Role of the World Bank

In a world where big business, trade and investment are increasingly calling the shots, the big question is what should be the role of multilateral agencies like the World Bank?

On his first official visit to India early this month, the World Bank Group President Robert B. Zoellick said he was visiting India to listen and learn how the World Bank Group’s services could be “smarter, faster and cheaper” to make the Bank a better partner for India. India is one of the first few countries that the World Bank President has visited early on in his tenure. Zoellick was also keen to see how best the Bank can support the world-class economic team steering the country’s economic reform program, and especially to see how it could help some of the country’s lagging states catch up.

As a part of this effort, a series of consultations are taking place with civil society groups to get feedback and better understand how to improve the Bank’s way of working.

A couple of months ago consultations, spread over five thematic issues, brought together participants representing organizations and individuals from across the country working in the fields of decentralization and local governance, service delivery, empowerment of women and tribals, advocacy, communication and citizen’s voice. The consultations revolved around issues related to agricultural growth; investing in health and education; service delivery and infrastructure; and inclusive growth. Issues raised are being shared at national and state forums with a wider group of experts, Civil Society Organizations (CSOs), and leading opinion makers from across the country.

Consultations were also held on what is termed as a Long Term Strategic Exercise (LTSE) for the Bank on a global level. These involved discussions with representatives from the government, academia, and donor agencies, as well as spokespersons from CSOs. The consultation revolved around key themes including inclusive and sustainable globalization, environmental impact of globalization, knowledge role of the Bank, global public goods and the Bank’s governance structure.

These efforts are a precursor to the more extensive consultations that the Bank in India will hold over the next year as it forges its new Country Strategy for India.

Development challenges facing India

Even as India touches new heights of economic growth, there is also a flip side to this story. Nearly 300 million people continue to live on less than one dollar a day. Almost half of the children under 3 years of age are malnourished. Surveys show that on any given day anywhere between 20-25 percent of government teachers and health workers are absent from schools and clinics they are serving. The country suffers from a massive infrastructure deficit. It has practically no interstate expressways linking its major economic centers, and only 8,000 km of four-lane highways. No city in India has water 24 hours a day, seven days a week.

“The market cannot deliver inclusive growth. We need better quality public expenditure. In fact shifting resources from subsidy to infrastructure is what we need. For example Rs 60,000 crore worth of fertilizer and food subsidy can be put into roads, water management, health etc. This will contribute to deeper and wider reduction of poverty than merely giving out handouts,” said Rajiv Kumar, Director and Chief Executive, Indian Council for Research on International Economic Relations (ICRIER).

A web of complex development challenges confronts the country today. Dr Shankar Acharya, Honorary Professor and Member Board of Governors, ICRIER sums up the risks as follows: populists policies, a weak infrastructure, rigidities in the labor market, poor performance of the agricultural sector, slow pace of economic reforms, and poor human resource policies in the areas of education, skill-development and health service provision. Moreover, a core set of challenges on the implementation side with regard to delivery of basic public services continues.

The reality is, despite being a growing economy and the world’s second most favored destination for investment after China, India’s development has been hugely uneven.

What can the Bank do to help?

“The success of the past years has created its own challenges: there are large infrastructure needs and widespread skill shortages that could slowdown future economic growth. In addition, a large poverty reduction agenda still remains and ‘trickle down’ is not enough to ensure that all Indian citizens will benefit from growth. And although the economy is in a low carbon growth path, there are still large parts of the country which don’t have access to rural electrification or to other energy related services for a better life. We feel these are tough issues that India faces today, where the World Bank could bring value,” said Ms Isabel Guerrero, World Bank Country Director in India.

It is here that most interlocutors feel the Bank can support India as it seeks to spread the fruits of its economic growth to a wider cross-section of Indians.

• Support the improved delivery of public services

Analysts say the Bank should work with the government to help improve the delivery of basic public services so that they reach the people they are intended for. “I think the World Bank should focus on building capacity of the government to deliver better public service. Today one of the real constraints in India is lack of project design and project implementation capability for delivery of public services. The Bank could help address them,” Mr Rajiv Kumar of ICRIER said.

• Improving infrastructure

The Planning Commission has estimated that, in order to close the infrastructure deficit – and to sustain GDP growth at 9 percent, India will need to invest an additional US$ 500 billion during the next plan period. Economists like Dr Shankar Acharya said the Bank should focus on developing better infrastructure.

“The successful example of rapid telecom development is very promising. But unlike telecom, the sectors of power, roads and urban infrastructure are burdened by long histories of a subsidy culture and dual (Centre and states) constitutional responsibilities. Unless the various infrastructure constraints are addressed swiftly and effectively, it is difficult to see how 8 percent economic growth can be sustained,” Dr Shankar Acharya added.

CSOs too feel the need for the Bank to focus and re-strategize in countries like India. “The Bank’s role as a financial aid giver is not going to be the same as it was 25 years ago. It needs to reposition itself and focus on sectors where it has comparative advantage like the infrastructure sector,” said Samuel Paul of Urban Affairs Centre in Bangalore.

“Sure India needs more infrastructure to be an effective part of the global economy. But ports, airports, dams don’t cater to poor people. It ought to attend to the problems of the very poorest first and help sustain the natural resources of the country,” said Ashok Khosla of Development Alternatives.

• Providing knowledge services

The Bank is also recognized as a service provider of knowledge of what works and what does not. “I think the World Bank today is in the best position to provide success stories from across the world in terms of reforms and showcase such success stories. These could be more country-specific,” said Mr Bimal Jalan, former Governor of the Reserve Bank of India. Acknowledging its knowledge base, Pratap Bhanu Mehta, President and CEO, Centre for Policy Research said the “Bank should leverage its research and technical expertise to monitor various sectors of the economy.” “The Bank can also be a huge source of ideas and information. By supporting research talent it can enrich the information base on which decisions are taken,” he added.

• Focusing on Public goods

Economists, policy makers and civil society organizations agree that the World Bank should play a major role in addressing global public goods be it in the area of poverty reduction, or climate change or in the global trading system that requires international collective action. Mr Montek Singh Ahluwalia, Deputy Chairman, Planning Commission who is also a member of the Growth Commission, set up by the World Bank, feels the Bank needs to identify and pursue action on international public goods.

Creating an enabling environment for economies to prosper is another area where analysts feel that multilateral agencies like the World Bank have a huge role to play.