Government officials say the loan had been accepted because the World Bank did not attach any "unreasonable or insulting" conditions to it. "We have rejected a Rs 5 billion World Bank assistance for infrastructural development in 10 municipal areas in the state because of insulting terms," municipal affairs and urban development minister Ashok Bhattacharjee said.

He said that the government will reject a loan only if it comes with strings attached. The CMC had been allowed to take the Rs 11 billion loan, to be jointly provided by the World Bank and the Asian Development Bank (ADB), only after the terms had been scrutinised by the finance department and found to be satisfactory, the minister said.

With the loan being cleared for acceptance by thestate government, the CMC will sign a new agreement with the financial institutions. Bhattacharjee said the CMC authorities have been instructed to draw up the feasibility report at the earliest.

Asked how the state planned to carry on those projects for which World Bank funds had been rejected, Bhattacharjee said te West Bengal Infrastructural Financial Development Corporation had been approached to provide the necessary money.

Financial analysts feel the government changed its earlier decision not to accept any World Bank loan as it had no other option. The World Bank froze a loan worth Rs. 1 billion for urban development projects and held back another worth Rs. 23 billion after the state government said it would not comply with the Bank's "insulting" terms.

After the government objected to the Bank conducting an independent financial survey in the state, the Bank said a study by the state government on its fiscal situation would be accepted. State Finance Minister Asim Dasgupta considers theclimbdown by the Bank as a moral victory. Eminent economist Amal Mukherjee said the state had to work a way out of the situation as it would have been impossible to save its economy without money from the international funding agencies. "The Marxists have realised that it would be difficult to survive in an isolated economy," Mukherjee said.

But Bhattacharjee claimed the government's rejection of the Rs. 5 billion loan bore testimony to the state's unchanged opinion in the matter of accepting money from the World Bank.