A K DharÎPARIS, June 25: Multilateral and bilateral donors at the India Development Forum (IDF) meeting here have pledged around US $ 6.7 billion in external assistance to India for the current year signalling continued trust in the country's economic potential.

While announcing continued high level of external assistance to India, the chairperson of the IDF, Miako Nishimusu said the current year's pledge was a slight step up against last year's figure of $ 6.6 billion.

Rapping the performance of the state governments for "repeatedly falling into financial crises," the IDF chairperson warned that "such imbalances would make it more difficult for India to manage - in capital flows or external shocks."

The marginal increase has been given with the clear aim that the assistance should be used on supporting state-level fiscal reforms, she said.

Japan has emerged as the largest donor nation with a new commitment of $ 1.16 billion and the World Bank, the largest institutional financier with a pledge of $ 3 billion. Germany has overtaken the United States to become the second largest aid giver with a pledge of US $ 500 million.

Other major contributors are Asian Development Bank with a pledge of US $ 800 million, and European Commission, International Finance Corporation and UNDP with $ 200 million.

"Unfortunately, a history of excessive subsidies, inadequate cost recovery and poor pricing have worsened the state fiscal situation," a World Bank critical appraisal of India's reforms, released here, said.

The study by the world bank director Edxin Lim said "virtually all states in India are finding it difficult to maintain infrastructure - let alone ensure its needed expansion - or to cover basic education or primary health care."

The World Bank has also expressed concern at huge overall public sector deficit, on public spending and public pricing policy which it said was more aimed at current rather than capital spending and human development.

The bank officials said finance ministry papers themselves indicate that explicit subsidies still represented about 15 per cent of India's GDP and of these also only 30 per cent were targetted towards provision of basic goods to the poor.

To complaints on slow pace on recommendations of the disinvestment commission, the finance secretary said his ministry had recently submitted to the government an elaborate paper on disinvestment programme.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.