank board to consider the loan proposals postponed.

The APREL proposal, which was earlier put on hold, will have an IDA component of $242.0 million and IDBR loan amounting to $301.3 million.

Finance secretary Montek Singh Ahluwalia, along with additional secretary V Govindarajan, said the Asian Development Bank (ABD) was also likely to follow the same line, although nothing was currently pending with thebank.

The finance ministry also expressed the confidence that at the bilateral level, many countries have shown their willingness to continue with humanitarian loans. The United Kingdom, he said, would not impose any bilateral restriction.

Ahluwalia said with this loan the issue pertaining to what was humanitarian and what was non-humanitarian would also become clear to a great extent. It was argued that the loans for the power sector could be classified as humanitarian loans as availability of power would mitigate the sufferings of those living without electricity. The finance secretary said that humanitarian loan could also be granted to projects relating to health, education and broadly poverty alleviation.

The multi-sectoral World Bank loan for Andhra Pradesh, he said, had twin objectives: increasing critical development expenditure in previously neglected social and infrastructure sectors and putting state finances on a sustainable path. The project, he said, had six components, includingirrigation ($142 million), road maintenance ($112.60 million), public sector reforms ($18.30 million), primary education ($137.40 million), primary health ($58.40 million) and integrated child development services ($74.60 million).

Govindarajan later said that the other three loans likely to be approved by the World Bank shortly include women and child development project ($300 million), state health project for Orissa ($76 million) and UP irrigation project ($130 million). While the first two are IDA funded, the third loan will have a mix of IDA and IBRD. Ahluwalia said the gross inflow of foreign aid amounted to little less than $3 billion (Rs 11,000 crore) per annum. During the current fiscal, around 95 per cent is expected to flow in from the cleared proposals.

Asked whether the government was considering to re-package the loan proposals to make them appear humanitarian, the finance secretary replied in the negative but added, "We would like resumption of normal pattern of loans."

About the impactof economic sanctions on nation's economy, he said efforts would have to be made to secure larger foreign direct investment (FDI). He added that the government had been announcing measures to streamline and facilitate inflow of FDI.

Ahluwalia denied that any package was being worked out in this regard. However, he added, "Without waiting to unveil a package, we are announcing steps as and when we are ready with them."

Rupee perks up

The World Bank's decision to sanction a $543-million loan for the implementation of the Andhra Pradesh state economic restructuring project lifted the sentiments in the foreign exchange market on Friday.

Finance secretary Montek Singh Ahluwalia's announcement that another $506 million worth of World Bank approval for three projects might come through next week further cheered the rupee which gained by 10 paise to close at 42.62/64 over the previous close of 42.72/74.