The World Bank’s new Country Strategy for India, the framework for the Bank’s work in the country over the period 2009-2012, will focus on developing India’s much-needed infrastructure and to support the country’s seven poorest states achieve higher standards of living for their people. The strategy envisages a total proposed lending program of US$14 billion, for the next three years, of which US$9.6 billion is from the International Bank for Reconstruction and Development (IBRD) and US$4.4 billion (SDR 2.982 billion equivalent at the current exchange rate) from the International Development Association (IDA). 
Critical to boosting growth and bridging the gap between rich and poor is addressing India’s vast infrastructure deficits. No Indian city provides water 24 hours a day, 7 days a week; only half the population has access to safe drinking water; and 40 percent of India’s 600,000 villages are not connected to a road |
The strategy is guided by the priorities of the Government of India as reflected in the Eleventh Five-Year Plan. After a series of consultations with a broad range of stakeholders including the government and civil society, it identifies sustaining rapid growth as critical: not only building the infrastructure which underpins growth but also bringing along the 300 million citizens who live in dire poverty. A related challenge is to ensure that development is sustainable, meaning that the environment is cared for in the process. Providing services for all citizens implies much greater effectiveness of public spending. “India’s rapid growth will not be sustainable if it does not include the 300 million citizens who live below the official poverty line, nearly 60 percent of whom reside in the country’s seven poorest states,” said Giovanna Prennushi, World Bank Economic Adviser. “This strategy is designed to boost support to these states, but also not to forget about the poorest people in India’s middle income states. The challenge is to target poverty where we can help make the difference.”
Given the enormous needs, the strategy has identified three priorities:
I. Maintaining rapid and inclusive growth
Infrastructure: For India’s rapid and sustained growth, major investments in power, transport, water, and urban development are needed. Inadequate power supply remains a critical constraint to growth; while GDP grew at an average of about 8 percent a year over the past five years, electricity generation only grew at an average of 4.9 percent per year. The national and state highway networks have not kept pace with the tremendous growth in demand for road transport: only about 30 percent of state highways are two-lane and more than 50 percent are in poor condition. Inadequate urban infrastructure is hampering the expansion of growth centers. While the Eleventh Plan foresees a major role for private sector involvement in infrastructure development through public-private partnerships (PPPs), these may not materialize to the extent hoped for in the aftermath of the global financial crisis. The World Bank will specially focus on infrastructure investment in its new strategy, including on strengthening the capacity of government agencies to design and manage (PPPs). Skills: The shortage of skills is preventing large segments of the population from being part of India’s growth story. Nearly 44 percent of India’s labor force is illiterate, only 17 percent of it has secondary schooling, and enrollment in higher education is just 11 percent. This compares unfavorably with, for example, China, where access to secondary education is almost universal and enrollment in higher education exceeds 20 percent. Moreover, the quality of most Indian graduates is poor and employers offer very little skills upgrading (16 percent of Indian manufacturers’ offer in-service training to their employees, compared to over 90 percent of Chinese firms). The informal sector employs over 90 percent of the workforce, but there is very little investment or opportunity for formal “skilling” for informal workers and enterprises. 
The World Bank will continue to support public education programs like the Sarva Siksha Abhiyan (SSA). Under the next phase, Bank support will focus on the quality of education |
Agricultural Growth: Low agricultural productivity is keeping some 60 percent of India’s population behind. Shortages of basic rural infrastructure’– from roads to electrification – are hindering the growth of off-farm activities. No doubt, agricultural growth has been faster over the past five years (4.7 percent per year) – facilitated by very good monsoons, greater production of high-value fruits, vegetables, and dairy products, an increase in the minimum support price for grains, and the sudden increase in global prices for agricultural products. But, sustaining this level of performance over the longer term will be difficult without addressing several policy and structural constraints, including a myriad of restrictions, subsidies, support prices, sector governance issues, as well as the tiny size of landholdings and years of underinvestment.
II. Making development sustainable
Most environmental indicators suggest that growth is extracting an increasing toll on the country’s natural resources – water, land, forests, soils and biodiversity – and leaving a larger pollution footprint. India is highly vulnerable to climate change; cyclones, floods and droughts are happening with increasing frequency, and the Himalayan glaciers that feed India’s largest rivers show clear signs of retreat. Indeed, climate change will impact India first and foremost through its water resources. Rising temperatures will also affect agricultural yields, forests, and marine and coastal biodiversity. India will need to better manage these resources (particularly water) and reduce the burden that environmental degradation is imposing on the population, particularly on the most vulnerable groups.
India needs to better manage its natural resources to sustain economic growth |
III. Increasing the effectiveness of service delivery
While much progress has been made on primary school enrollment, improvements have been elusive in other sectors, particularly health. Although deaths from TB have fallen and polio cases have reduced dramatically in 2008, child malnutrition levels are worse than in Sub-Saharan Africa, despite large expenditures. No Indian city provides water 24/7, only half the population has access to safe drinking water, and less than a third has access to sanitation. Given the importance of these schemes, systemic improvements in design and governance are crucial to get results from public spending. The new strategy will place special emphasis on centrally sponsored schemes that aim to achieve the MDGs. The Bank will focus on increasing accountability to citizens, decentralizing responsibilities, and enhancing private sector participation in the delivery of these services.
Different needs, different approaches
The tremendous size of India and the sharply different levels of development both within states and between states require a differentiated approach to meeting the country’s development needs. i. Low-income states
The new strategy devotes more resources to engaging with India’s seven low-income states––Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, and Uttar Pradesh––which are home to more than half of India’s population. Here, the Bank will focus on poverty reduction and on achieving the Millennium Development Goals (MDGs). Intensive technical assistance will be provided to help these states develop their administrative capacity. Bank lending to these states will primarily be in the form of low-interest IDA credits as well as technical and advisory services. ii. Middle-income states
In India’s middle-income states – which are already at income levels comparable to lower middle income countries – the Bank will provide support on two fronts: fighting poverty in the lagging regions of these states, and addressing the complex challenges emerging from rapid growth. States such as Andhra Pradesh, Karnataka, Punjab, Tamil Nadu, Haryana, Gujarat, and Maharashtra will be helped to forge the institutions needed in a middle income economy. Cutting-edge analytical work and the best international expertise will be brought to bear upon complex problems where there are yet no clear solutions. Lending to these states will be in the form of competitively priced IBRD loans. iii. Engaging at the Center
The World Bank Group will continue to support policy and institutional changes in central government and the expansion of national programs. One such example is the support for India’s public education system, the Sarva Siksha Abhiyan (SSA). Schools are now accessible and the program has achieved gender equity. Under the next phase, Bank support will focus on the quality of education. Another example is the Bank’s continued support to PowerGrid, a leading electric transmission network in India.
World Bank provides additional lending to cope with global financial crisis
Support to IIFCL, SIDBI and PowerGrid | The World Bank has agreed to help India with US$ 3 billion of increased investment as the global financial crisis undermines private financing for the country’s much-needed infrastructure agenda.
The development institution has provisioned this additional amount as part of the total financing envelope of US$ 14 billion proposed in the India Country Strategy over FY 2009-2011. The strategy is geared to help India fast track infrastructure development, support the country’s seven poorest states, and respond to the financial crisis.
Part of the additional financing can be put to work swiftly in some areas where the Bank is already engaged: including a line of credit to the India Infrastructure Finance Company Limited (IIFCL) to help finance private-public partnerships in infrastructure; funding for the Small Industries Development Bank of India (SIDBI) to provide credit to small and medium enterprises; and assistance to PowerGrid to expand its transmission network. Other areas which could receive support from additional financing include the National Housing Bank and the recapitalization of state banks, the details of which are yet to be discussed with the Government of India. |
Focus on implementation
Apart from focusing on the states, strengthening project implementation is at the core of the new strategy.
This will include supporting analysis of important issues confronting policymakers, including poverty and exclusion, skills and job creation, low-carbon growth, the challenges of rapid urbanization, and the management and development of water resources.
Working with the private sector
The World Bank’s private sector affiliate, the International Finance Corporation (IFC), also has an extensive program for addressing poverty in India. The World Bank and IFC are already collaborating to bring cutting-edge expertise for Public-Private Partnerships (PPPs), tailored to India’s needs. India was the largest IDA and second largest IBRD borrower from the Bank in fiscal 2008. The Bank’s US$ 15.1 billion-portfolio in the country covers 61 active investment projects.
For more information on the Bank’s work in India, please visit http://www.worldbank.org.in
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