Country Strategy - Public Information Notice

The World Bank’s Board of Executive Directors today discussed a Country Strategy  for India. This strategy provides an update on India’s economic and political situation since the last full strategy cycle (which was discussed and endorsed by the Board in 2000), assesses India’s development priorities in the context of India’s own poverty reduction strategy as reflected in its Tenth Five-Year Plan, and proposes a strategy for the Bank’s Group  work in India over the period 2005-08.

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The Country Context
Supported by wide-ranging reforms, India has experienced rapid growth by almost any standard over the past decade (averaging about 6 percent per year between 1992/3 and 2003/4).  India’s external position has also improved dramatically.  The rapid growth of information technology (IT) service exports and high remittances have resulted in current account surpluses. In parallel, India has made impressive progress towards reducing income poverty, an important element of the Millennium Development Goals (MDGs). Continued progress has also been made on many social indicators, particularly literacy, which rose from 52 percent in 1991 to 65 percent in 2001. These improvements are both real achievements for India and of global significance.
 
However, while impressive, India’s economic and social performance has been uneven. Despite the emergence of tens of millions from poverty during the 1990s, average incomes across India remain low and there has been little movement on some critical social indicators. Maternal and under-five mortality have hardly improved, and HIV/AIDS is spreading quickly, with risk factors that put the country in danger of a growing epidemic. 

There also remains a substantial and persistent disparity of opportunity, particularly in the education, health and economic prospects of women and other vulnerable groups. A symptom of this disparity is the strikingly low ratio of girls to boys which, rather than improving with India’s development progress, appears to be worsening.  A growing gulf has emerged between faster and slower growing states – with the result that poverty is increasingly geographically concentrated. Further, over three quarters of the poor live in rural areas. 

Given these disparities, it can be said that India occupies two worlds simultaneously. The first, where economic reform and social changes have begun to take hold and where growth has had an impact on people’s lives and opportunities – and the other, where citizens appear almost completely left behind by public services, employment opportunities and brighter prospects.  Bridging the gap between these two Indias is perhaps the greatest challenge facing the country today.

The World Bank Group's Country Strategy
This Country Strategy sets out how the World Bank Group proposes to build a growing partnership with the Government of India (GoI) during fiscal years 2005-08 – a critical period if the MDGs, including halving poverty by 2015, are to be met. Assisting India, home to over one-quarter of the world’s poor (some 260-290 million people), with best-practice knowledge and financing for development, is central to the Bank Group’s mission to help reduce global poverty.

The overarching challenge of this new strategy is how to maximize and leverage the diverse resources of the Bank Group to dramatically scale up our impact, help to improve the quality of life for some of the world’s poorest citizens, and help India move closer to achieving the MDGs. 

In order to achieve this enhanced impact, three Strategic Principles will underpin the Bank Group’s work: 

Focusing on Outcomes: to ensure that all of the work of the Bank Group is explicitly geared towards supporting India’s achievement of its development goals;

Exercising Selectivity: to target limited resources to activities where assistance is welcomed and where contributions can also be the most effective;

Generating and Providing Knowledge: to generate and provide knowledge that can be realistically applied.

In applying these Strategic Principles, the Bank Group is seeking a substantial increase in its volume of lending to India.  Given the enormous needs, the strategy has identified three program priorities:

Supporting efforts to improve government effectiveness

Investing in people and empowering communities

Promoting private-sector led growth

In line with these priorities, the Bank Group's program expansion will primarily be in the following sectors: infrastructure (roads, transport, power, water supply and sanitation, irrigation and urban development – to underpin both accelerated growth and improved service delivery); human development (education, health, social protection – priorities to support specific MDGs); and in  rural livelihoods (with an emphasis on community-driven approaches).

Scaling up will require a strengthened program at the national level, including more lending compared to recent years. An important shift is the greater recourse to co-financing with other development partners under common arrangements for national programs in the areas most critical to meeting the MDGs.

This strategy also proposes some important shifts in the approach to India’s states. Since 1997, the Country Strategy has included a focus on states undertaking comprehensive reforms. With the widening gulf between reforming and non-reforming states, some shifts in this approach are warranted. These include:

First, in consultation with the Government of India and other partners, the Bank will seek to ensure that all of the largest and poorest states of India that so wish are engaged in a dialogue on cross-cutting reforms.

Second, the Bank will work proactively to try to build a productive development relationship with four states where poverty is increasingly concentrated in India – Bihar, Jharkhand, Orissa and Uttar Pradesh.  

Third, state-level adjustment lending operations aimed at supporting achievement of the MDGs, are also expected to remain an important part of the Bank program. 

Fourth, instead of concentrating on ‘focus states’, investment lending will be channeled more broadly to states on the basis of guidelines for each sector, which guidelines attempt to set out the sector-specific conditions that experience has shown to be necessary for project success.

The International Finance Corporation (IFC) will continue to provide equity and loan financing and guarantees. This will include pioneering investments in infrastructure where innovative structures and long tenors are required; and investments in projects which are constrained by limited risk appetite of other investors, including medium-sized manufacturing companies, agribusiness companies and companies entering new markets domestically and internationally.

For the Bank Group, global knowledge support – policy dialogue, analysis, technical assistance and advisory services – will be re-focused to better support the Program Priorities.  The strategy envisions enhanced analytical work on emerging issues of national interest, as well as strengthening demand-driven responses by the Bank.  

The Country Strategy also proposes a new way of looking at IBRD lending.  Rather than establishing low or base case scenarios for Bank lending, and structuring triggers to shift from one case to another, the Bank program will fall within a range limited by an upper bound for IBRD lending (US$2.15 billion per year on average). Getting to this upper bound will require strong reform performance as well as a strengthened pace of project preparation.