Washington: The World Bank has approved a $250 million loan to the northern Indian state of Punjab for the improvement and expansion of the state's 7,400 km road network.

 
The loan from the International Bank for Reconstruction and Development is payable in 20 years, including five years of grace period, according to a Bank release.

 
The Punjab State Roads Sector Project will assist the state government to provide a targeted approach to the comprehensive improvement and maintenance of the 7,400 km of plan roads (state highways, major district roads and other district roads), which link the rural road network to the national highways and provide most of the main road links in the state.
 

One of India's most prosperous states, Punjab has the highest per capita income and lowest poverty headcount in India, and it ranks second in the India Human Development Index (2001).

However, since the mid-1990s, Punjab's economic environment has seen some deterioration, and its 6.2 percent economic growth in 2005-6 is still below the national average of eight percent despite visible improvements since 2004.

 
"Economic diversification is critical to accelerate economic growth in Punjab," says Fayez Omar, Senior Manager, India Programme and Acting World Bank Country Director for India.

"Without an effective road network, it will be very difficult to encourage the shift from the present heavy dependence on wheat and rice to higher value, more time sensitive agricultural production and distribution. Effective roads are also essential to the development of light manufacturing and service industries which rely on high quality logistics."

 
Better roads, lower transport costs and higher transport service standards have been identified by the Punjab government in their 10th Five-Year Plan, as core elements of the required enabling investment climate and a prerequisite for economic diversification and accelerated economic growth.

 
Isabel Chatterton, World Bank Senior Financial Specialist and project task team leader, said the likely growth areas are both the agricultural and industrial sectors that need efficient supply and logistics chains.

 
"Sectors such as textiles and contract farming are very dependent on good transport and reliable delivery," he said.