"The government plans to direct multi-lateral aid from the World Bank and ADB towards infrastructure development, while bilateral aid will focus on social sector spending," a senior finance ministry official told The Indian Express.

DFID has committed a grant of 300 million pounds per year, of which half will be used for Sarva Shiksha Abhiyan and health sector programmes through budgetary support from the central government. The other half has been slated for development programmes in Madhya Pradesh, Orissa and Bihar. The DFID has dropped Andhra Pradesh and West Bengal from the list as they have made considerable progress.

"Another $100 million a year is expected to come in the form of grants from the European Commission, targeted towards health, primary education and capacity building," the official said. This is in contrast to the mandate of the commission, which wanted the money to be spent in the sector of civil aviation and higher education.

So far, the government has identified four projects for the $2 billion annual commitment made by JBIC and is in the process of short-listing another four. The agreement for these is expected to be inked in March 2009. The funding will be used for forest conservation and urban water supply in Kerala apart from the Chennai metro. The remaining four projects are expected to be in the areas of urban and rural water supply development.

However, most of the funding from German development agency KFW, will go towards clearly identified infrastructure projects in power and roads. KFW has committed funds worth Euro 316 million annually as development loans to India.

After infrastructure, social sector spending seems to be next on UPA's agenda–a move that is aimed at employment creation and enhanced public spending to beat the adverse impact of the on-going financial crisis.