NEW DELHI: The International Finance Corporation (IFC), the private sector lending arm of the World Bank, has assured India continued assistance in its development efforts, particularly in building quality infrastructure, while helping the private sector with the objective of making it internationally competitive.

Predicting 2006 as a "banner year of performance" for the emerging economies with their stock market capitalisation poised to exceed $5 trillion for the first time, the IFC, in its report on "Emerging markets", pegged the overall growth rate for the developing countries at about 5.5-5.9 per cent during the calendar year.

Major challenges remain

At the same time, however, the report brought out on the occasion of IFC's 50th anniversary year, warned that major challenges still remained to be overcome in matters such as macroeconomic stability, corporate governance and environmental and social issues.

"Emerging markets as a group have proved that they can sustain high growth and attract capital. There is tremendous dynamism. But the growth is uneven, and there is a huge unfinished agenda," IFC's Executive Vice-President, Lars Thunell, said. The private capital flow of about $350 billion into the developing countries, Mr. Thunell said, was now over four times the quantum of international aid. However, the development community was required to do a better job of using market-based solutions to reduce poverty, address social needs, and preserve the global environment, he said.

"More and more development and aid organisations — multilateral banks, foundations, non-profits — are looking at an entrepreneurial approach to development. They are asking how they can harness the power of private capital, free enterprise, and social entrepreneurship to bring about [the] needed change," Mr. Thunell said.

For IFC, India is its third largest exposure. As of July 31 last year, IFC's portfolio in the country comprised investments in 79 companies with a total exposure of $1.25 billion on IFC's own account and $348 million for B-loan participants.

Listing the various companies in which IFC has invested, the report said: "IFC commitments in India have grown strongly over the past three years." The companies are engaged in diverse fields, including manufacturing, agri-business, biotechnology, health and infrastructure. In the report, Mr. Thunell maintained that the IFC would broaden and deepen economic growth to reach the poor, especially in countries where investment climate barriers were keeping small entrepreneurs and women trapped in the informal economy.

"We need to bolster the stability of existing capital markets and flows in the developing world by strengthening domestic financial institutions and deepening local currency markets," he said, while noting that corporate governance was required to be improved so that more of the emerging companies which were creating jobs could tap the capital in the global economy.

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