WWOR LOD B ANAK OTPER AT IAONTS E VAL UNATEIOAN DC-PARrTMVINENT I nd ia: The 22552 Challenges of Develo ment A Country Assistance Evaluation pp~~~~~l, .' , X ' sX :' ' ' ' : :' ; : ' ; : ' 's s\, j0_/ U; OPERATIONS EVALUATION DEPARTMENT ENHANCING DEVELOPMENT EFFECTIVENESS THROUGH EXCELLENCEAND INDEPENDENCE IN EVALUATION The Operations Evaluation Department (OED) is an independent unit within the World Bank; it reports directly to the Bank's Board of Executive Directors. OED assesses what works, and what does not; how a borrower plans to run and maintain a project; and the lasting contribution of the Bank to a country's overall development. The goals of evaluation are to learn from experience, to provide an objective basis for assessing the results of the Bank's work, and to provide accountability in the achievement of its objectives. It also improves Bank work by identifying and disseminating the lessons learned from experience and by framing recommendations drawn from evaluation findings. WORLD BANK OPERATIONS EVALUATION DEPARTMENT MEDN INDIA: THE CHALLENGES OF DEVELOPMENV A Country Assistance Evaluation Glanni Zanini 2001 The World Bank http: /,/Ivwww .wworldbank. ori/httil/oed Washington, D.C. Copyright © 2001 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, USA All rights reserved Manufactured in the United States of America First printing May 2001 1 2 34 04 0302 01 The opinions expressed in this report do not necessarily represent the views of the World Bank or its member governments. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement of acceptance of such boundaries. The material in this publication is copyrighted. The World Bank encourages dissemination of its work and will normally grant permission promptly. Permission to photocopy items for internal or personal use, for the internal or personal use of specific clients, or for educational classroom use is granted by the World Bank, provided that the appropriate fee is paid directly to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers MA 01923, U.S.A., telephone 978-750-8400, fax 978-750-4470. Please contact the Copyright Clearance Center before photocopying items. For permission to reprint individual articles or chapters, please fax your request with information to the Republication Department, Copyright Clearance Center, fax 978-750-4470. All other queries on rights and licenses should be addressed to the Office of the Publisher, World Bank, at the address above, or faxed to 202-522-2422. Cover photo: World Bank photo library. ISBN 0-8213-4968-6 Library of Congress Cataloging-in-Publication data has been applied for. * Printed on Recycled Paper CONTENTS v Acknowledgments ix Foreword xiii Executive Summary xx Abbreviations and Acronyms I 1. India's Development Record 1 From Independence through the 1980s 2 The 1990s: Far-Reaching Reform 5 Strong Foundations for Development 5 A Large, Unfinished Reform Agenda 9 2. The India-World Bank Historical Relationship .9 External Development Assistance and the Bank's Contribution 9 Through the 1970s: A Cyclical Relationship 10 The 1980s: Lending Push in a Poor Policy Environment 12 The 1990s: Enhanced Relevance of the Bank Assistance Strategy 15 3. The Bank's Products and Services 15 Analytical Services: High Quality but Limited Outreach 16 Lending Priorities: Toward Social Sectors 17 Completed Project Performance: Mediocre 21 Ongoing Portfolio: Sound 21 Efficiency: Adequate 22 Aid Coordination and Effectiveness: Uneven 25 4. Selected Sectors and Topics 25 Overview of Sectoral Assistance 32 Public Financial Accountability: A Promising Beginning 33 Mainstreaming Participation, but Resettlement Safeguards Are Still Contentious 34 Gender: Unsuccessful Mainstreaming 35 5. The Development Effectiveness of Bank Assistance 35 The Elusive Counterfactual 36 Development Effectiveness: Improving 37 Bank and Borrower Performance: Mixed 39 6. Improving Assistance for Higher Reach and Impact 39 Lending Instruments 40 Lending Linkage 40 State Focus 40 Program Priorities 41 Analytical Work 41 Monitoring 41 Participation 41 Safeguards 41 Aid Coordination 42 The Bank's Efficiency 43 7. The Client's Evaluation of Bank Assistance 43 Civil Society's Views from the CAE/CAS Synthesis Workshop 44 Feedback from the India-Based CAE Advisers 45 Feedback from the Government iii INDIA: THE CHALLENGES OF DEVELOPMENT 47 Annexes 47 A: Reference Tables 48 Table A.1: Economic and Social Indicators for India and Selected Comparators 52 Table A.2: OED Summary Ratings for India 53 Table A.3: Portfolio of Bank Lending to India (Exit/Approval FY90-00) 57 B: Report from the Committee on Development Effectiveness 60 Endnotes 64 Bibliography Text Boxes 10 2.1 Strong Local Institutions and the Right Incentives: Operation Flood 13 2.2 Poverty Reduction Focus of Bank Assistance 16 3.1 The Bank's Outreach Has Improved but Still Falls Short 17 3.2 A Strong Link Between Analysis and Policy Dialogue 27 4.1 Cautious Conclusions Cloud the Policy Dialogue for Rural Development 28 4.2 An Extraordinary Failure-The Upper Krishna Irrigation II Project 29 4.3 Strong Local Institutions and the Right Incentives: Uttar Pradesh Sodic Lands Projects 31 4.4 Best Practice Projects Text Figures 2 1.1 Poverty, Inequality, and Consumption per Capita, 1971-97 11 2.1 Commitments, Disbursements, and Net Transfers, 1985-2000 18 3.1 Net Lending Commitments by Sector, 1986-90 and 1996-2000 18 3.2 India's Poverty Distribution and Bank Lending 20 3.3 OED Project Evaluation Ratings by Commitment, Fiscal 1976-2000 Text Tables 4 1.1 Selected Economic Indicators 4 1.2 Key Social Indicators, 1980-98 19 3.1 OED Project Evaluation Ratings, Comparative Performance, Various Fiscal Years 20 3.2 OED Project Evaluation Ratings, Sectoral Performance, Fiscal 1996-2000 iv t~~~~~~~ r~~~~~ ACKNOWLEDGMENTS T his Country Assistance Evaluation (CAE) Ravallion, lead adviser on poverty, Develop- builds on evaluations of sector assistance ment Economics and Chief Economist (DEC); programs, projects, and nonlending serv- Anandarup Ray, consultant (former senior ices to assess the development effectiveness of economic adviser, DEC); Daniel Ritchie, con- Bank assistance to India during the 1990s. It sultant (former director for the Asia Techni- uses the Operations Evaluation Department's cal Department); and Anwar Shah, principal (OED) standard evaluation categories: outcome evaluator and public sector management clus- (that is, relevance, efficacy, and efficiency), sus- ter leader, OED. Outside reviewers include tainability, and institutional development. Marc Lindenberg, Dean, Graduate School of The areas covered by the evaluation work Public Affairs, University of Washington (for- broadly mirror those emphasized in the Coun- mer Senior Vice-President, CARE) and the fol- try Assistance Strategy (CAS) documents of the lowing Indian experts: S. Aiyar, U.S.-based late 1990s. They reflect the main assessment correspondent, Economic Times of India; R. categories of country performance proposed in Mohan, Director, National Council of Applied the replenishment paper for IDA12 and are gen- Economic Research, New Delhi; G. Sen, Pro- erally consistent with the comprehensive de- fessor, Indian Institute of Management, Ban- velopment framework: private and financial galore, and Chair of the External Gender sector development; public sector management Consultative Group, World Bank; A. Sengupta, reform; rural and urban development; energy, Professor, J.N. University, New Delhi, (for- water management, and transport; human and mer member of the Planning Commission and social development; and the environment. Executive Director, International Monetary Reviewers who commented on early drafts Fund); T. N. Srinivasan, Professor, Economics (but who cannot be held responsible for er- Department, Yale University; and Isher J. rors, omissions, or for OED's evaluation judg- Ahluwalia, Director and Chief Executive, In- ments) include, among current or former dian Council for Research on International World Bank staff, Mark Baird, country direc- Economic Relations, New Delhi, who also tor for Indonesia, East Asia and Pacific Region provided feedback on early drafts of the back- (EAP); Vinay Bhargava, country director for the ground papers dealing with poverty and core Philippines, EAP; Pieter Bottelier, consultant macroeconomic issues. (former country director for China, EAP); Sar- Bank staff and Indian officials and observers war Lateef, senior adviser, Poverty Reduction were interviewed during 1999 and 2000 in Wash- and Economic Management Network; Martin ington, D.C., and in India. During a CAE mission v INDIA: THE CHALLENGES OF DEVELOPMENT in April and May 1999, which included visits to The CAE also relied on various ongoing OED Ahmedabad, Delhi, Hyderabad, Lucknow, and sector assistance reviews (which were also case Mumbai, group discussions were held in Delhi studies for Bankwide sector assistance reviews): on a number of sectoral topics and cross-cutting by R. Berney and J. Levine (OEDST) on energy; themes. Further sectoral consultations and joint Uma Lele (OEDST) and N. Kumar (consultant) CAE/CAS workshops (jointly organized by OED on forestry; Keith Pitman (OEDST) and I. J. and the South Asia Region) took place from Singh (consultant) on water resource manage- March to May 2000 (for health and forestry in ment; R. Ridker (consultant) and S. Stout (Op- 1999). In April 2000, a second CAE mission held erations Evaluation Department Office of the fmnal consultations on a preliminary CAE draft and Director) on health, nutrition, and population; a CAE/CAS synthesis workshop (also joint with and K. Ringskog (OEDST) and Nola Chow (con- the Region). sultant) on environment. Also, Rema Balasun- Various background papers and notes were daram and Patricia Laverley (OEDPK) reviewed prepared by consultants and OED staff and are the lessons from other donors' evaluations and available as part of the OED Working Paper Se- Barbara Yale (OEDCM) analyzed the aid coor- ries. They all have taken into account comments dination survey. Finally, the CAE and some of received from peer reviewers, Bank staff, civil the background papers drew on recent OED and society, and the government. Their findings, Quality Assurance Group evaluations on the however, remain entirely the responsibility of dairy industry, NGOs, resettlement, rural water the individual authors. These papers are avail- supply, and sanitation. able on request. Stephen Howes and Mandakini Kaul of the The core team members produced evalua- New Delhi Office (among other staff) and Chi- tive papers in their areas of responsibility: Di- tra Bhanu (OED consultant) were instrumental nanath Khatkhate, on private sector and in the organization of the extensive consultations financial sector development; Jack van Holst held in March-May 2000 and in coordinating all Pellekaan, on rural development and on the comments required of regional staff on the poverty; and Baran Tuncer, on public sector many background papers. management and state focus. Other contribu- J. Gwyer and 0. Rajakaruna (consultants) tors included: Swaminathan Aiyar (consult- provided inputs on portfolio management and ant) on the Bank's external communications performance, quality at entry, and research and strategy; Anaya Basu (Development Econom- gave statistical assistance. W. Hurlbut (OEDST) ics Research Group, World Bank) on gender; provided editorial advice. R. Baba, N. Namisato, Helen Abadzi (Operations Evaluation Depart- C. Diaw, and D. Flex invaluably supported the ment Sector and Thematic Evaluation, OEDST, entire CAE team. World Bank), Sukhdeep Brar, and Aklilu Habte Gianni Zanini (task manager, Operations Eval- (consultants) on education; Hernan Levy uation Department Country Evaluation and Re- (OEDST, World Bank) on transport; Om gional Relations) produced the main CAE report Prakash Mathur (consultant) on urban devel- with close assistance from Jack van Holst opment; T. N. Srinivasan (consultant) on eco- Pellekaan (consultant). The main report has nomic challenges for poverty reduction and taken into account comments from the review- growth; A. Vaidyanathan (consultant) on irri- ers mentioned above, OED staff and manage- gation (this paper was used as an input to the ment, former and current Bank staff and rural development and the water resource management working on India, and former and management background papers); Warren Van current officials in the Government of India. Of- Wicklin III (Operations Evaluation Depart- ficial government comments on the October 24, ment Corporate Evaluation and Methods, World 2000, draft of the CAE were received only from Bank) on social development; and Vinod Sah- the Ministry of Human Resource Development. gal and Deepa Chakrapani (OEDCM) on pub- Those comments were taken into account in lic financial accountability. preparing this version of the CAE and are dis- vi ACKNOWLEDGMENTS cussed in the background paper titled "Evaluat- ing Bank Assistance for Education Sector De- velopment." Director-General, Operations Evaluation Department: The study was published in the Partnerships RobertPlcciotto and Knowledge Group (OEDPK) by the Out- Director, Operations Evaluation Department: reach and Dissemination Unit. The task team in- Gregory K Ingram cludes Elizabeth Campbell-Page (task team Manager, Country Evaluation & Regional Relations: leader), Caroline McEuen (editor), and Juicy Ruben Lamdany Qureishi-Huq (administrative assistant). Task Manager: Gianni Zanini vii FOREWORD FOREWORD PROLOGO PREFACE This evaluation assesses the En este documento se evalua la Cette etude evalue 1'efficacite development effectiveness of Bank eficaciadelaasistenciaprestadaporel de l'assistance de la Banque au assistance to India during the 1990s. Banco a la India en los afios noventa con developpement de l'Inde pendant les India was one of the Bank's founding el prop6sito de impulsar el proceso de annees 1990. L'nde est l'un des mem- members and remains one of its desarrollo de ese pais. La India, miem- bres fondateurs de la Banque est reste largest and most influential borrowers. bro fundador del Banco, sigue siendo I'un de ses emprunteurs les plus im- The Bank has been India's largest uno de sus prestatarios mas grandes e portants et les plus influents. La Banque source of external long-term capital influyentes. El Banco ha sido el mayor est la principale source de capitaux and has financed a sizable share of proveedor externo de capital a largo exterieurs a long terme du pays et fi- its public investment. Its lending and plazo del pais y ha financiado una pro- nance une part notable de ses in- nonlending services have been thinly porci6n considerable de las inversiones vestissements publics. Ses prets et ses spread over many central and state del sector publico; asimismo, ha sum- activites non financieres concernent agencies and have addressed many inistrado servicios crediticios y no cred- une multitude d'agences des etats et du different objectives. iticios, con objetivos muy diversos, a gouvernement federal et poursuivent India entered the decade with numerosos organismos del gobierno un grand nombre d'objectifs divers. substantial economic and social central y de los estados. Au debut des annees 1990, l'Inde achievements but also with closed La India comenz6 el decenio con avait deja fait d'importants progres sur trade and investment regimes, fiscal notables logros econ6micos y sociales, le plan economique et social, mais imbalances, and a large and un- pero tambien con regimenes cerrados son developpement etait freine par wieldy public sector. After a bal- de comercio e inversiones, desequi- des reglementations restrictives en ance of payments crisis in 1991 it librios fiscales y un sector publico matiere de commerce et d'in- deregulated the trade and invest- grande e inmanejable. Tras la crisis de vestissement, par les deficits budge- ment regimes. Economic growth re- balanza de pagos de 1991, desregul6 taires et par la taille et la lourdeur du bounded quickly and proved dichos regimenes. El crecimiento secteur public. A la suite d'une crise resilient even during the 1997 East econ6mico se recuper6 rapidamente de la balance des paiements en 1991, Asian crisis. Social indicators also y resisti6, incluso, los embates de la le gouvernement a liberalise le com- improved. India, however, failed to crisis que sacudi6 al este asiatico en merce et les investissements. La re- sustain the reform process in the 1997. Tambien los indicadores so- lance economique a ete rapide et a fiscal area and to broaden it to other ciales mejoraron. Sin embargo, la India resiste a la crise qui a frappe l'Asie structural areas. Moreover, there was no consigui6 mantener el proceso de Orientale en 1997. Les indicateurs little progress in reducing rural reformas en el campo fiscal ni ampli- sociaux se sont ameliores. Cepen- poverty, largely due to the absence arlo a otros sectores estructurales. dant, l'Inde n'a pas reussi a maintenir of an effective agricultural and rural Ademas, la pobreza se redujo muy le rythme des r6formes budgetaires development strategy and low poco en las zonas rurales, en gran me- et a etendre le processus a d'autres growth in the poorer northern and dida debido a la ausencia de una es- problemes structurels. En outre, peu eastern states. In the second half of trategia eficaz de desarrollo agricola y de progres ont et faits vers une re- the 1990s, a few states initiated sub- rural y al escaso crecimiento de los es- duction de la pauvrete rurale, en l'ab- stantial policy and institutional tados mas pobres del norte yel este. En sence d'une strat6gie agricole et de changes, but there remains a large la segunda mitad del decenio de 1990, d6veloppement rural efficace et du outstanding reform agenda at both algunos estados emprendieron impor- fait de la faible croissance des etats the state and federal levels. tantes reformas normativas e institu- les plus pauvres du nord et de l'est. ix INDIA: THE CHALLENGES OF DEVELOPMENT The Bank provided strong cionales, pero son muchos los Pendant la deuxieme moiti6 support for the reforms of cambios pendientes, tanto en des annees 1990, quelques the early 1990s, beginning el gobiemo federal como en e tats ont commence a re- with three adjustment loans. - los estados. former leurs politiques et leurs It expanded assistance to the El Banco proporcion6 un institutions; neanmoins, c'est social sectors; devoted more fuerte respaldo para las refor- un vaste programme de re- attention to improving par- mas de principios de los afios formes que l'Inde doit encore ticipation; and, where de- noventa, comenzando con entreprendre au niveau des velopment results had been tres prestamos para fines de ajuste. etats et du gouvernement federal. unsatisfactory, reduced lending (to Ampli6 su asistencia a los sectores so- Au debut des annees 1990, la virtually zero in power) and em- ciales; dedic6 mayor atenci6n a mejo- Banque a fortement soutenu les re- barked on comprehensive sector rar la participaci6n; y, donde los formes, au moyen tout d'abord de trois work-for example, in rural devel- resultados no habian sido satisfacto- prets d'ajustement. Elle a ensuite etendu opment and irrigation. After the rios en terminos de desarrollo, re- son assistance aux secteurs sociaux et mid-1990s the Bank focused assis- dujo el financiamiento (practicamente a accorde une attention particuliere ai tance on reforming states, with a a cero para el sector de la energia) e une meilleur participation; la ou les notable measure of success. Still, inici6 amplios estudios sectoriales, resultats obtenus etaient decevants, more emphasis on fiscal manage- por ejemplo, en la esfera del riego y elle a reduit ses prets (a virtuellement ment, on public sector and judicial el desarrollo rural. En la segunda zero dans le secteur de l'energie), mais reforms, on improvement in agri- mitad del decenio, el Banco centr6 su a entrepris un vaste programme d6- cultural policies and rural devel- asistencia en la reforma de los esta- tudes sectorielles, par exemple dans le opment, and on gender equity may dos, con bastante exito. No obstante, developpement rural et l'irrigation. have led to greater impact. se podrian haber logrado mejores re- Depuis le milieu des annees 1990, la Overall, the strategic goals of the sultados si se hubiera hecho ma.s hin- Banque a concentre avec succes son Bank were relevant and the design capie en la administraci6n fiscal, la assistance sur les etats reformateurs. of the assistance strategy improved reforma del sector publico y el poder Neanmoins, l'aide de la Banque aurait as the decade unfolded. Efficacy judicial, el mejoramiento de las politi- peut-etre et plus efficace si l'institution was modest, mainly on account of cas agricolas y el desarrollo rural, y avait accorde une plus haute priorite the Bank's limited impact on fiscal la igualdad entre los generos. a la gestion budgetaire, a la reforme du and other structural reforms, the fail- En general, los objetivos es- secteur public et du pouvoir judiciaire, ure to develop an effective assis- trat6gicos del Banco fueron perti- a l'amelioration des politiques agri- tance strategy for rural poverty nentes y el disefio de la estrategia de coles et de developpement rural et a reduction, and the mediocre quality asistencia fue mejorando a medida l'galite des sexes. at exit of projects. Institutional de- que avanzaba el decenio. La eficacia Ce document a une distribution velopment impact has also been result6 moderada, fundamentalmente restreinte et ne peut etre utilise par ses modest and sustainability uncertain debido a la limitada incidencia del destinataires que dans l'exercice de given the remaining serious fiscal Banco en las reformas fiscales y otras leurs fonctions officielles. Son con- imbalances, high environmental reformas estructurales, la incapaci- tenu ne peut etre divulgue qu'avec costs, and governance weaknesses. dad para elaborar una estrategia de l'autorisation de la Banque Mondiale. Thus, the overall outcome of the as- asistencia eficaz para reducir la po- Dans l'ensemble, les objectifs sistance for the decade is rated as breza en las zonas rurales y la strategiques de la Banque etaient moderately satisfactory. mediocre calidad final de los proyec- sains et la structure de la strategie The relevance of the assistance tos. Los efectos para el desarrollo in- d'assistance s'est amelioree tout au strategy, however, has improved sub- stitucional tambien han sido escasos y long de la decennie. Le programme stantially over the past two years la sostenibilidad, incierta, en vista de los a eu une efficacite modeste, du fait through a more sharpened focus on graves desequilibrios fiscales que auin surtout de l'influence limitee de la poverty reduction, a more selective existen, los elevados costos ambientales Banque sur la reforme budgetaire et approach to state assistance, and y las deficiencias de la gesti6n publica. d'autres reformes structurelles, de son x FOREWORD greater attention to gover- En consecuencia, el resultado incapacite de mettre au point nance and institutions. But it general de la ayuda prestada une strategie efficace de re- is too early to gauge the effi- durante el decenio en su con- duction de la pauvrete rurale cacy of these recent initiatives. - junto se califica como moder- et de la qualite mediocre des India has built strong foun- adamente satisfactoria. . projets acheves. L'impact de dations for development. The Sin embargo, la pertinencia la Banque sur le developpe- Bank's main challenge is to de la estrategia de asistencia ment institutionnel a egale- support far-reaching reforms, ha mejorado considerable- ment et modeste et la at both the state and central govern- mente en los ultimos dos anos, gra- durabilite des effets de ses inter- ment levels, with high-quality and cias a una dedicaci6n especial a la ventions est incertaine, compte tenu widely disseminated policy studies reducci6n de la pobreza, un criterio de l'importance des deficits budg& and policy-based sector and program mas selectivo frente a la ayuda a los taires, de graves problemes d'envi- loans. The five pillars and the fiscal estados y una mayor atenci6n a la ronnement et d'une faible and structural reform triggers of the gesti6n de gobierno y las institu- gouvernance. Bref, les resultats 1997 Country Assistance Strategy re- ciones. Pero todavia es demasiado globaux de cette assistance pendant main valid. Thus, only adjustments to pronto para evaluar la eficacia de l'ensemble de la decennie sont con- accelerate and assure the full appli- estas iniciativas recientes. sideres comme moderement satis- cation of those pillars and triggers ap- La India tambien ha sentado bases faisants. pear necessary. s6lidas para el desarrollo. La principal Neanmoins, la pertinence de la The Bank should link the overall dificultad, para el Banco, consiste en strategie s'est nettement amelioree au lending volumes to fiscal discipline respaldar reformas profundas, tanto cours des deux dernieres annees, du at the central government level and en los estados como en el gobiemo fait d'une plus grande concentration to progress in structural reforms in central, con estudios sobre politicas, de sur la reduction de la pauvrete, d'une agriculture and the implementation excelente calidad y amplia difusi6n, y aide plus s6lective aux 6tats et d'une of an effective rural development prestamos para programas y reformas attention plus forte aux problemes de strategy, as progress in these areas de politicas sectoriales. Los cinco pilares gouvemance et de developpement is crucial for rural poverty reduc- y los mecanismos de activaci6n de la institutionnel. Toutefois, il est encore tion. New lending should be con- reforma fiscal y estructural establecidos trop t6t pour evaluer l'efficacite de centrated in reforming states, where en la estrategia de asistencia al pais de ces nouvelles initiatives. an assistance strategy has been 1997 siguen siendo validos. Por ello, L'Inde a bati de solides fondations agreed with the state government, s6lo parecen ser necesarios los ajustes pour son developpement futur. Pour while maintaining a strong policy destinados a acelerar y asegurar la la Banque, le principal defi est d'ap- dialogue with the center and sup- plena aplicaci6n de dichos pilares y puyer de profondes reformes au porting analyses of state finances. mecanismos. niveau des 6tats et du gouvernement policies, and institutions in nonre- El Banco deberia condicionar el federal, grace a des 6tudes de haute forming states. Similarly, sectoral volumen global del financiamiento a qualite largement disseminees et a des lending volumes should be linked to la disciplina fiscal del gobierno cen- prets programmes et des prets secto- agreements on sector-specific poli- tral, asi como al avance de las refor- riels pour la reforme des politiques. Les cies and institutional frameworks. mas estructurales en el sector agricola cinq principales composantes du doc- While in recent years Bank assis- y la ejecuci6n de una estrategia efi- ument de strategie de 1997 et les con- tance has become more pro-poor, caz de desarrollo rural, puesto que el ditions relatives a la reforme budgetaire the Bank should make greater ef- progreso en estos campos es crucial et aux reformes structureiles restent val- forts to monitor systematically the para reducir la pobreza en las zonas ables. Seuls quelques ajustements poverty and gender impacts of Bank- rurales. Los nuevos prestamos de- paraissent necessaires pour accelerer assisted projects and programs, as berian concentrarse en la reforma de et renforcer l'execution des com- well as to mainstream gender be- los estados con cuyas autoridades se posantes et des conditions. yond the social sectors. It should also hubiera acordado una nueva estrate- La Banque doit tier le volume assist government agencies to do the gia de asistencia, a la vez que se global de ses prens a la discipline xi INDIA: THE CHALLENGES OF DEVELOPMENT same for overall public ex- mantiene un intenso dialogo budg6taire au niveau du gou- penditure programs. Finally, - sobre politicas con el gobiemo vemement central, au progres it should strengthen aid co- central y se respaldan los anali- des reformes structurelles dans ordination on country assis- -. sis de las finanzas, politicas e I'agriculture et a la mise en tance strategies and on critical instituciones de los estados o. ceuvre d'une strategie efficace sector strategies (for exam- que no han iriciado reformas. de developpement rural; en ple, agriculture and rural de- Analogamente, los volumenes effet, des progres dans ces do- velopment) to enhance the de financiamiento sectorial de- maines sont essentiels pour la effectiveness of external assistance berian vincularse a acuerdos sobre r6duction de la pauvrete rurale. Les and enable greater selectivity in the marcos normativos e institucionales prets nouveaux doivent etre concentres Bank's own programs. propios de cada sector. sur les etats reformateurs, sur la base Aun cuando en los ultimos afios la d'un accord sur la strategie d'assistance asistencia del Banco se ha orientado avec chaque gouvemement; dans les mas a reducir la pobreza, el Banco de- etats qui refusent les reformes, la beria desplegar mayores esfuerzos Banque doit maintenir un bon dialogue para realizar un seguimiento sis- de politiques et appuyer des etudes temAtico de los efectos de los proyec- de la situation fnancier, des politiques tos y programas que financia en la et des institutions des etats. De la meme pobreza y en la situaci6n de la mujer, facon, le volume des prets sectoriels doit asi como para incorporar la prob- etre lie A des accords precis sur les lematica del genero a otros sectores, politiques et les institutions du secteur. ademas de los sociales. Deberia, Au cours des dernieres ann6es, l'as- asimismo, ayudar a los organismos sistance de la Banque A et de plus en publicos a hacer lo mismo en relaci6n plus orientee sur les problemes de con los programas globales de gasto pauvrete; neanmoins, la Banque doit puiblico. Por u1timo, deberia mejorar intensifier ses efforts pour organiser un la coordinaci6n de la ayuda en las es- suivi systematique de l'impact de ses trategias de asistencia al pais y en las programmes et projets sur la pauvrete estrategias para sectores de impor- et la condition feminine; elle doit aussi tancia critica (como la agricultura y el integrer les problemes degalite des desarrollo rural) a fin de mejorar la efi- sexes dans l'ensemble de ses opera- cacia de la asistencia externa y per- tions, au dela des seuls secteurs soci- mitir una mayor selectividad en los aux. La Banque doit aussi aider les propios programas del Banco. agences gouvemementales a etendre cette pratique aux programmes de depenses publiques. Enfin, elle doit renforcer la coordination des strategies d'assistance des bailleurs de fonds et des strategies sectorielles pour les secteurs critiques (par exemple l'agri- culture et le developpement rural), afin d'ameliorer l'efficacite de l'aide exterieure et d'accroitre la selectivite de ses propres programmes. Robert Picciotto Director-General, Operations Evaluation xii EXECUTIVE SUMMARY EXECUTIVE RESUMEN RESUME SUNMMARY - ANALYFIQUE India was one of the Bank's La India fue uno de los miem- _ L'nde est l'un des membres founding members. It is still one of the bros fundadores del Banco. Es todavia fondateurs de la Banque. Le pays, qui Bank's main borrowers and has had a uno de sus principales prestatarios y est reste l'un des plus grands em- major influence on the Bank's under- ha tenido una gran influencia en la prunteurs de l'institution, a beaucoup standing of development. The Bank manera en que el Banco entiende el influence les conceptions de la has been India's largest source of ex- desarrollo. El Banco ha sido la mayor Banque en matiere de developpement. ternal capital, providing almost a third fuente de capital externo de la India, La Banque est la principale source de of all long-term gross inflows in the ya que ha suministrado casi un tercio capitaux etrangers de l'inde; ses fi- 1980s and more than a fifth by the end de todas las entradas brutas a largo nancements, qui dans les annees 1980 of the 1990s. plazo en el decenio de 1980, y mas de representaient pres du tiers des ap- With more than a quarter (more una quinta parte al final de los afios ports bruts de capitaux, depassaient than 300 million) of the world's poor, noventa. encore le cinquibme de ces apports India's performance is critical to the Lo que ocurra en la India, pais vers la fin des annees 1990. achievement of the International De- donde se concentra una cuarta La performance d'un pays qui velopment Goals, which include parte (mas de 300 millones) de compte plus du quart des pauvres halving poverty worldwide between los pobres de todo el mundo, es du monde (plus de 300 millions) 1990 and 2015. This evaluation as- de gran trascendencia para el logro est d'une importance critique pour sesses the development effective- de las metas internacionales de l'accomplissement des Objectifs du ness of Bank assistance to India desarrollo, entre las que se in- Developpement International, qui during the 1990s. cluye reducir la pobreza mundial visent notamment a reduire de a la mitad entre 1990 y 2015. En moitie la pauvrete dans le monde de A Large, Unfinished Reform la presente evaluaci6n se inten- 1990 a 2015. La presente evaluation Agenda tara calibrar la eficacia en terminos etudie l'efficacite de l'assistance de India entered the 1990s with a sub- de desarrollo de la asistencia del la Banque au developpement de stantial record of achievement. Banco a la India durante el dece- l'Inde pendant les ann6es 1990. Famine had been eradicated and nio de 1990. self-sufficiency in food production Un Vaste Programme de achieved. Social indicators had im- Un programa de reforma Reformes, Encore Inacheve proved, with a rise in life expectancy, ambicioso e inacabado Au debut des annees 1990, l'Inde a reduction in infant mortality, a La India comenz6 el decenio de avait deja derri&e elle d'importantses moderated population growth rate, 1990 con un historial bastante pos- realisations. La famine avait ete and increased primary school en- itivo. Se habia erradicado el hambre eradiqu6e et le pays 6tait parvenu au rollment. But these indicators trailed y se habfa alcanzado la autosufi- stade de l'auto-suffisance alimen- those of China and many other low- ciencia en la producci6n de ali- taire. Les indicateurs sociaux s'etaient income countries, and India ranks mentos. Los indicadores sociales ameliores, grace a l'allongement de 132 out of 174 countries on the habian mejorado: alta esperanza de l'esperance de vie, a la reduction Human Development Index. At the vida, reducci6n de la mortalidad in- de la mortalite infantile, a une same time, only modest steps had fantil, moderada tasa de crecimiento moderation de la croissance demo- been taken toward economic reform, demografico y aumento de la ma- graphique et a l'augmentation des and India trailed in global economic tricula escolar primaria. Pero estos taux de scolarisation primaire. N6an- competition as well, burdened with indicadores iban a la zaga de los de moins ces indicateurs etaient encore xiii INDIA: THE CHALLENGES OF DEVELOPMENT closed trade and investment China y muchos otros paises inferieurs a ceux de la Chine regimes, fiscal imbalances, de ingreso bajo, y la India et de beaucoup d'autres pays and a large and unwieldy ocupa el nuimero 132 entre a faible revenu. L'Indice du public sector. un total de 174 en lo que se Developpement Humain A balance of payments cii- refiere al indice de desarrollo - place l'Inde au 132eme rang sis in 1991 prompted policy- humano. Al mismo tiempo, sur un total de 174 pays. En makers to move toward se habian conseguido s6lo outre, seuls des progres mod- reform. The approach was modestos progresos hacia la estes avaient et accomplis designed to give the private sector reforma econ6mica, y la India era vers les reformes economiques et a greater role in India's develop- menos competitiva a escala mundial, l'Inde - penalisee par des regle- ment by improving the investment sobrecargada como estaba con unos mentations restrictives en matiere and tax regimes, reorienting foreign regimenes cerrados de comercio e de commerce et d'investissement, investment policy, opening infra- inversi6n, desequilibrios fiscales y un par ses deficits budgetaires et par la structure to private investment, re- sector publico muy grande y poco taille et la lourdeur de son secteur forming public enterprises and the manejable. public - etait loin derriere beau- financial sector, and reducing price La crisis de la balanza de pagos coup d'autres sur le plan de la com- controls. The reforms paid off: eco- de 1991 impuls6 a las autoridades a petitivite economique. nomic growth rebounded and promover la reforma. El objetivo era Une crise de la balance des proved resilient, even during the dar al sector privado un papel mas paiements en 1991 a pousse les East Asian crisis of 1997. But India importante en el desarrollo de la dirigeants du pays a s'engager dans failed to sustain the fiscal reform India, mejorando los regimenes de la voie des reformes. Il s'agissait process and to broaden it to other inversi6n e impuestos, reorientando d'accorder une place plus impor- structural areas. There has also been la politica de inversi6n externa, tante au secteur prive dans le little progress in addressing rural abriendo la infraestructura a la in- developpement de l'Inde, en refor- poverty, largely because of the lack versi6n privada, reformando las em- mant le regime fiscal et la regle- of an effective agricultural and rural presas publicas del sector financiero mentation des investissements, en development strategy and low y reduciendo los controles de pre- revisant les politiques concernant growth in the poorer northern and cios. Las reformas dieron resultado: les investissements etrangers, en ou- eastern states. In the second half of el crecimiento econ6mico se rean- vrant le secteur des infrastructures a the 1990s, a few states initiated sub- im6 y demostr6 su capacidad de re- l'investissement prive, en restruc- stantial policy and institutional sistencia, incluso durante la crisis turant les entreprises publiques et le changes, but there is a large out- de Asia oriental de 1997. No ob- secteur financier et en assouplissant standing reform agenda at both the stante, la India no logr6 sostener el le contr6le des prix. Les reformes ont state and the federal levels. proceso de reforma fiscal ni ampli- donne de bons resultats: la relance arlo a otras areas estructurales. de la croissance economique a per- The Banks' Approach in the Ademas, se habia progresado poco siste et meme resiste a la crise qui 1990s: Enhanced Relevance en la lucha contra la pobreza rural, a frappe l'Asie Orientale en 1997. The relevance of Bank assistance en buena parte por falta de una es- Cependant, l'Inde n'a pas mis en increased markedly during and im- trategia agricola y de desarrollo rural oeuvre un programme de reforme mediately after the 1990-91 macro- eficaz y por el bajo crecimiento de budgetaire et n'a pas etendu le train economic crisis. During the first half los estados mas pobres del norte y des r6formes a d'autres problemes of the 1990s, the Bank focused on del este. En la segunda mitad el structurels. Peu de progres ont et crucial areas of reform for sustainable decenio de 1990, algunos estados realises dans le domaine de la pau- growth for improved macroeconomic iniciaron considerables cambios nor- vrete rurale, pour deux raisons prin- management and liberalization of the mativos e institucionales, pero to- cipales: l'absence d'une strategie trade and investment regimes and davia hay un amplio programa de agricole et de developpement rural on human development for broad- reforma pendiente tanto en el plano efficace et le faible croissance des based improvement in primary social federal como estatal. 6tats les plus pauvres du nord et de xiv EXECUTIVE SUMMARY services. It also expanded El enfoque del Banco en lest. Au cours de la deux- support for environmental los afios noventa: una ieme moitie des annees 1990, protection and devoted more mayor relevancia quelques 6tats ont lance d'im- attention to improving par- La relevancia de la asisten- portantes reformes concer- ticipation. Where develop- cia del Banco aument6 no- nant leurs politiques et leurs ment results were unsatis- tablemente durante la crisis institutions; neanmoins, en- factory, the Bank reduced macroecon6mica de 1990- core aujourd'hui, c'est un lending (to virtually zero in 91 y en el periodo inmedi- vaste programme de re- power) and launched comprehen- atamente posterior. Durante la formes que l'Inde doit entrepren- sive sector work. primera mitad el decenio de 1990, dre au niveau des 6tats et du In the second half of the 1990s, el Banco se centr6 en algunas areas gouvernement federal. and most notably after 1997, the rel- cruciales de la reforma para el crec- evance of Bank assistance to poverty imiento sostenible (mejor gesti6n La Strategie de la Banque reduction improved. In the mid- macroecon6mica y liberalizaci6n dans les Annees 1990: Un 1990s, the Bank began to focus as- de los regimenes de comercio e in- Programme Plus Pertinent sistance on reforming states, with versi6n) y en el desarrollo humano L'aide de la Banque est devenue notable success. But greater em- (mejora de amplia base en los ser- beaucoup plus pertinente pendant et phasis on fiscal management, pub- vicios sociales primarios). Ampli6 juste apres la crise macro6conomique lic sector and judicial reform, tambien su apoyo a la protecci6n de 1990-91. Pendant la premiere agricultural policy and rural devel- ambiental y dedic6 mas atenci6n a moitie des annees 1990, la Banque opment, and gender equity would mejorar la participaci6n. Cuando a concentr6 son attention sur des have been beneficial. los resultados en terminos de de- reformes vitales pour une croissance Overall, the strategic goals of the sarrollo fueron poco satisfactorios, durable (une meilleure gestion Bank during the decade were rele- el Banco redujo los prestamos (a macroeconomique et la liberalisa- vant and the design of the assistance practicamente cero en el sector de tion de la reglementation du com- strategy improved. Efficacy is rated la energia) y emprendi6 amplios merce et des investissements) et pour as modest, mainly because of the estudios sectoriales. le developpement humain (un vaste Bank's limited impact on fiscal and En la segunda mitad el decenio programme d'amelioration des serv- other structural reforms, the failure de 1990 y muy particularmente de- ices sociaux de base). Elle a 6gale- to develop an effective assistance spues de 1997, la relevancia de la ment accru son aide a la protection strategy for rural poverty reduction, asistencia del Banco para la reduc- de l'environnement et s'est interess6e and the mediocre quality of projects ci6n de la pobreza mejor6. A medi- davantage a l'amelioration des at exit. Institutional development im- ados de los anios noventa, el Banco processus participatifs. La ou les re- pact has also been modest, and sus- comenz6 a centrar la asistencia en sultats obtenus n'etaient pas satis- tainability uncertain, given the serious la reforma de los estados, con con- faisants, la Banque reduisait ses prets remaining fiscal imbalances, high siderables logros. Pero habria sido (a pratiquement zero dans le secteur environmental costs, and governance conveniente una mayor insistencia de l'6nergie) et lancait de grands weaknesses. Taken together, these en la gesti6n fiscal, la reforma del programmes d'etudes sectorielles. ratings gauge the overall outcome of sector publico y del poder judicial, Pendant la deuxieme moitie des assistance for the decade as moder- la politica agricola y el desarrollo annees 1990 et surtout depuis 1997, ately satisfactory. rural y la igualdad entre el hombre la Banque a am6liore la nature de But these ratings must be viewed y la mujer. ses interventions pour la reduction in light of the recent, substantial En terminos generales, las metas de la pauvrete. Vers le milieu des an- improvement in the relevance of estrategicas del Banco durante ese nees 1990, la Banque a commence the assistance strategy, largely decenio fueron relevantes, y mejor6 a s'interesser, avec succes, aux etats prompted by the innovations em- el disenio de la estrategia de asis- reformateurs. Mais il aurait ete bodied in the 1997 Country Assis- tencia. La eficacia se califica como souhaitable d'accorder une plus tance Strategy (CAS). The focus on modesta, sobre todo por la limitada haute priorite a la gestion budgetaire, xv INDIA: THE CHALLENGES OF DEVELOPMENT poverty reduction has been contribuci6n del Banco a las * la reforme du secteur pub- sharpened, a more selective reformas fiscales y estruc- lic et du pouvoir judiciaire, a approach to state assistance turales, la inexistencia de una la politique agricole, au has been put in place, and - estrategia eficaz de asistencia developpement rural et a 1'6- greater attention is being para la reducci6n de la po- galit6 des sexes. given to governance and in- breza rural y por la mediocre Dans 1'ensemble, les ob- stitutions, although it is still calidad de los proyectos en jectifs de la Banque au cours too early to judge the efficacy el momento de su con- de cette periode etaient sains of these initiatives. clusi6n. Los efectos del desarrollo in- et la structure de sa strategie d'as- stitucional han sido tambien sistance est meilleur. Les notes don- Next Steps modestos, y la sostenibilidad incierta, nees sur le plan de l'efficacite restent India has built strong foundations dados los graves desequilibrios fis- modestes, surtout a cause du faible for development. The Bank's main cales subsistentes, los altos costos impact de la Banque sur la r6forme challenge is to support far-reach- ambientales y los problemas de go- budgetaire et d'autres reformes ing reforms, at both the state and bierno. En conjunto, estas califica- structurelles, de son incapacite de central government levels, with ciones permiten considerar que el mettre au point une strategie effi- high-quality and widely dissemi- resultado global de la asistencia du- cace de reduction de la pauvrete ru- nated policy studies and policy- rante el decenio ha sido moderada- rale et de la qualite mediocre de based sector and program loans. mente satisfactorio. certains projets acheves. La Banque The five pillars of the 1997 CAS Al considerar estas calificaciones, n'a eu qu'une influence modeste remain valid: hay que tener tambien en cuenta sur le developpement institutionnel * Support policy reform in key que desde hace poco la estrategia de et la durabilite de ses interventions areas, including rural develop- asistencia resulta mucho mas rele- est incertaine en raison de la per- ment, power, urban manage- vante, sobre todo por las innova- sistance de graves deficits budge- ment, and urban water supply ciones plasmadas en la estrategia taires, de serieux problemes and sanitation. de asistencia al pais de 1997. Se ha d'environnement et de la faiblesse * Focus on poverty alleviation, in- conseguido una mayor atencion a la de la gouvernance. La synthese de cluding a large and expanding reducci6n de la pobreza, un toutes ces notes permet de con- social lending program and new planteamiento mas selectivo de la clure que, dans l'ensemble, les re- initiatives for community partici- asistencia a los estados y un mayor sultats obtenus pendantt dix ans pation and demand-driven small interes en el sistema de gobierno y d'assistance ont et moderement investments in the poorest las instituciones, aunque es todavia satisfaisants. districts. demasiado pronto para juzgar la efi- Neanmoins, cette appreciation * Increase the priority of social and cacia de estas iniciativas. doit etre corrigee pour tenir compte environmental impacts of Bank d'une nette amelioration de la operations. Proximas medidas strategie d'assistance au cours des * Promote private sector develop- La India ha construido s6lidos dernieres annees, grace surtout aux ment, including the financial cimientos para el desarrollo. El prin- innovations introduites dans le doc- sector. cipal desafio del Banco es apoyar re- ument de strategie de 1997. Une * Concentrate assistance on states formas de largo alcance, tanto en los plus haute priorite est maintenant ac- and programs strongly committed estados como en el gobierno central, cord6e a la reduction de la pau- to reform. con estudios sobre politicas de alta vrete, l'aide aux etats est devenue The fiscal and structural reform calidad y ampliamente difundidos plus s6lective et une attention plus triggers for lending embodied in acompafiados de prestamos para grande est apportee a la gouver- the CAS remain appropriate as well. programas y sectores orientados a la nance et au developpement des in- Only adjustments to accelerate and reforma de las politicas. Los cinco pi- stitutions; cependant, il est encore assure the full application of the lares de la estrategia de asistencia de trop tot pour juger de l'efficacite de pillars and triggers appear necessary. 1997 contin6an siendo validos: ces initiatives. xvi EXECUTIVE SUMMARY Recommendations - Apoyo a la reforma de Prochaines Etapes Lending Link. The Bank politicas en las areas L'Inde a etabli de solides fon- should link the overall lend- clave, en particular el de- dations pour son developpe- ing volumes to fiscal disci- - sarrollo rural, la electri- ment futur. Le principal defi pline at the federal level and cidad, la gestion urbana de la Banque est de soutenir to progress in structural re- y el abastecimiento de de profondes reformes au forms in agriculture and the agua y saneamiento en niveau des etats et du gou- implementation of an effec- las ciudades. vernement federal, grace A tive rural development strategy. . Atencion a la reducci6n de la po- des etudes de haute qualite qui de- Progress in these areas is essential to breza, con inclusion de un pro- vront etre largement diss6min6es et poverty reduction. The current link grama amplio y creciente de au moyen de prets programmes et between overall lending volume and pr6stamos sociales y nuevas ini- de prets sectoriels pour la r6forme fiscal discipline and between sec- ciativas para la participacion de la des politiques. Les cinq principales toral lending volumes and sector- comunidad y pequefnas inver- composantes de la strategie de 1997 specific policy and institutional siones impulsadas por la de- restent valables: frameworks would be maintained. manda en los distritos mas * Appui aux reformes de politiques New Lending. New lending pobres. dans les secteur prioritaires, no- should be concentrated in reforming * Mayor prioridad de los efectos tamment le developpement rural, states, where an assistance strategy sociales y ambientales de las op- l'6nergie, l'urbanisme, les adduc- has been agreed with the state gov- eraciones del Banco. tions d'eau et l'assainissement erinent. In nonreforming states, as- . Promocion del desarrollo del sec- dans les villes. sistance should be limited to policy tor privado, incluido el sector fi- * Concentration sur la lutte contre dialogue, clarification of perform- nanciero. la pauvrete, grace notamment A ance criteria, economic and sector * Concentracion de la asistencia en une forte expansion des prets work to contribute to the internal de- los estados y programas fuerte- aux secteurs sociaux, a de nou- bate, and pilot projects that demon- mente comprometidos con la re- velles initiatives de participation strate the benefits of policy and forma. des communautes et a de petits institutional reform. In the same Los requisitos de reforma fiscal y investissement dans les districts manner, sectoral lending volumes estructural, establecidos como des- les plus pauvres, repondant A la should be linked to agreements on encadenantes para el financiamiento demande des populations. sector-specific policies and institu- en la estrategia de asistencia al pais, * Une plus grande priorit6 A l'im- tional frameworks. continuian siendo tambi6n validos. pact social et environnemental Monitoring. Although Bank assis- S6lo parecen necesarios algunos des op6rations de la Banque. tance has become increasingly pro- ajustes para acelerar y garantizar la * Le developpement du secteur prive, poor in recent years, the Bank should plena aplicacion de los pilares y y compris du secteur financier. systematically monitor the poverty desencadenantes. * Concentration de l'aide aux etats and gender impacts of Bank-assisted et des financements de pro- projects and programs. Given the Recomendaciones grammes en fonction de la large gender gap, the Bank should Vinculacion con los prestamos. El vigueur de l'engagement en also make greater efforts to main- Banco deberia vincular el volumen faveur des reformes. stream gender beyond the social sec- global de los prestamos a la disci- Les conditions definies par le doc- tors. It should enlist government plina fiscal en el plano federal y al ument de strategie en ce qui con- agencies to do the same for public ex- progreso de las reformas estruc- cerne la reforme budgetaire et les penditure programs. turales en la agricultura y la apli- reformes structurelles restent egale- Aid Coordination. The Bank cacion de una estrategia de ment valables. Quelques ajustements should continue to endorse gov- desarrollo rural eficaz. El progreso paraissent necessaires pour accelerer ernment preparation and direction of en esas areas es fundamental para la et renforcer l'execution des princi- formal aid coordination meetings reduccion de la pobreza. Se man- paux objectifs et conditions. xvii INDIA: THE CHALLENGES OF DEVELOPMENT and to provide logistical sup- tendria la habitual conexi6n Recommandations port. To enhance the effec- entre el volumen global de Conditions des Prets. La tiveness of external assistance los prestamos y la disciplina Banque doit lier le volume and partnerships, and to en- 3 fiscal y entre el volumen de global de ses prets a la dis- able greater selectivity, the los prestamos sectoriales y cipline budgetaire au niveau Bank should strengthen las polfticas relativas a sec- - federal, aux progres des re- informal, in-country donor tores especificos y los marcos formes structurelles dans l'a- coordination of country assis- institucionales. griculture et a la mise en tance strategies and critical sector Nuevofinancamiento. El nuevofi- ocuvre d'une strategie efficace de strategies, such as agriculture and nanciamiento deberfa concentrarse developpement rural. Des progres rural development. en los estados interesados en la re- dans ces domaines sont essentiels forma, cuando se haya acordado una pour reduire la pauvret&. Les con- estrategia de asistencia con el gob- ditions presentes qui lient le vol- ierno estatal. En los estados no par- ume global des prets a la discipline tidarios de la reforma la asistencia budgetaire et le volume des prets deberfa limitarse al dialogo sobre sectoriels aux reformes des poli- politicas, la aclaraci6n de los criterios tiques et des institutions sectorielles de desempefio, los estudios econ6mi- doivent etre maintenues. cos y sectoriales para contribuir al Prets Nouveaux. Les nouveaux debate intemo y proyectos piloto que prets doivent etre concentres dans demuestren los beneficios de la re- les etats reformateurs sur la base forma normativa e institucional. De la d'un accord sur la strategie d'assis- misma manera, el volumen de los tance avec le gouvernement de prestamos sectoriales deberia vincu- chaque etat. Dans les etats qui re- larse a acuerdos sobre marcos insti- fusent les reformes, I'aide doit etre tucionales y politicas relacionados limitee au dialogue de politiques, a con sectores especificos. la clarification des criteres de per- Seguimiento. Aunque en los uilti- formance, aux etudes economiques mos afios la asistencia del Banco se et sectorielles permettant de faciliter ha centrado cada vez mas en los les debats internes et a des projets pobres, el Banco deberia supervisar pilotes visant a demontrer les avan- sistematicamente los efectos de los tages de la reforme des politiques et proyectos y programas respaldados des institutions. De la meme facon, por el en la lucha contra la pobreza le volume des prets sectoriels doit y el logro de una mayor igualdad &tre lie a des accords precis sur les entre el hombre y la mujer. Dadas politiques et le cadre institutionnel. las enormes diferencias en este ter- Suivi. Au cours des dernieres an- reno, el Banco deberia tambien n6es, la Banque s'est de plus en hacer mayor esfuerzo por incorpo- plus interessee a la lutte contre la rar este tema en las actividades ha- pauvrete; la Banque doit aussi or- bituales, mas alla de los sectores ganiser un suivi systematique de sociales. Deberia conseguir tambien l'impact de ses projets et pro- que los organismos gubernamen- grammes sur la pauvret6 et la con- tales hicieran otro tanto con los pro- dition feminine. Compte tenu de la gramas de gasto publico. gravite de 'inegalite entre les sexes, Coordinaci6n de la ayuda. El la Banque doit intensifier ses efforts Banco deberia continuar respal- pour integrer ce facteur dans dando la preparaci6n y direcci6n l'ensemble de ses operations au dela xviii EXECUTIVE SUMMARY gubernamental de las re- des seuls secteurs sociaux. uniones formales de coordi- Elle doit egalement mobiliser naci6n de ayuda y I'appui des agences gou- ofreciendo apoyo logistico. vernementales pour que les Para aumentar la eficacia de memespratiques soient eten- la asistencia externa y de las dues aux programmes de asociaciones y hacer posible depenses publiques. una mayor selectividad, el Coordination de lAide. La Banco deberia reforzar la coordi- Banque doit continuer de soutenir naci6n informal de los donantes les efforts du gouvernement pour la dentro del pais en lo que se refiere preparation et la coordination des a las estrategias de asistencia de al- reunions officielles de coordination cance nacional y las relativas a sec- de laide; cet appui doit etre ac- tores criticos, como la agricultura y compagn6 d'un soutien logistique. el desarrollo rural. Pour accroitre l'efficacite de l'aide ex- terieure et des partenariats et pour favoriser la selectivite, la Banque doit renforcer les reunions in- formelles des bailleurs de fonds dans le pays pour la coordination des strategies d'assistance, globalement et pour les secteurs les plus impor- tants, tels que l'agriculture et le developpement rural. xix ABBREVIATIONS AND ACRONYMS AIDS Acquired Immunodeficiency Syndrome CAE Country Assistance Evaluation CARE Cooperative for Assistance and Relief Everywhere CAS Country Assistance Strategy CEM Country Economic Memoranda CODE Committee on Development Effectiveness DEC Development Economics & Chief Economist DFID Department for International Development DPEPs District Primary Education projects EAP East Asia and Pacific Region ESW Economic and sector work GDP Gross domestic product Gol Government of India HIV Human Immunodeficiency Virus IBRD International Bank for Reconstruction and Development ICICI Industrial Credit and Investment Corporation of India IDA International Development Association IFC International Finance Corporation M&E Monitoring and evaluation NGO Nongovernmental organization NTPC National Thermal Power Corporation OED Operations Evaluation Department OEDST Operations Evaluation Department Sector and Thematic Evaluation PER Public Expenditure Review PIU Project Implementation Unit PREM Poverty Reduction and Economic Management Network QAG Quality Assurance Group SAC Structural Adjustment Credit SAL Structural Adjustment Loan SC Informal Subcommittee of the Committee on Development Effectiveness SDC Swiss Agency for Development Cooperation UNDP United Nations Development Programme UPBEP Uttar Pradesh Basic Education Project VEC Village Education Committee WTO World Trade Organization xx INDIA'S DEVELOPM\ENT RECORD From Independence through the 1980s Indian civilization is deeply rooted and far reaching. Long before the end of the first millennium, India had made seminal contributions to math- ematics, astronomy, architecture, metallurgy, medicine, weaving, dyeing, fine arts, language, and philosophy. Tolerance and spirituality characterize the country's rich culture.' When the British began establishing colonial rule in the 18th century, India's economy was strong in trade, commercial agri- culture, and labor-intensive industry, especially textiles. Its political struc- ture, however, was fragmented and its income distribution highly unequal. At independence in 1947, India had made remarkable strides in political con- solidation and the rise of an educated elite, but it remained an acutely im- poverished nation burdened by a surging population. Eradicating poverty became the declared over- concrete shape to this strategy in line with the arching objective of India's development strat- development paradigm of the time.' egy. A broad national consensus soon emerged Government control over the economy and the on the means to achieve this objective-rapid large role of public investment in productive ac- growth through industrialization and redistribu- tivities generated some social benefits but also had tive transfers to the poor. India's development a significant negative side. The industrial licens- policies welded two disparate visions: Mahatma ing system, the restrictions on capital flows, and Gandhi's dream of a simple, village-based econ- the complex system of high trade barriers reduced omy and Nehru's socialist ideal of a self-reliant competition, thwarted enterprise restructuring, welfare state. In deference to both, the govern- generated monopoly rents, and stifled growth. ment subsidized small-scale industries and hand- Paradoxically, the public sector-with its human icrafts and intervened extensively in the economy and financial resources overstretched-lacked through publicly owned heavy industries and di- the capacity to intervene effectively on behalf of rect controls. Economic openness was viewed the poor; that is, by providing universal school- with suspicion. A series of five-year plans gave ing and basic medical facilities. INDIA: THE CHALLENGES OF DEVELOPMENT The proportion of poor people fluctuated to replacement levels. Between 1970 and the late around 50 percent through the 1970s (see figure 1980s life expectancy rose from 49 to 60 years, 1.1), when the average per capita income growth infant mortality fell from 137 to 80 per thousand, rate was below 1 percent.3 The higher per capita and the annual population growth rate fell from growth of the 1980s, estimated at 3.5 percent, re- 2.3 percent to 2 percent. Primary enrollment duced poverty to around 34 percent. But the high rose from 73 percent to 97 percent. growth was unsustainable as it relied on excessive But social indicators trailed behind those of public spending and financing of the fiscal deficit China and many other low-income countries. at commercial rates. Moreover, the unintended bias By the end of the 1980s, with only modest steps against labor intensity was such that output growth toward economic reform, India also trailed in the in the industrial sector during 1951-91 did not con- global economic competition, the result of "clo- tribute to poverty reduction at all, either in urban sure to trade and investment; a license-obsessed, or rural areas. Instead, poverty reduction was pos- restrictive state; inability to sustain social ex- itively affected by growth in the agricultural and penditures; loss of confidence in the efficacy of service sectors, and by human capital development growth in reducing poverty; macro instability, in- (Ravallion and Datt 1996). deed crisis; pessimism; and marginalization of By the 1980s India had eradicated famine India in world affairs" (Bhagwati 1998). and attained self-sufficiency in food production. The Bank played a modest role in helping cre- The 1990s: Far-Reaching Reform4 ate the physical and institutional infrastructure The Gulf War's temporary effect of raising oil of the Green Revolution, but the Bank's role in prices and disrupting remittance inflows high- sustaining the revolution was critical (Lele and lighted India's macroeconomic weakness. By Bumb 1995). India also made significant gains June 1991, with reserves exhausted, India faced in social indicators, with some southern states serious external debt service problems. Per capita (led by Kerala) succeeding in bringing fertility economic growth turned negative. The macro- Headcount and Gini index (percent) Mean per capita consumption, 1973-74 (rupees) 60 80 Mean per capita consumption 55 Headcount index _ 70 55 7~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 40 - ---- ----------- - - -- -^- -- ^---- ---- - 4-- : 0 35 Gini index n n- 30 30 ..... .., - ''- 20 25 --- 10 2 0 I I F I i I l I I I I I I a I I I I I I I I 0 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 Note: Data points for headcount and Gini indexes for 1 995-97 are estimates. Missing data points are connected with a dotted line. Source: Dan 1997. 2 INDIA'S DEVELOPMENT RECORD economic crisis, the break up of the Soviet Union interest cost of the large and rising stock of gov- and its economic development model, and the ernment debt (see table 1.1). In public enterprise example of reforming China's economic suc- reform, India has so far preferred slow "disin- cess created the opportunity for the reformers to vestment" of minority stakes to privatizing viable take over policymaking. Understanding the need units or closing unviable ones. Much "learning to go beyond stabilization measures, a new gov- by doing" regarding the regulatory framework for ernment introduced two major structural policy private sector participation was combined with changes. It dismantled industrial licensing, ex- inadequate public investment in infrastructure, cept for 18 industries, and initiated the liberal- a major bottleneck (Ahluwalia 1999). Finally, ization of foreign trade and exchange. labor market rigidities remained untouched. The new approach aimed at giving the private India is still a low-income country with high sector a greater role in India's development by poverty, ill health, malnutrition, illiteracy, a large improving the investment and tax regimes, re- gender gap, and deep social divisions (see table orienting foreign investment policy, opening in- 1.2). Caste still matters: while two-thirds of all In- frastructure to private investment, reforming dian women and two-fifths of all Indian men are public enterprises and the financial sector, and illiterate, 81 percent of all scheduled caste women reducing price controls. The government also ex- and 54 percent of all scheduled caste men are il- panded its poverty alleviation programs. literate. India ranks 132 out of 174 countries in the These reforms yielded positive results. Per Human Development Index (UNDP 1999). More- capita income rebounded to $390 by 1998 after over, environmental damage (unsafe water supplies dropping from its 1990 peak of $360. Export and sanitation, soil degradation, and air pollution) growth was brisk until 1996, after which it slowed estimated in the range of 4.5 to 8 percent of GDP but did not stop. Annual per capita output growth a year offsets much of the gain from economic increased to 3 percent in 1992-94, reached 5 per- growth (Brandon and Honmnann 1995, Khanna and cent in 1994-96, and has remained around 3-4 Babu 1997, Tata Energy Research Institute 1998).5 percent since. Through the financial turmoil in The states differ substantially in poverty levels East Asia, inflation rates stayed moderate, the bal- and trends. Poverty has increased in Bihar, Mad- ance of payments stayed healthy, and external hya Pradesh, Orissa, Rajasthan, and Uttar Pradesh, reserves increased. Thus the first stage of mar- where the bulk of the poor live. It has declined ket liberalization has been a macroeconomic in Andhra Pradesh, Gujarat, Kerala, Maharashtra, success. Moreover, the economy became more and Punjab. The highest rate of decline occurred integrated with the global economy and expe- in Kerala (both rural and urban poverty incidence rienced a large increase of private investment. have been halved since the 1970s), which among In the mid-1990s frequent government the states has the highest proportion of villages with changes and associated electoral cycles slowed electricity, a high road density, a high proportion the pace of reform. And the past three years have of land under irrigation, and by far the highest fe- seen backsliding in trade liberalization (a 4.5 per- male literacy rate. The earlier investment in edu- cent import surcharge in 1998) and fiscal man- cation and rural development enabled Keralites to agement. Subsidies remain large. Expenditure take advantage of the opportunities that opened composition in both the center and the states is up in the Gulf from the mid-1970s and to use the deteriorating toward salaries, pensions, and in- resulting inflow of remittances effectively. terest payments. Revenues are falling. After bot- According to World Bank estimates of poverty toming out around a still high 8 percent of GDP based on official expenditure surveys and price in 1994-97, the consolidated public deficit rose indexes, aggregate progress in poverty reduction to above 11 percent in 1999-2000, exactly the has been disappointing. Poverty incidence wors- same as at the start of the decade. This again ened to 41 percent in 1992 because of negative raised the risk of macroeconomic instability, per capita income growth and higher food prices crowding out credit to the private sector and pub- (due to poor harvests and limited imports). In the lic development spending because of the high following years growth picked up and poverty 3 INDIA: THE CHALLENGES OF DEVELOPMENT Indicator 1990 1992 1994 1998 Annual GDP growth (percent) 57 5 7 9 7.3 6.1 Annual GNP per capita growth (percent) a 3 zs 3.5 I 6 1 57a 429 0ks Gross domestic fixed nvestment 2 (percent of GDP) 22-5 Ill A 21 t8 21 3 Public sector)(percent of GDP) 8.8 8.0 816 1 6.6 6.6 5 @9E3 0 migDm4gX 81 6gDiEEE P ffiEttD, ) gE D D Private sector (percent of GDPo) a D 127 12.9 12.9 1626 16.2 (mOnthsOflMpOrts) =->X >>g 1.0 ^0>f 5 40 fEE66 gg6f 5 ;'E6 E Inflation (CPI, annual percent) 115 96 81 -_ 93 1 13 Heal effective exchange rato e(199D 100) !1 100.0 72.0 74.2 704 73.6 Overall public sectorpdeficit -1113 5 -9.2 1 91 87 4 97 Public sector debt 0 85.5 1B 89.9 f8 837 75 7 76.6 Current account balance (percent ofGP) -2.5 -12 11 4114 1.0 Exports, annual growth (percent) 9.1 6.9 A 4 8.0 7.1 4.4 Imports, annual growth (percent) ~ 3.2 18.6 k 1 7.5 1. External debt (percent of GNP) 26,3 s. 34 314A2.72. Debt service (percent of exports) 327 281 258 222 1710 Foreign exchange reserves - --- ---~n.s (months of imports) 1K 0 4 4.0 6.6 54 6.1 Source World tank Unif ieo Sirvey 2000, MF staff estimares (for fiscal estimates). China Low-income Indicator 1~ ~)~tc 90 190 95-98 1990 1990 95-98 Illiteracy rate, adult total (percent of people 1 5±) 4 r34.0 22.2 16.5 446.8 36.9 38.5 Female (percent of females 1 5+) 4705319f2r5I60.0 47.9 42.0 Male (percent of males 1 5±) 21.4 13.0 8.8 034.2 26.2 29.11 Gross primary school enrollment ,., O. (percent) no 5a11 30 125.0 11 8.0 sa 94.0 102.5 104.3 Female (percent) 4104.0 120.0 117.0 82.7 94.0 98.4 Male (percent) 121.0 130.0 118.0 104.6 11 0.8 108.7 Gross secondary school enrollment .. .. (percent) a S s46.0 49.0 67.0 s.33.6 40.1 53.7 Female (percent) 37.0 42.0 63.0 a25.5 32.9 47.2 Male (percent) 4 54.0 56.0 70.0 141.2 47.4 59.3 Life expectancy at birth, total (years) 66.9 68.9 69.9 58.2 61.4 59.7 Infant mortality rate (per 1,000 live births) 0A420 33 1 31.1 97.5 74.7 77.4 n.a Not asslabhn. a. Latest enrollmeor data ass for 1905. Source: Oepartmenr of tconomic Affairs, M isitry at r nairce, India (except for secondary school enrol moenti ann S MA database,Wor d taok 4 INDIA'S DEVELOPMENT RECORD declined in both rural (to 36 percent) and urban rate of 3.6 percent a year beyond 1996, only slightly (to 30 percent) areas by 1997, but at a slower pace less than actual. Their simulations showed that than India had experienced in the 1980s. Yet, rural India could have doubled its per capita growth rate poverty was higher in 1997 than at the beginning if it had adopted East Asian policies on public sav- of the decade (see figure 1.1). But a contrasting ings, openness, labor market flexibility, and gov- hypothesis of faster urban and rural poverty re- ermnent spending (Bajpai and Sachs 1997). While duction during the 1990s has recently been pro- these estimates are only indicative, they suggest that posed on the basis of the rising private India could grow at a rate higher than the 4 per- consumption growth estimates recorded in the na- cent recorded in the past four years if it resumed tional accounts (Bhalla 2000) and of alternative the faster pace of reform of the early 1990s. price estimates for the deflator of rural household Beyond growth and macroeconomic stability, consumption (Deaton and Tarozzi 1999). researchers and policy analysts have reached a Controversies about poverty numbers are not broad consensus on the factors affecting the new to India and are quickly seized upon by op- pace of poverty reduction in India: more effec- ponents and proponents of reform. Regardless tive public development spending to enhance in- of which numbers are right, India has never frastructure (especially in rural areas), human been a good performer in poverty reduction by capital, and agricultural productivity (Datt and the standards of East Asia (Ravallion 2000). Ravallion 1998; Ravallion and Datt 1999). In turn, Growth has actually slowed in the poorer states. policy, institutional, and governance frameworks Moreover, comparing a near 50 percent reduc- influence the accumulation of physical and human tion in the growth rate of real agricultural wages capital, their efficient allocation, and technolog- in the 1990s to the the rate in the previous ical innovation and adoption (Srinivasan 2001). decade suggests that the poverty-reducing impact Widespread agreement has also emerged across of agricultural growth has declined. Among the the political spectrum on the need to rejuvenate possible explanations are slower labor demand the reform process. This view-articulated in the associated with new crops, a slowdown in agri- past five years in economic journals, policy stud- cultural productivity growth, and a slowdown of ies, government committee deliberations, and agricultural growth in the eastern states, where Bank reports-has been endorsed by all past poverty is concentrated. Finally, there was slug- coalition governments and reaffirmed strongly gish employment creation in the nonfarm rural by the current one. But the belief that a second economy (World Bank 2000). round of reform would entail high political risks For India as a whole, inequality measured by is still widespread. Though the bureaucracy's the Gini coefficient has declined slowly but steadily mindset has already begun to change, resistance by about 0.3 percent a year since the early 1950s, to reform comes also from vested interests that with some leveling in the 1990s to around 34 per- gain from the complex incentive structure. Pre- cent. Inequality remains higher in urban (36.5 occupation with issues of ethnicity and religion, percent) than in rural areas (30.4 percent; Datt regional pulls and pressures, and the ideological 1999). But the weaker effects of growth on poverty baggage of economic nationalism remain obsta- observed in the 1990s may stem in part from ris- cles to sustained reform. ing inequality that the surveys may not fully cap- ture. An illiterate Indian woman, a member of the A Large, Unfinished Reform Agenda scheduled tribe or caste, and a landless wage Business surveys and qualitative assessments of earner face significantly higher-than-average risks India's economic management and institutional of poverty. performance in the 1990s confirm that there have been substantial improvements in many areas, Strong Foundations for Development but they also point to remaining deficiencies in Based on policies prevailing in the mid-1990s, public sector management, regulatory frameworks, predictions of some researchers using cross-country labor market policies, corporate governance and growth regressions revealed a per capita growth exit policy, banking sector efficiency, and trade pro- 5 INDIA: THE CHALLENGES OF DEVELOPMENT tection.6 High corporate tax rates (35 percent for Training is needed to improve local capacity for domestic companies and 48 percent for foreign administration and service delivery. companies), in particular, are a disincentive to private investment. Private and Financial Sector Development A major constraint to private sector development Fiscal Reform is slow privatization of public enterprises, in- Reducing the fiscal deficit should be a priority, cluding banks, due in part to a blurred delin- but little progress on this front is expected this eation of responsibilities among the multiple year (2000-01). The public bureaucracy needs government agencies and commissions that ad- streamlining. Public programs for marketing vise on and implement privatization.9 Overly food and other commodities (including the still protective labor laws need to be relaxed; archaic ineffective Public Distribution System) need fur- bankruptcy and liquidation laws and proce- ther reform, as do programs for employment and dures (including the Sick Industrial Company training. Subsidies (about 14.4 percent of GDP) Act) urgently need reform. Completing the en- and public enterprise losses need to be reduced. abling legislation and regulatory institutions Expenditures need to be redirected toward op- will allow an expansion of private sector par- erations and maintenance and investment in in- ticipation in infrastructure. The regulatory frame- frastructure.7 To improve revenue buoyancy and work for corporate governance also needs more equity, the tax base needs broadening and tax transparency. administration needs improvement. Openness Governance Protection remains very high compared with all Variable enforcement of laws, regulations, and large countries in Asia and Latin America (the ef- contracts and delayed administration of justice fective rate of protection on the secondary sec- are serious problems, especially with respect to tor was 47.6 percent in 1998) and, thus, the the poor. The chain of accountability from the liberalization timetable to correct the still sub- civil service to the legislature is weak.8 Oversight stantial anti-export bias of the current regime and audit reports have limited impact because should be accelerated. Even internally, India is of a lack of transparency, delays, and poor fol- not a single common market, especially in low-up by parliamentary oversight committees. agriculture-interstate sales taxes and movement State administrative and financial control ca- restrictions across and within states still apply. pacities have large gaps and variations. The per- formance of the civil service is undermined by Agricultural Reform overstaffing, low salaries, inadequate perform- Agriculture remains overregulated, with dis- ance appraisals, and political interference. Cor- torted production and marketing incentives. ruption, which extends to the police and judicial Public resources are used inefficiently, mostly systems, is perceived to be serious. for public employees' salaries and subsidies Much work lies ahead to improve weak gov- for water, electricity, fertilizer, and food that do ernance. In addition to strengthening financial ac- not reach the poorest. Basic reforms are needed countability, public sector reforms require focus to free internal trade, eliminate other market dis- on quality, efficiency, incentives for service de- tortions, and integrate India fully with world livery, and orientation toward a market economy. markets while increasing investment in agri- The legal system also needs strengthening to cultural technology and rural infrastructure, fight corruption and uphold equality under the protecting the poor, and ensuring that quality law. Devolution of power has been gradual since inputs are supplied.10 the landmark 1992 constitutional amendent man- dated decentralization of state responsibilities to Environmental Protection elected local bodies, or panchayats, and en- Environmental legislation is adequate, but cur- hanced representation of women in such bodies. rent efforts to strengthen the weak enforcement 6 INDIA'S DEVELOPMENT RECORD capacity must be accompanied by policy tertiary levels and toward primary ones, mak- changes. To stem over-watering and excessive ing institutional changes, and sharpening tar- private pumping from aquifers, subsidies for geting and incentives. electricity and water should be drastically re- duced. Community-based programs hold prom- Social Inclusion ise for improved natural resource management, India's public sector has an affirmative action but scaling them up requires increased public program, which applies to elected bodies, to funding. A more effective public role for urban help break caste inequality. Reservation of a sanitation services is also needed. third of local council seats for women, decreed by the 1992 Panchayats Act, is already raising Social Sectors the voice of poor women in local politics. Public education can be effective, as in Mad- India's gender strategy aims to empower women hya Pradesh, where local communities suc- socially and economically by changing atti- cessfully took responsibility for hiring teachers tudes toward girls; providing education, train- and monitoring their performance. At the same ing, employment, and support services; and time, national enrollment levels in primary emphasizing women's rights and laws. This schools remain lower than in comparator coun- strategy should be pursued with renewed vigor, tries. Improving service delivery of health and sensitively mainstreaming exclusion concerns in education services for better efficiency and ac- all development programs and monitoring their cess by the poor requires increasing public ex- gender-disaggregated and caste-disaggregated penditures, reallocating expenditures away from impact. 7 THE INDIA-WVORLD BANK HISTORICAL RELATIONSHIP External Development Assistance and the Bank's Contribution External financing has always been a substantial fraction of India's pub- lic investment: long-term public borrowing from abroad has ranged from 1.7 percent of GDP (in the 1980s) to 2.5 percent (at its peak dur- ing 1992-94). Since 1995 it has been around 1.9 percent. The composition of these capital inflows has changed from an equal contribution of official and private sources in the 1980s to 52 percent private financing in 1998--2000. India was one of the Bank's founding mem- policy performance, however, IBRD lending in hers, is still one of the Bank's main borrowers, recent years would have been substantially and has had a major influence on the Bank's un- higher (see last section of this chapter) and the derstanding of development. The Bank has been blend would have been harder. India's largest source of external capital, pro- viding almost a third of all long-term gross in- Through the 1970s: A Cyclical flows in the 1980s and, by the end of the 1990s, Relationship still supplying more than a fifth. Bank dis- The Bank's relationship with India began with bursements, which were about 5.5 percent of a slow acquaintanceship; praise from the Bank gross domestic public investment during the for India's first five-year plan; cautious lending 1980s, rose to about 8 percent in the early 1990s for railways, iron and steel, irrigation, and de- and have been 6.2 percent since 1998. Cumula- velopment finance; and mild criticism of the tive lending from 1950 until June 2000 has been overly ambitious second five-year plan in the late $53.8 billion for 412 projects, split equally be- 1950s.1 initially, the Bank and other donors sup- tween the International Development Associa- ported the third five-year plan, consisting of am- tion (IDA) and the International Bank for bitious investment programs supported by Reconstruction and Development (IBRD). Bank generous capital transfers. But a high-level Bank commitments to India have averaged about $1.6 economic mission led by B. Bell criticized the billion annually during fiscal 1997-2000, with 54 government's development strategy and rec- percent from IDA and 46 percent from the IBRD. ommended greater liberalization, increased for- Without sanctions and with satisfactory country eign assistance, and a currency devaluation. 9 INDIA: THE CHALLENGES OF DEVELOPMENT _gs;E~~R.l~tUXE;Ep-ppiC. _lEpE E 0During the fliPs and 19S0s Sthe; Bank contributed $i425 gmillion to00 g tern from import co3mp,etition, hgh Bhstate--subsdies,; and political 4 support t continued development o oeaves Op- intefIntce in mmangementofthe cooperai led dt Bn kto eationFlood, thit|had already assured small-scale producers i wlihdraw its suppout An DED study concluded that the project mr0kt fr .th milk.i This,led to C isIn mik pro- prFovie olid andtuinable fittothdpoor. ema 000gducti;on, tr ainin g f or vJillaXfgerSs; ing dairytechnoloqgy, manufacturei 00 lesson iderntifed lnathe study was thet developmenteffe;tivmnes of dairy e stat ofpriat seto inve and Io exen astnc c h i subsantillyyrying major benefits for women. The diffic,ulteso;f proteting the sys R on sound locaW l insttutionsw waitthe rigtinc tives.l 0 The sense of vulnerability prevailing in Inclia the same time, Indian autlhorities-who feared at the time, partly due to the country's increas- Bank interference in politically sensitive national ing clependence on aid, exacerhated sensitivities programs-resistecl the Bank's ambitions to sup- about outsicde interference. The policy dialogue port the government's antipoverty programs. triggerecd by the 13ell report and cdirectecl by the Policy advice and economic analyses, mostly Bank's president )ecame confrontational. The produced by resident mission staff in close con- Bank and India became estranged, withl the no- sultation withl government officials, had a mod- table exception of agricultuLe (that part of the Bell est impact. Conditionality was usecd sparingly and report was preparecl undcird the direction of John cornmiion ground between the Bank's objectives Crawford). For the Bank, the policy dlialoguLe rep- ancl the government's was continually stressed. resents an early attempt to use the leverage of External political factors helpecl celment the its lending in a major member country. While the relationship. While assistance f'rom the U.S. gyov- government accepted the need for reformil, 13ank ernment cleclined, reflecting a deteriorating po- pressure caused resentment. The modest almount litical relationship, Bank lending increased and of the clevaluation, combined with tariff sur- soon exceeded aid floxxs from other donors, charges on traclitional exports, a severe cdrought, eliciting much goodwill from Inclian officials. ancl inadeqtiate relaxation of the unclerlving By the end of the 1970s Inclia ancd the Bank were control regime proved insufficient to generate a converging: the Bank hacd adoptecl the essence strong supply response. Given the high politi- of India's outlook on developmental priorities, cal cost of the devaluation and its apparent in- while India hadl started to cut its tangle of red effectiveness, vastly compounled bhy dlelays andc tape. shortfalls in promised quick-disbursing aid, con- trols were tightenecl again and the government The 1980s: Lending Push in a Poor Policy emerged from this episode wary of liberalization Environment and cletermined to lessen the country's cte- Throughout the 1980s most academics, govern- pendence on foreign assistance. In parallel, the ment officials, and top political leaders became Bank's activist attitude gave way to an exagger- aware of the need to adopt a new moclel of eco- ated reticence to advocate policy change. Instead, nomic management, but the necessary political the Bank focused on narrow issues clirectly re- support for far-reaching reform was not forth- lated to its operations' success, even in its quick- corning. Bank staff producecd a large number of dishursing program lending-for example, the sector reports, especially in industry ancd finance, annual industrial imports credits. that pointed to policy deficiencies that required In the late 1960s and 1970s, trust was re- attention. stored. India's agricultural sector became the BBut while the Bank was actively promoting focus of Bank assistance, which helped expedite structural adjustment in many of its member the adoption ancd dissemination of the new teclh- countries, high-level discussion of necessary nologies that produced the Green Revolution. At policy adjustments in India-to say nothing of 10 THE INDIA-WORLD BANK HISTORICAL RELATIONSHIP an explicit link between the Bank's lending and charge for the power they produced and were policy reform-was largely avoided. Throughout behind serious state financial problems that have the 1980s, Bank management did not address yet to be resolved. India's disappointing policy record for fear of The Bank also lent for the expansion of irri- jeopardizing a strong lending relationship with gation systems known for their inability to re- a sensitive client. The Bank also muffled its ad- cover costs and clouded with the suspicion of visory and institutional reporting roles.2 corruption. The focus on irrigation came at the Although IDA lending slowed considerably cost of neglect of rainfed areas in which a large throughout the 1980s, both as a proportion of the proportion of the rural poor live. Bank lending total and in absolute terms (in line with under- for urban development met with considerable takings to the IDA deputies), IBRD lending and failure because it ignored the public finance International Financial Corporation investments and institutional development aspects of urban expanded very rapidly. Total Bank annual com- lending. The failure was so profound that it be- mitments reached a peak of $3 billion in fiscal 1989 came the reason for the decision in the first half and $18.5 billion for the decade (figure 2.1). of the 1990s to withdraw entirely from the sec- In many cases Bank-supported projects were tor. Furthermore, despite the great needs in the inconsistent with Bank economic and sector social sectors, the Bank was not able to estab- analyses and advice. Many projects had limited lish a dialogue or a lending program in health policy content and supported the expansion of and education because of the government's re- the state in the economy, regardless of effi- sistance to foreign advice. ciency. The Bank continued to lend to public sec- There were some bright spots, such as a loan tor enterprises that made fertilizer, steel, and to the Housing Development Corporation that cement; to unsound rural credit institutions; and helped establish housing finance in the country, to inefficient state electricity boards that did not and a successful project that provided resources Figure 2.1 Commitments, Disbursements, and Net Transfers, 1985-2000 Billions of U.S. dollars 6 A et transfers from all sources 4 J _ i, C~~~~rld Bank commitment 2 World Bank net transfers ... disbursemen.... - 4 . . . . . . . . . . . . . . . . -2 -4 -6 Ij - L L _ I L I I I 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Source: For commitments, gross disbursements, and net transfers see Controller's database. For total net transfers see Global Development Finance database, 10 July 2000. 1 1 INDIA: THE CHALLENGES OF DEVELOPMENT for venture capital and research and develop- and on human development (for broad-based im- ment. On the whole, however, in the 1980s provement of primary social services). It also transfer of resources was the overriding objec- expanded its support for environmental protec- tive of the Bank, with little concern for the ef- tion. But the Bank did not pay enough attention fectiveness with which these resources were to the inadequacy of agricultural incentives, the used. As lending expanded in the wrong direc- landless rural poor, rainfed agriculture, and the tion, however, the quality at entry of the Bank structural constraints to rural development. It portfolio faltered. OED rated Bank performance also missed opportunities to reform safety nets at the project appraisal stage satisfactory in only and to improve the targeting of the poor and 26 of 57 operations (52 percent by commitment) women in its projects and in public expenditures. approved in fiscal 1985-89. In the second half of the 1990s the relevance of Bank assistance to poverty reduction im- The 1990s: Enhanced Relevance of the proved, and even more so after 1997. In the mid- Bank Assistance Strategy 1990s the Bank began studying state finances, Against the backdrop of strong commitment to increased its attention to sector reforms, offered structural adjustment by a new government, the assistance in establishing a framework conducive relevance of Bank assistance increased markedly to efficient private investment in infrastructure, during and immediately after the 1990-91 macro- and offered its support in restructuring social pro- economic crisis. Changing the mindset of the grams and providing the poor with skills to par- principal counterparts in the core ministries was ticipate in the new, more competitive market not the issue any more. Instead, the central chal- economy. The telecommunication companies, lenge was to help the newly elected, reform- ports, and gas and oil sectors, which had the po- minded government implement its programs, a tential to attract private investment, were ex- challenge that the Bank substantially met. cluded from lending assistance. All new loans Bank assistance focused on supporting were expected to have a strong policy content. macroeconomic stabilization measures (together The 1995 Country Assistance Strategy docu- with the International Monetary Fund); reforms ment (CAS) explicitly listed continued reduction in the investment and trade regimes, finance, of the central government's deficit to 5.5 percent taxation, and public enterprises; and cushion- in 1995-96 and beyond and progress in imple- ing short-term social costs, including with three menting its reform agenda as triggers for pro- quick-disbursing, policy-based operations. At viding annual lending volumes of around $2.9 the same time the Bank sought to discontinue billion. The strategy also proposed discontinuing old-style lending for public enterprises and state lending to states whose fiscal stance was unsus- electricity boards, and to build a lending pro- tainable. Significant shortfalls against those trig- gram in health and education. The Bank con- gers were expected to lead to progressive tinued lending, however, in a number of sectors reductions in lending, beginning with IBRD op- without a sector strategy and without seeking erations, to a minimum of $1.2 billion annually. the necessary reforms (for example, in agricul- But the government made clear to the Bank, as ture, irrigation, urban water supply-even bank- well as to the International Monetary Fund, that ing). Nonetheless, the partial attempt to make it preferred to follow its own pace in reforming Bank advice consistent with its lending led to the economy and that it did not see a role for the a record drop in new commitments in fiscal Bank in framing the agenda. In spite of the in- 1994 to less than $1 billion and to the disman- adequate fiscal stance (see table 1.1), the down- tling of the Industrial and Finance Division of ward adjustment in Bank lending volume did not the India Department. happen, and annual new commitments returned For the first half of the 1990s the Bank focused to more than $2 billion in fiscal 1995 and 1996. on crucial areas of reforms for sustainable growth The most recent full CAS, in December 1997, (for improved macroeconomic management and contained triggers similar to those in the 1995 liberalization of the trade and investment regime) CAS for overall annual lending of about $3 bil- 12 THE INDIA-WORLD BANK HISTOR CAL RELATIONSHIP lion. It vcas built around the same objective of * Focus on poverty alleviation, including a large poverty redLuction throughi accelerated growtlh and expanding social lending program andl and social development as past assistance strate- new initiatives for co-mmunity participation and gies. But it added specific antipoverty inter- demand-driven small investments in the poor- ventions. It also set out a new and highly est districts (see box 2.2). relevant operational approach to deal witlh the * Increased priority to the social and environ- challenge of finding a role for the Bank in sup- mental impacts of Bank operations. porting reforms; that is, to scale up lending to * Promotion of private sector development, in- reforming states. And for the first time the CAS cluding the financial sector. artictulatecd mnonitorable targets against wvhich Concentration of assistance toward states and the success or assistance can he judged. The programs strongly committed to reform. Bank ailmed to contribute by 2010 to: Some components of the 1997 CAS havc pro- * Reducing poverty to 15 percent gressed wvell B3ank assistance has focused in- * Halving the proportion of malnourished creasingly on rural development; social and children human development; participatory. decentral- * Putting in place a reliable disease surveil- ized, and targetec poverty reiLction programs; lance system and economic management and statistical svs- • Increasing contracel)tive prevalence Lo morc emris. TIme newv focus on states willinig to reforim than 60 percent of eligible couples has le(d to Bank support for two comprehensive * Reducing the population growth rate to 1. 2 reform programs in Andhra Pradesh, Karnataka, percent (fromI 1.9 percent). and tTttar lPradesh, and close engagement with The five operational pillars of the 1997 strat- Orissa and Rajasthan. egy. still hiighly relev-ant, were: But lencling commitments of $2.1 billion in fis- * Support for policy reform (througih early en- cal 1998 were muclh lower than planned because gagement ancd building consensus and own- of the sanctions imposed by major Bank share- erslhip with partners and clients) in key areas, holcders after India's nuclear testing in May 1998. includcing rural development, power, urban Under the sanctions, only projects meeting a management, and urban water supply and 'hasic human needs" criterion were allowed to sanitation. go forwarc. At tle end of 1999 the sanctions had A clear Bank assistance strategy for poverty reduction in india turesto supportoommunities to ident4design, and implement did not emerge until the late 1990s. The 1997 Country Assis- projects that communities demand and then maintain. In short, tance Strategy (CAS) contained the first explicit proposals for they aim at developing communityandvillage social capital as Bank assistance (Annex Z of the CASIto address povert on all a way of making fasterprogress in povityreductionaniongthe three fronts suggested by World Dewlopment Report 199a The poorest groups. A founal but siple ex-auto evaluation proce- 1999 CAS progress report reafrmned ts approach. dure, designed to forestall corruption, uses village counicils, or There is now considerable energy devoted to ensuring the Gram Panchaynts for review, and then processing by a district poverty focus of Bank operations In addition to continuing to ad- office for approval and close monitoring. dress policy and infrastructural constraitt growth and to sup- The World Bank Qulality Assurance Group review of thse port improved social services, the Bank approved more targeted projects in 1999 notedsome riskthatthe institionaltramnework povety interventions in Andhra Pradesh antd Rajasthan through may not be sustained, but regarded them as carefully prepared, Distriet Poverty Initiaitve projects and is planning such a proi- withsound quality atentry and stmng governmentsupport and ect in Madhya Pradesh. These projects have the characteristics therefore well worh tying. As these projeets can become mod- of social funds wih the addition of significant institutional de- els for nationwide poverty reduction progras implemento- velopmeantcomponents.They rely on existing instutional struc- tion should be closely watched. 1 3 INDIA: THE CHALLENGES OF DEVELOPMENT held up more than $2 billion of IBRD lending pected a lending envelope for fiscal 1999 of for energy, state roads, and other infrastructure $1.9 billion. Because sanctions remained in projects. place, blocking all the infrastructure projects in In the January 1999 CAS progress report, the the pipeline, only $1.1 billion was committed in Bank recognized that India had not met the fiscal 1999. In fiscal 2000 the sanctions were de 1997 CAS fiscal triggers and had made only lim- facto relaxed in the fourth quarter, but the Bank ited progress in structural reform. Thus India was still committed only $1.8 billion, remaining on at the border "between the base case and the low the border between the base case ($2.7-3 billion) case, still in the former but heading in the di- and the low case ($1.2 billion) lending scenar- rection of the latter." Consistently, India ex- ios presented to the Board a year earlier. 14 m I THE BANK'S PRODUCTS AND SERVICES Analytical Services: High Quality but Limited Outreach T' g through the mid-1990s, poverty-focused Bank research assessed poverty trends and the factors that influenced them. This high-qual- ity work was appreciated in Indian academic circles. In the late 1990s Bank research focused more on the impact of different policies on poverty reduction and thus became more relevant to policymakers. Country Economic Memoranda (CEMs), sector re- basis of a much higher sustainable fiscal deficit ports (for example, in transport, education, health, than the IMF did. Interestingly, because India's and so on), and Poverty Assessments synthe- growth performance exceeded Bank and IMF sized research findings of the Bank and others forecasts, actual sustainable deficits were even and analyzed most of the relevant issues. (Al- higher than the estimates. Many of the themes though the policy framework in agriculture was and issues raised in the Bank's CEMs found their only addressed in the later part of the 1990s.) The way into the Ministry of Finance's annual eco- CEMs became a vehicle to discuss macroeco- nomic surveys and the Reserve Bank of India's nomic policies and sector policies. The 1992 annual reports-suggesting the Bank had at least CEM took an in-depth view of the structural re- an indirect impact on the intellectual debate on forms under way and the shortcomings of poverty policies. alleviation programs. The 1993 CEM raised for the But Bank reports have been cautious in pre- first time issues related to state finances. The senting conclusions and policy options (see box 1994 CEM dealt with issues of capital controls and 4.1) because of the government's sensitivity to recommended the Chilean example of taxation criticism, its resistance to policy advice from ex- on potentially volatile inflows, generating con- ternal sources, and its view that Indian experts siderable controversy with the International Mon- and officials should be left to draw their own con- etary Fund (IMF) at a time when this idea was clusions on policy issues. As a result the dis- not popular. The 1995 CEM went into more de- semination of controversial analyses and tail on state finances and legal reform. recommendations has often been restricted, and Typically, the Bank also took a less alarming many Bank reports have not been processed for view of India's fiscal deficits and worked on the final distribution to the Board.' Recently, dis- 1 5 INDIA: THE CHALLENGES OF DEVELOPMENT _ g l ~I I iI Sflgtb semng atio$n has i-iprcvecnl,btfeirtl5~ie provreds tinfrat onlflow and intiu tiodg nd oal capaciecieys Asn ins faorabl en ssibneen crstedyte newx 3 ian cosnus a dnertaene tie Banks ie Ipartnedreatlyp withlca poicyOs on ecnomi q Eigh,te coflinpe reofrth s socalt theparmnk' Lilt insBtitte tees. Sin-counarlyextherl reatonst reefnots haeonoti poliy ogrAte uraopnnes endL discosur pasnels heighywenl- itred rpr iumahbu get,ln maleagvant, suppor Bank daisso ndi ofica f r bt atedsandthesBank.r thBandkashepdte tankag nationer haesoeremphasfizedisnewmlonsatind len din volume evolve i cenat)rovide ofnowedgea beyonosd t orheoniest ofactie an(hsbeen anl2are0dt00ulib gepin eda Indian bureau 3r2cy Alle akreceiedtlell doiissemiatoniet onstl mostlyruankalsconrt m igh Ixcllnter rates tnIniaofan Oppoluntisoftralitegic rebyepatice atarehni mal aspesan-l tineedsoto naeofis gretrlforalosecbtot w ernacuarpe s fncatins rIM online indsby Buandingkis cmontacswtrategi popular eolic- to hares the positentia pofgteeviion, especiallyion loca tlen Iron ~ aogic, and eoeg ei.Gaconoitci*and sctiorao work gudesig Recen stafo ddtieConserende lagn bdEcI-tipomis forAl locala ade ncs findiongs e remlnacinoganSizaioe hasorts pcoveln't and otreeachnmcad trwrkpeae seeintion a mrvd uuther prtra tc sraitc esrogres tural,. policy handh institutiona deficienciesn ipossecibles (senvboxmntli3.1).Liaceelp (lertaengtin o s de parn ers hipba work- locsal prlicy Fighntof prsntaione,repots tmhatsth Banksv Qualit ointitues.adh Siilrl, th mostd reoent Reonomi ratiedcsatiosfatr (hBand wdli averageios 72upr-a (leservkingvoflwide Idiss exemintsion ( ti Brank cent),antutUrrira onelomet wastmoe o est practirce(see 2000)frteji)ie ofeec adteeot strategickelevimanc te a espiets, and time soe of is glalisct work. Thev woundations einesscBtienkss among inrstrateictgoals, pniolicyi-en of thle assistacprogra in educeation w erelca inthe talogsues, wandercSonoirce mandasetoewrkdeig 1990C JondWtien Coneprencepton Fd ton fore Allt anMfndnst weeakignSm reports dpertohv idn't and thesprmy eonoicantio sectorisas work prepared m-eet oiiath efercrteia,nuc as rea-lisitic, mesurahe for ivt.lThe healrsntheprogramwa ut n h _~ ~cisst-iain [lie variet an iches of tin __ orawnect in'e r(nvironm sentalissues,rural ,d eveo- stenthofth Bank's cniglobalte wor one disetoaspri- cent n tion,swit. Yem as on keyec- untles uatite9 Wnd [)l protectin. A nepr. ommendaotion th and' policy woption ubn tel t he Bank iinvolednn Inari andlexprt win th porepa-i nfrastonictrde, ranl development, waterareoucez ationsiwa fnorthe Jotenle )nerncem amlmntIathereort. Ueffe tivens (urb and inratrutrenvfiefronmen in the pr counedtry in cooep era-tcrngwithloal instai-e tarlv issues, waterored)ureit mandagmnarht). cts itsies cantIlwithothe participationeofosomeeof the Moste Bankp fsat cnoii reports aperthae lttl fli-sbes primar4 tet tionant dieaeantle hroealth pe r hcd a significant impact,i systems experts binlth xvorloln 00 ~ ~ tismiain h vare* Z ieyati richnesscof in thrwnouth hgintyeernalcnt lsensuo-buiscaln antIrUi- Tery Bomank's wetlin $04hifldionCLI-n the 9 e0 toxeai 100000ta; 6;>fuen d td xteo r i t p apemiarstion havehts infcn impactllutf rpors amutingl to)ie a3n2 billttuion,alag portionienciesn- throght hfighl relevan tht anlyeso fisal, strc ergli y , cottte.Smp larely w the$. bilonsturiength pre - 16~ ~~~suae ru QG anl eiwc cr eoti igl eeathg n(aiyac THE BANK'S PRODUCTS AND SERVICES Box 3.2 and A QuaityA aeGrup review pl has praised e reportWw * The y's context objectives, and scope were clear in the Pnt%e n Fisdl Oif to Renewed *ewt(Wodd Bank 1998) and minds of Bank management and task team leaders and shared proposed itfor best pracio on all criteria (reluvance, inteal qual- by the state officials. ity,presentinandlkelynpactforseasw,ssushasthef4lwing: * The report integrated sector knowledge and perspectave T the state government initiatedthe study requestwithout any into the macroeconomic and fiscal framework consistely prodding by Bank staff. and coherenty and tailored them to the state's * The Bank assembled a high-caliber team with an appropri- circumstances. ate skill mix. * The reconinondatons waem tested fertheirpolhicai feasibility . The study was undertaken jointly by Bank stff and state of- by involving the politicians. ficials who felt like equal partners * The strategy for report dissemination respected political * Co-task managemnent proved vary seful In interactions with sensitivities, but also made sure to reach out beyond bh- the client in Delhiandthe sectoral specialists inWashingtou. reaucratic circies. The state published and circulated the • The country director provided strong leadership and support recommendations in a suitabil fashion, which muted op- in the dialogue wih the client adequately resourced te position to the recommendations as being pushed by the task, and steered the report internally. Bank. vious five years. Cancellations were still highi in ing the geographical distribution of the poor fiscal 1995-2000, at 51.1 billion, (see figure 3.2). Agriculture remained the largest sector at about 16 percent of new; cotmm-litments in tiscal Completed Project Performance: 19906-2000, even after experiencing a decline due Mediocre to a review of lending for irrigation in the first The 121 completed and evaluated operations in half of the 1990s. Within the sector, irrigation re- fiscal 1991-2000) (for a total of S18 billion in net mained domilinant but lending for broad-based commitments), three quarters of wlhichl were rural development increasecl. Fromi virtually nil approved during the 1980s, had mixed results. in the 1980s, lending for health and nutrition, ed- OED rated only 72 percent of commitments sat- ucation ancl social developlmient expanded dra- isfactory for outcome, 58 percent likely to he sus- maticallv (to 35 percent) because of the tainable, and 38 percent substantial in institultional government's changcd attitude toward Bank in- development impact-all below Bankwvidle volvement in these areas. Transpport increased its averages. share, but power and urbatn developnment were Among, the 28 projects completecl and evalu- virtually phasedl ott. In the power sector this re- ated in the most recent three years (fiscal sulted fromi the Bank's insistence since 1993 that 1998-2010. with 54.2 billion in commitments), lending be conditional on far-reaclhing policy and virtually all of whiclh were initiated in the 1990s, institutional changes. In the urban sector-, the performance was significantly improved across Bank took a clecade-long pause to reflect on the the board. For outcome, 74 percent of comlmlit- failures of the past. Lending for industry and oil ments wvere satisfactory; 65 percent carried likely and gas disappeared altogether as the private sec- stIstainability ratings, and 44 percent had a sub- tor took over (see figurc 3.1). stantial institutional devclopmnent impact-all still As of June 1998. 73 percent of the Bank's below 13ankwide averages but in line with Inter- outstanding portfolio ($12.9 billion) w as ear- natiotnal Development Association (IDA) and blend marked for- state governments ancd other ben- countries' performance (see table 3.1 and figgure eficiaries identifiable by state. Of the leniding 3.3t) Of nine projects evaluated during 2000, one cotmmiiitrments going to states, more than half is a top-rated project (Technician Education II, see were for high-poverty states, roughly mirror- box 4.-i); seven shlowF a satisfactory outcome, al- 1 7 INDIA: THE CHALLENGES OF DEVELOPMENT 1986-90 Commitment, $13.1 billion 1996-2000 Commitment, $8.6 billion Oil and gas Public sector Industry 6% Agric P s management 5% Social 3 Agriculture 9% 9rulure Pnvatesectordevelopment 2% % Multisector 6% \ Finance Economic policy 10/ 7% Water 3 Education Water 3% __E40d/ucation Urban development 1%'/o 11% Urban development Transport 1 1% 6% Transport 6% Telecommunications 1 % 1Po%er Telecommunications 3% 28inn Environment 2% Mining 3 Environment 1% Health, nutrition, Health, nutrition, and population and population 21% 3% Source: World Bank data. Poverty by state group, 1994 Bank commitments by state group, June 1998 (5°6 millioon) 0Sil'P'/L3%f; '0 _ : ' " !,, , A 1 ~~~~~~~~~~~~~~~(2.9 billion) ^ c E H = high absolute poverty states (number of poor greater than 30 million: Bihar, Madhya Pradesh, Maharashtra, Uttar Pradesh). M = medium absolute poverty states (number of poor greater than 12 million: Andhra Pradesh, Karnataka, Orissa, Rajasthan, Tamil Nadu, West Bengal). L = low absolute poverty states (number of poor less than 12 million: all others). Source.World Bank data. 18 THE BANK'S PRODUCTS AND SERVICES though one (the Darn Safety project) received a tiative projects include provision for baseline modest institutional development impact rating; surveys, regular collection of mionitoring in- and one (the Industrial Pollution Control project) fornation during implementation, and quick received a moderately unsatisfactory rating. analysis and evaluation of this information, to Completed project performance indicators provide the basis for any changes in the pro- hased on number of projects (see table 3.1) and grams as they proceed. Similarly, the Uttar on the economic rates of return (a quarter of Pradesh Health Systems Development project those projects for wvhicl such rate was calculated has identified explicit achievement targets for had economic rates of return less than 10 per- the general population. the poor, and women cent) point to a similar picture. Water supply and ancd has provisions for M&E of performance. Fi- sanitation, agriculture, finance, power, and the nally, thorough and comprehensive M&E environment were the wNorst-pcrforming sec- arrangements have been put in place in the con- tors, while social sectors. industry, and oil and text of the comprehensive adjustment program gas were the best (see table 3.2). supported by the Bank in lUttar Pradesh, in- Monitoring and evaluation (M&E) arrange- cluding a baseline, state-specific poverty as- ments to track the poverty reduction and gen- sessment. Moreover, the June 2000 workshop der impact of Bank projects and government on "Poverty Monitoring and Evaluation" or- programs, with few exceptions, have been ganized by the Bank's Poverty Reduction and weak (see rhe Country Assistance Evaluation Economic Management Netwvork and the re- poverty, rural, gender, and environment back- gional office has been an important step forward ground papers). But the Bank hals begun to cor- in strengthening M&E arrangements in India. rect this inadecluacy in recently approved Quality at entry-relevance, design, and pre- projects. For instance, the District Poverty Ini- paredness for the Bank's completed projects in able 3.1 OED Project Evaluation Ratings, q Performance, Various Fiscal Years .. < .< ......................... X | 1 11 iBank Area/period s)omtmn (percent) X> a pria Irldia, 1981-90.,..-:-9,8- ...475 ;5/6 1991-2000 121< 18,033 $tZ 47/58 2 56/62 1996-2000 :- . 7,703 . TII -' , 58/65 - 56/54 1998-2000 28 . 4,222 21/14 57/65 X 68/63 Sri Lanka, 1996-2000 - - 623 'KM/7 - 50/66 ' 56/69 Pakistan, 1 996-2000 XV 3,506 , 112 , . 44 43 58/60 China, 1996-2000 ' , 6,239 * q. 78/81 74/76 East Asia and Pacific Region, 1996-2000 1fl 24,899 871 , 60 /72 X p 72 /82 IDA and blend, 1996-2000 - . 26,560 7 . 46 /56 M 59 /65 1998-2000 X 14,774 - - 47 56 57 62 Bankwide, 1991-2000 2,4167,589 Jt7'' 49/61 ;64/72 1996-2000 L . .v 88,646 72/E 53/63 63/73 1998-2000 -3. 52,57 1 / ' '.' 55/68 i 62 /75 Note Includes all projects completed in f sca 2000 and evaluated as of December 31, 2000 Numbers separated by slashes are percentage by number of projects and net comnitment by exit years 1 9 INDIA: THE CHALLENGES C)F DEVELOPMENT Percent 100 9 Satisfactory outcome * Likely sustainability , Substantial institutional 90 development impact 80 70 71 72 73 71 65 60 60 55 54 50 40 39 32 31 30' 20 1 8 1 0 0 0 0 1976-80 1981-85 1986-90 1991-95 1996-2000 Note Of the 40 projecas eva riated by OED for fisca 1 976-8 ex t only 2 were rated for inst tutro-aa dove opment impact Of the 44 projects evaluated farf sca 198 85 cily 12 were rated for institut ona deve opment impact Source O8D database, Decernber 2DDD Cii~~~~~~~~~~~~~~m , and gas 100/100 0/0 Health, nutrition, and population 62586890 0Satisfactory NetrE E Banspotk Urn d t E 5aommitme67t Likely 8 performance EE E' ~~~~(US$ ;Wsustainability E- Iat appraisal Sector :millions) ( percent) r(percent) Agriculture E1,234 30 /36 E 50/ 44 education r E t 576 100 / 52 E 67 /80 Electric and power 1,849 t3847 505 49 Environment 339 aa iO 34 50/ 34 Finance l2433 E3 67/57 E 67 57 Industry ea431 100/100 100/e100 Mmining 308 E 50 / 96 a / 0 Oil and gas :450 100 / 1V00 O / 0 Health, nutrition, and population 625 86 /89 100 /100 Transport: 513 I 671/64 33 / 48 Urban development X 582 r E ' 67 / B1 t671/81 Water and sanitation 362 IE i ;50 /52 251/20 TotallIndia tEE E E7,703 Et li B E 58 /65 t E561 54 Note- Includes al projects completed in fisca 2000 and evaluated as of December 31, 2000. Numbers separated by s ashes are percentages by number of projects and net commitTenit by ex t years Source OEO data. 20 THE BANK'S PRODUCTS AND SERVICES India during the 1990s (proxied by OED ratings reviewed in 1998, one (the Haryana Power Sec- of Bank performance at appraisal) was poor in tor Restructuring project) was on the top 10 both absolute and relative terms. Only 56 per- highly satisfactory list and the other (the Woman cent of the 50 evaluated projects in fiscal and Child Development project) was rated mar- 1996-2000 obtained satisfactory appraisal rat- ginally satisfactory. A similar review of seven ings, compared with 61 percent in fiscal 1990-94. other India projects in 1997 found one highly sat- Performance in the last three years has im- isfactory (the Coal Sector Rehabilitation project, proved, but is still low. Quality at entry was scoring high on all QAG criteria) and one mar- particularly poor in the sectors mentioned above, ginally satisfactory (the Rural Women's Devel- but satisfactory in most projects in the health and opment project).3 education sectors. Several implementation prob- lems, chiefly procurement delays, also under- Efficiency: Adequate mined performance. The 1997 portfolio review noted the most common causes: weaknesses in Decentralization preparing bid documents and in contracting In fiscal 1991 the resident mission was already procedures, and delays in contract awards fol- responsible for a significant part of supervision lowing bid evaluation. Other problems included work. In the following years its role expanded scarcity of counterpart funding and rapid tumover to encompass all of supervision, support for in the Bank's and borrower's project staff. procurement, disbursement, and auditing, and to deal with strategic and policy issues related to Ongoing Portfolio: Sound infrastructure development, social development, Approval of 10 new projects in the fourth quar- public affairs, and state focus. The Bank's July ter of fiscal 2000 boosted the Bank's portfolio for 1997 reorganization created a matrix management India to 76 projects amounting to commitments structure with a small country management unit of about $12.9 billion, with a high undisbursed headed by a director posted in the field office balance of $8.0 billion. Based on the supervision and virtually all operational staff working on ratings and QAG's classification, 29 percent of India placed administratively under regional sec- the commitments were at risk, a level higher than tor unit managers (based at headquarters). The the previous peak in fiscal 1993 (28 percent) and size of the field office increased from 50 to 57 considerably worse than the Bankwide level (16 professionals between fiscal 1991 and 1997 and percent). Commitment at risk doubled from the jumped to 83 professionals by fiscal 1999 to im- previous year, but this indicator is very volatile plement the decentralization objective of the on a quarterly basis, precluding a strong con- strategic compact. clusion. In fact, by end-December 2000, portfo- Preliminary estimates from a study of total field lio performance appears much improved, with office costs currently under way as part of a only 9 percent of commitments at risk. However, Bankwide review show that in fiscal 1999 the the high historical disconnect ratio (19 percent India field office spent about $8 million, or 24 in fiscal 1997-99, compared with 9 percent percent, of the South Asia Region's expendi- Bankwide and 19 percent for India in fiscal tures on the whole India program. This is about 1994-96) between Bank and OED completion the same percentage as for Africa and slightly ratings suggests a strong upward bias in self-eval- lower than for the East Asia and Pacific Region uations. (26 percent). South Asia's expenditures for the QAG reviewed the quality at entry of two on- entire India program for fiscal 1999 ($33 million) going projects in 1999 (among 80 randomly se- represented about 5 percent of the total for all lected Bankwide), one of which (the Andhra Regions, a much lower percentage than the Pradesh Power project) was rated highly satis- country's share of the developing world's pop- factory; the other (the Rajasthan District Primary ulation or the poor. Education project), satisfactory. Similarly, of the Expanded field presence was critical to the two projects (among the 100 selected Bankwide) successful expansion of Bank assistance in ed- 21 INDIA: THE CHALLENGES OF DEVELOPMENT ucation and social development and for en- China and the two Asian Regions and were also hancing the state focus of assistance. The shrink- close to Bank service standards. ing field presence in agriculture and gender paralleled less successful performances in these Aid Coordination and Effectiveness: areas. Bank staff and OED evaluators with ex- Uneven posure to the Bank's activities in India have Aid coordination and mobilization have been praised the Bank's enhanced appreciation of pursued through regular annual donor meet- country culture and conditions and the client ings outside India, at which the government focus that decentralization has brought about. A and Bank have solicited pledges to fill the ex- client survey conducted in 1998 reflected satis- ternal financing gap estimated by government faction with the impact of decentralization, es- and Bank economists. In addition, the United pecially more nimble decisionmaking and greater Nations Development Programme chairs vari- resilience of the Bank-India partnership. Clients ous sectoral in-country working groups. seek even more delegation of authority to field Aid coordination among donors has been office staff. minimal at the country-strategy level and uneven at the subsectoral and state levels (for example, Cost and Efficiency Indicators it has been strong in health but neglected in agri- The trend in the Bank's total staff direct costs for culture). Moreover, partnerships with other India has been flat since fiscal 1995 at about $16 donors appear to be declining.5 Even coordi- million, up by about 9 percent compared with the nation intemal to the Bank Group has been sub- early 1990s. India's economic and sector work and optimal. Indeed, the Bank-Intemational Finance lending unit costs, which were generally lower Corporation (IFC) 1997 Country Assistance Strat- than for China in fiscal 1990-94, rose substantially egy was a one-sided Bank document. The Bank's in the second half of the decade, and were well efforts at encouraging private sector participa- above recent unit costs for China and East Asia tion in infrastructure (in power, for example) and Pacific programs, which instead decreased were not sufficiently coordinated with the IFC over the same period. Project preparation costs until recently.6 in India were also higher than those for other According to a 1998 client survey, govern- large countries, including Argentina, Brazil, and ment officials appreciate the Bank's deference Mexico. Supervision costs, in contrast, compared to the government's preeminent role in aid co- favorably even with large countries, and lending ordination. A survey of the main donors, con- costs per commitment dollar were substantially ducted in May/June 1999 for this evaluation, lower than for neighboring Pakistan and other Re- suggests that they would appreciate a more gions, reflecting the economies of scale of India's active Bank role. For donors the goal of mobi- larger average project size.4 lizing resources appears to be less important Available operational efficiency measures are than interacting with partners about the coun- highly imperfect but point to average perform- try's development priorities; addressing envi- ance. During fiscal 1995-99 India's total pro- ronmental, poverty, and governance issues; gram costs per satisfactory commitment dollar and encouraging civil society, nongovernmen- were 41 percent higher than China's and 18-90 tal organizations, and the private sector to par- percent higher than those for other larger coun- ticipate in the country's development.7 The tries in Latin America and the Caribbean. But respondents thought that the relevance and India's costs were slightly lower than those for impact of aid coordination activities with respect East Asia and Pacific and Latin America and the to the balance of payments, governance issues, Caribbean and substantially lower than those in and financial and private sector development all other Regions. Moreover, the performance of were low or negligible. Their responses to the outstanding portfolio has seen notable im- questions on outputs and impact of aid coor- provement. Finally, indicators of service effi- dination indicate only modest achievements, ciency up to fiscal 1999 compared well with ambivalence about the government's ability to 22 THE BANK'S PRODUCTS AND SERVICES coordinate aid, and a desire for a more active * Adequacy of the policy and institutional Bank role, especially in-country. This mismatch environment suggests the need for an intensive dialogue * Client ownership, commitment, and appropriate (led by the government) among all India's ex- design, which are facilitated (and tested) by the ternal partners about aid coordination arrange- use of pilot projects, beneficiary participation, and ments and the role of the Bank. local partnerships (see boxes 2.1 and 4.4) The major lessons from country program eval- * Quality at entry, through simplicity of design uations by three donors (Swiss Agency for De- and early identification of institutional capacity velopment Cooperation, the government of the constraints Netherlands, and the Department for Interna- * Attention to gender concerns tional Development) confirm the importance of * Investment in knowledge products combin- several factors for the success of external ing foreign and local expertise as the most ef- assistance: fective way to influence decisionmakers. 23 SELECTED SECTORS AND TOPICS Overview of Sectoral Assistance T- r he effectiveness of Bank assistance during the 1990s varied among sectors. Results have been strongest in power (in the second half of the decade). They have been good in private sector development, population, health, nutrition, and education and modest elsewhere.1 Public Sector Management ing and management) than broadly at the sec- Fiscal adjustment and public enterprise reform tor, state, or national levels. Results were mod- were supported by the 1991 structural adjustment est. Only 16 out of 100 projects completed in loan, but with little long-term impact. Together with India and reviewed by OED in a 1997 survey had the other two projects of the early 1990s (the Ex- a primary focus on institutional development. In ternal Sector and the Social Safety Net adjustment the face of weak line institutions, the Bank re- operations), the Bank supported institutional lied on project implementation units to ensure changes in taxation; the financial sector; and the better project performance, but this has been at trade, foreign exchange, and investment regimes. the expense of strengthening or reforming the Since explicitly acknowledging the seriousness of existing institutional machinery. governance problems in the December 1997 Coun- try Assistance Strategy (CAS), the Bank has paid Financial and Private Sector Development much more attention to this issue in both its lend- The Bank's high-quality economic and sector ing and nonlending activities. Civil service issues work, intensive policy dialogue, and lending are beginning to be addressed in the focus states. operations (including the three adjustment loans) The Bank's economic and sector work on public in the early 1990s were relevant and contributed sector management, while inconsequential at the effectively and in a timely way to good progress center, is having a stronger impact at the state level. in the incentives framework facing the private Fiscal and public enterprise reform issues are also sector and to strengthening the financial system. being addressed in the context of state-level, pol- India's commitment to structural adjustment in icy-based lending. 1991 represented a clear breakthrough from the Institutional development components of proj- piecemeal approach to policy change. ects were more focused at the agency level (and In the second half of the decade, however, even here, narrowly so, mostly in skill upgrad- a Bank loan supporting the restructuring of a 25 INDIA: THE CHALLENGES OF DEVELOPMENT small number of public banks achieved very lit- Agriculture and Rural Development tle and had virtually no demonstration effect The Bank's 1991 country economic report con- on the rest of the banking system. But the cluded that Indian agriculture was in crisis, largely Bank's strong advisory role helped maintain the brought about by serious policy and institutional momentum of the financial sector reforms. shortcomings at the central and state government Moreover, many impediments to private sector levels. Given the importance of agricultural and growth remain unaddressed, such as labor rural development to economic growth and market rigidities, delayed justice, poor corpo- poverty reduction, adjustments in agricultural sec- rate governance, slow and ineffective privati- tor policy deserved to be pursued within the gov- zation of public enterprises and banks, and lack ernment's broader program of stabilization and of private sector participation in the develop- reform. Despite the report's conclusions, agricul- ment of ports and roads. These are areas where tural policy issues were never near the top of the the policy dialogue could have been more Bank's strategic agenda during the first half of the forceful. 1990s. Since there was a similar lack of interest on the government side, the Bank made only weak Urban Development attempts at meaningful dialogue on agricultural pol- The Bank has not finalized an urban develop- icy. This neglect also held up further analytical ment strategy, even after a major but protracted work by the Bank on Indian agriculture and weak- sector study and evaluation of its unsatisfactory ened the relevance of its sectoral assistance. experience in the 1980s. There has been virtu- Compared with the late 1980s, there was a re- ally no new lending during the 1990s, except for duction in Bank lending for agriculture in the first water supply and sanitation projects. But the half of the 1990s, largely due to a review of the reach of the eight projects completed and eval- dominant irrigation lending component rather uated has been limited, and in most cases the than a response to the unsatisfactory policy en- borrowers' weak commitment to the agreed vironment in the sector. Nonetheless, the Bank pricing and institutional reforms meant that continued to lend substantial amounts in the even their limited outcomes were not sustain- sector in an overregulated and inefficient policy able. In spite of 25 years of Bank assistance for environment, with many stand-alone projects urban water supply projects, no Indian city addressing relatively narrow issues. In a few today can provide safe water for more than a states the Bank sought adjustments in agricultural few hours a day, and most water and sanitation policy, with some success (for example, in water agencies have financial difficulties and offer in- pricing). But such efforts were often undermined adequate service. by weak enforcement of the hard-won project Relevance of sectoral assistance has been covenants, while large-scale lending continued. improving in the late 1990s, but remains mod- The Bank's assistance program was also slow est. Three ongoing projects are being imple- to adjust to changing circumstances. For exam- mented satisfactorily, according to the latest ple, the extension system assisted by a Bank- progress reports. But they are narrowly focused funded project was geared mainly to supporting on specific cities rather than on sectorwide is- irrigated grain production rather than diversified sues and municipal development. Further- and rainfed agriculture, which would have been more, there has been little follow-up by the more relevant for rural poverty reduction. Ear- Bank on its 1996 sector work (which the Qual- lier extension projects also used the discredited ity Assurance Group, QAG, judged "an out- training and visit system, but revised extension standing piece of analytical work") for building models are being explored in two recently ap- the capacity of municipalities, helping the cen- proved projects (the National Agricultural Tech- tral government and other tiers of govern- nology and the Uttar Pradesh Diversified ment implement the urban agenda, and Agricultural Support projects). fostering a better balance between private and In the second half of the 1990s lending for agri- public participation. culture and rural development increased, but the 26 SELECTED SECTORS AND TOPICS Bank concentrated on a few main sulbsectors and poor, althotugh the m-ajority of the ongoing rural placed even more emphiasis on state-level re- clevelopment projects still favor those with such forms. The new, sharper foCus of assistance arose assets as lanc. Bank researchers have recently ar- froml the realization thlat earlier neglect of agri- gued in favor of the need for agrarian reform in cultlral policy issues and dispersion of projects India, including improved land distribution had limited sustainahle impact on poverty re- (Mearns 1999; Mearns and Sinlia 1999). Never- dluction andv were creating serious proleiems in theless, for enhanced off-farm (as well as on- project imiplementation and performance. The farm) employlmient opportunities for the poor. increased lending was for irrigation and drainage h-oosting agricultural production remains critical (still the dominant part of the portfolio), wTater- because the greatest stimulant for growth of the shed andl area deeveloppment, and forestry. There nonagricultural economy in rural areas is dynamic were also project comiipornents directed at agri- agricultural growvth" (Fislher, Mahajan, and Singha euiltural research andl extension. Overall, Bank 199'7). Suich a hoost in the sector's growth, in tLrn, lendling wvas largely dlirectecl to states willing to will require substantial policy improvements. adopt significant policy reforms, such as for water In 1999 the B3ank concluded a major revTieW mianagement and pricing. This more selective of rural developmnent and poverty reduction that and relevant sector orientation had a larger im- had hegun in the mid-1990s wvith the coiimmis- pact on rural developmiient institutions than the dis- sioning of suhscctor reviews. The reviewv Cul- parate and enclave projects of earlier years. tninatecd in a good synthesis report that pointed Plroviding the rural poor (mostly landless to substantial shortcomings in incentives. insti- peasants or farm-iers on marginal lands) wvith ac- tutions, and public expenditure priorities. 't'he re- cess to land on a formal hasis-rather than port, however, shouldl haive taken a holder through often illegal tenancy arrangements- approach h)y presenting more specific recoini- and maore off-farm employment opportunities, mendations (see h)ox 41 ). Inclda is clefining its see- w,-hich in recent years have increasedl slowly, is tortal assistance strategy in light of this sector important for sustained poverty redLuction (Worlcl work. Thle Bank has not mnade clear how it in- Baink 2000). Over the past fewv ycars the Bank tcncls to strengthen focus on atgriculnural andl rural has indleedl focused more on tl-he assetless rural development policy in its future policy dialogue, Box 4.1 Df A Duality Assurance Group (fAG) review panel foundthat India- The (AG panel thought that the Bank should have taken a Towards Rural Development and Povefty Reduetion (World Bank bolder approach by being more specific on recommendations for 1999b), asa synthesis, contains much good analytical materal. And reductions of subsidies for canal irrigation, power, and urea. And the thrust of the report's conclusions and recommendations is by leveraging its lending on corresponding actions (although best sound. But it presents surprisingly timid recommendations for handled separately). Nonetheless, the renewed interest of the changes in incentives, institions, and investments. Indian government to review its agricultural policies and rural The panel acknowledged the reports strong points, which development strategy led the panel to a positive assessment of included its synthesis of existing but unexploited analytical the report's likely impact. work and its discussion of sequencing of proposed policy The Country Assistance Evaluation sectoral background re- changes (quite a rarity). In line with the rural development strat- view also concluded that the report could have been bolder in egy advocated in Rural Development From Vision to Action presenting its conclusions and that its impact on crucial issues (World Bank 1997). it addresses rural, not just agricultural, de- for rural development and the poor remains uncertain. The re- velopment; poverty reduction in its widest dimensions (except port was discussed at a workshop in New Delhi and later with for land redistribution); and desirable changes in incentive the government, but no further dissemination in the states had regimes, institutional arrangements, and public investment. been initiated by the end of 2000. 27 INDIA: THE CHALLENGES OF DEVELOPMENT in its overall country strategy, ancl in its opera- form and water management. Also, irrigation tions at the central and state government levels 2 projects continued to be implemented in a pol- Lending in the irrigation subsector had been icy environment providing the wrong incentives a crucial part of the Bank's support for increased for water use and agricultural production. Results grain production hased on Green Revolution have been clisappointing so far. Only half of the technology, whichcl depended heavily on irriga- 18 projects completed in the 1990s have been tion. Through the 1990s. this lending still ac- rated satisfactory, onlv a thirdx were judgecd to counted for about 50 percent of the agricultural have had substantial institutional cdevelopmiient portfolio. Since early in the decale, Bank assis- impact, and only three were evaluated as hav- tance has been mostly for river basin develop- ing likely sustainability (for an example of a mcnt through the state-focused Water Resource failed project, see box 4.2). Consolidation projects in the context of in- In the second half of the 1990s, following the creasing pressures on domestic, agricultural, and release of a global water resources policy paper industrial water clemand. Major objectives were by the Bank (but at the same time as the Bank's to improve river basin planning and water man- review of irrigation strategy for India in 1998), agement to increase the reliability of water sup- the Bank's irrigation assistance has focused in- plies and support higher agricultural productivity. creasingly on strengthening the institutional ca- These projects were also intencled to help coIII- pacity of irrigation management systems, plete a number of older projects whose imple- establishing water users associations, and re- mentation hacl stalled. covering costs for irrigation water The new, crop B1ut these projects focused too much on con- of projects appears to be performing much bet- struction and not enough on institutional re- ter than their forerunners. -, O O*dv~~ he ppr rihnaIrigtin I pojcta c$6oilonwt osdeal erlgig ascue eiou dam itr atoa Deeopmnfsoito rdtapoe in 198 age" tohose adrros and clsdi i-97ad4the cvOmmnAbl ojetveoln Frtesaegvnmt.dmcsruioonheKishna tremibuinsop anffetiva e$ atmlaicapinlindrgthegtyasofBnasstance. WVMThi Inlxo tnlacievedi (80 percent. Whil the plniudviaiiyo ntttoa aait,hsldt oerstldfmlesn irriAtinwter atvrual eo ott user ha inrese ncomegnrtngshm ratffo 1 ecnt6pr users associaIosdept50hvnhencaedurg coman pis unutainalrTepoetpovddtrelsos 28enoreove n apply-led 28 SELECTED SECTORS AND TOPICS The Utttar Pradeslh Sodic ILands Reclamation dLuctivitv by creating conditions at the state level project, for example, has not only been teclhni- for the sustainable supply of safe water through cally successful but has also created opportuni- increased involvement of the private sector-is ties for women and the poor to access prodiuctive appropriate, as neither the Bank nor govern- land and higher incomes (see box 4.3). Another ments can possibly assist all rural areas directly. example of the Bank's new approach is the on- Two watershed management projects (clas- going irrigation component of the Andlira sified as environment projects) wcre approved Pradesh Economic Restructuring project, whicth in fiscal 1990 and implemented satisfactorily. focuses on reducing the role of government and They addressed watershed issues in the "plains" enhancing the role of beneficiaries in the man- and the hills" in a number of states. At the end agement of major parts of irrigation systems. In of fiscal 1999 a second hills project-designed tlhrce vears there has been a remarkable ini- to intensifv a participatory approach to imple- provement in rehabilitation of canals, water mentation-was approved. A series of watershed management, andl cost recovery in Andhra projects is being planned, in contrast to area de- Prndesh as a restult of the empowerment of velopmcnt projects, to reflect the idea that wa- water users groups to manage the tertiary irri- tershedls shoukl be the organizing principle for gation systems. area development in rural settings. While Bank Improving the quality and qLuantity of rural assistance for rural roads has been relatively water supplies is one of the important devel- limited, it has been highly relevant andl effica- opment challenges in India-on average only cious througlhout thie decade. about 75 percent of the rural population has ac- In the early 1990s tic Bannk launched a new cess to public water supplies, which leaves program of assistance for the forestry sector some 17S million people wvithout safe public based on the Government's policy statement of wvater. While many rural developpment projects 1988 and the Hank's forestry policy paper of 1991. also contain rural water supply components, The lBank's policy (similar to tle government's) the perfornmance of tvo completed stand-alone wvas based on four principles: multisectoral ap- projects in Maharashtra ancl Kerala was modestly proaches an,d international cooperation; rectifv- satisfactory at best. but twVo otller ongoing proj- ing inarket andl policy failures that lecd to ects in Karnataka and tTttar Pradesh are pro- deforestation and unsustainable landt use; fi- gressing satisfacto-ily. 'he tlhrust of the ongoing nancing operations that lead to socially, envi- Bank assistance-to improve health andt pro- ronmentally, and economically sustainable Box 4.3 The main objective of the two Ultar Pradesh Sodic Lands Recla- Very substantial benefrs have come from crop diversifica- mation projects (the first approved in 1993 and almost comn- tion and increased crop yields, leading to an almost 50 percent pleted, and another approved in 1999) isto reclaimareasthathave increase in family income. Paddy yields have risen from 12 to become contaminated with high levels of salt in the soil and were 3.74 tons per hectare; wheat yields from 0.75 to 2.63 tons per unproductive under previous water management regimes. hectare. About l1,t38hectares have been allocated to the land- Backed by the enthusiastic support of the state government, less (average farm size is about 0.5 hectare). Village imnple- the approach involes large-scale drainage, use of chemicals, mentation committees review and decide on land allocation, on-farm development promotion of forest species on community Womens selt-help groups operate small-scale credit schemes. lands, and strengthening local Institutions so thev can partici- Planned recovery of operation and maintenance costs will pate in implementing the land reclamation program. An impor- be only partial in the short terrn. But since nmost of the benefi- tanttarget group forthe use of the reclaimed land is the poor and ciaries are poor and the farms are very small, this may be a bet- landless. ter way to transfer resources to the poor. 29 INDIA: THE CHALLENGES OF DEVELOPMENT resource expansion and intensification; and pre- going Andhra Pradesh Power adaptable pro- serving intact forest areas. gram loan ($210, approved in February 1999) In addition to the multistate Forestry Research, highly satisfactory and noted that the Bank's se- Education, and Extension project and the Ecode- quential state-by-state approach yields oppor- velopment project, the Bank financed six state tunities for learning from experience across forestry projects in the 1990s that supported the states with important cost savings. Both the development strategies of the state forest de- OED sector evaluation and the QAG review partments and also aimed at strengthening the panel concluded that the South Asia Region's capacity of the relevant state institutions. Much approach in India is a best practice model that of the population living around forests is poor, should be emulated throughout the Bank's en- and hence this assistance has an impact on ergy sector portfolio. poverty reduction through employment and the generation of productive assets. Transport There is considerable variation in the per- The Bank's intrasector lending shift from a focus formance of these projects depending on the on railways in the 1980s to highways in the fol- commitment of the state forestry agencies, but lowing decade was appropriate, given the gov- their main contributions have been to: ernment's unwillingness to address the railway's * Provide crucial additional financing for im- pricing distortions (with subsidies for passenger portant state forestry programs that have gen- traffic financed by very high freight charges) erated employment for the poor. and continuing poor corporate governance, * Strengthen local capacity for forest resource exemplified by resistance to corporatizing (and management. eventually privatize) Indian Railway's large man- * Improve forestry officials' attitudes toward ufacturing units and social sector activities. At the community participation. same time, the government's decision in the * Raise policy and institutional development mid-1980s to accept international competitive bid- issues for discussion among stakeholders. ding procedures opened the door to highway Issues that need attention in future Bank as- lending. The increasing emphasis on subna- sistance include expanding the role of the pri- tional lending, however, has tilted the balance vate sector, the revenue-raising capabilities of the of sectoral assistance too much in favor of state forest sector, marketing nontimber forest prod- projects, given that the national highway system ucts, clarifiying of the roles of the center and the represents only 8 percent of all major roads but states in forestry, and project sustainability. carries 35 percent of the traffic and is the most congested.3 Power The poor performance of power projects and Environment the post-1991 adjustment spirit led the Bank in Since 1990 the Bank has lent $1.94 billion to India 1993 to decide that new lending would be con- for 19 projects to mitigate environmental dam- ditional on the adoption of far-reaching re- age. Another $97 million was granted under structuring of the state electricity boards. The Global Environment Facility and Montreal Pro- conditions included unbundling generation, tocol trust funds for four other projects to pro- transmission, and distribution; establishing an tect the global environment. The Bank has also independent state regulatory authority; and pri- supported various studies addressing environ- vatizing all distribution facilities and all new gen- mental issues. According to OED interviews with eration investment. Since 1996 a new series of stakeholders, the Bank's sector work has had highly relevant power projects has emerged in considerable impact on policies and environ- a few states, with strong client ownership mental awareness in the country. The Bank's (Orissa, Haryana, Andhra Pradesh, Uttar most significant achievement is in mainstream- Pradesh) and a substantial demonstration effect ing environmental concerns in its agriculture, on others. A QAG review panel found the on- power, irrigation, and water supply and sanita- 30 SELECTED SECTORS AND TOPICS Box 4.4 Best Practice Projects ..|1/........... Among the five dozen Bank-financed projects completed since physical and institutional targets, including women's enrollment fiscal 1995,six projectsin five differentsectors receivedthe high- lup to 30 percent from 11 percent befre the projects,L This in- est possible evaluation ratings, including highly satisfactory cludes making a new policyframeworkfinal in partnershipwith outcome. These projects were all very successful at achieving employers. Success factors are strong state ownership, frequent their physical and institutional strengthening objectives, but jointmeetingsandreviewsfosteriogknowledgesharingamong they differed greatly in their support for sectorwide policy and all states, a coilegiate relationship amongthe Bankteam and na- institutional change. OED has not yet audited these projects; it tional and state counterparts, and full national policy support. has onlyconducted brief desk reviews of the completion reports. Shortcomings are uneven state perfonnance in adopting a flex- The projects share a high degree of commitment ownership, and ible curriculum, instruction quality, and employer participation. long-term vision. The Private Power Udlities project ($200 million, fiscal The Oil India Ltd. Petroleum project ($140 million, fiscal 1992-97) aimed totransform the Muimbai utility-majority-owned 198-5) focused narrowly on maximizing oil recovery from de- by three public financial institutions-from a distribution com- clining oil fields in Assam. Components were limited to invest- pany into an integrated power utility. it also aimedto provide ad- ment and improvements in technical and management capability ditional electricity capacity to meet increasing demand and to for a committed and already financially viable public enterprise. support efforts to transfer ownership to the private sector. Not The Industrial Teclhnologyproiect($200 million, fiscal 1990-9B) devoid of controversy, preparation was delayed by a court ac- was relevant in the pre- and post-liberalization environments. tion initiated by nongovernmental organizations on environ- It catalyzed change, helped launch a domestic venture capital mental grounds. Political commitment, ownership bythe utility's industry, attracted foreign venture capitalists, supported a management, and the company's financial strength and will- stronger industry orientation, increased seff-financing of tech- ingness to address the environmental implications proved key nology research institutes, and contributed to liberalization of to the project's success. import policies. The project took into account market failures In the Maharashtra Eergency Erthquake Rehabilitation and distortions created by government import policies. Strong, project ($217 million, fiscal 1994-89), commitment, ownership, committed intermediaries, flexible project design, strong fi- participation, long-term vision, and repair and reconstruction ac- nancial incentives, consensus building, and training were cru- tivities on an unprecedented scale succeeded in providing safe cial to success, allowing adaptation to the changing economic replacement dwellings for nearly 1 million people in the state's enviromnent, changing technology institutions' attitudes, and cre- southeastern region. Vulnerability to seismic events was re- ating new skills. duced by installing inodern seismic equipment and preparing The two Technician Education projects ($472 million, fiscal widely disseminated construction guidelines, a manual for 1991, fiscal 1998-00) were complex, multistate projects affect- nonengineered masonry construction, and a statewide disaster ing the entire polytechnic system in 20 states and surpassing all management plan. tion portfolio SuLbstantial progress has been the IJttar Pradesh Socdic Lands Reclamation proj- macde lateIy on more rational power pricing in ect, and the Renewable Resources Developpment a few states that have embarked on Bank- project, to cite a fev, have performed well. Oth- supported reform. Price subsidies for water and ers, hoxvever, such as the Environmental Man- energy procducers anld constumers, however. re- agenient Capacity Building project, the Bombay main in most states ancl are highly daraging to Sewage D)isposal project, the Indcustrial Pollution the environment. Moreover, the overall impact Control project, and the Ecodevelopment project. of Balki and government actions to prevent en- have had difficulty in implementation for various vironmental problems has been modest. reasons, including poor compliance by the bor- Environmental project performance has been rowers, inadeqtuate management, procuremiient mixed. Most forestry and water resource projects, problemi-s, and cdifficulty witlh social issues. 31 INDIA: THE CHALLENGES OF DEVELOPMENT Mainstreaming environmental concerns in OED in its review of the project's implementa- policy reforms and in the public investment pro- tion completion report. gram should be an important focus of Bank ef- forts in India. This would include addressing Education environmental safeguards further upstream, sup- In the early 1990s the Bank overcame the line porting alternatives to public sector manage- ministry's resistance to lending for education ment of water supply and sewerage systems, projects, which was mainly due to fear of in- promoting rational pricing of natural resources, terference by outsiders in sensitive curriculum backing enforcement efforts of the existing com- matters. Initially, the Bank assisted in the vo- prehensive environmental legislation, and ex- cational/technical education area, with four panding use of the Global Environment Facility projects that have been recently and success- to address greenhouse gas and ozone produc- fully completed. Since October 1993 seven Dis- tion and to reverse threats to biodiversity. trict Primary Education projects (DPEPs) have been approved and are still ongoing for $1.2 bil- Health lion in gross commitments from the Bank and The Bank health program is now on the right with a large amount of parallel donor financ- track, having improved considerably during the ing. These projects focused on increasing ac- last decade. Its assistance program was built on cess to primary education for the disadvantaged, the findings of World Development Report 1993, particularly children from scheduled tribes and solid sector work conducted in collaboration castes and girls; capacity building; and quality with Indian expertise, effective policy dialogue, improvement. and recognition that there needed to be a focus The large efforts to promote primary educa- on specific diseases. The result was a series of tion have been accompanied by high govenmuent broad-based projects that focused on maternal commitment, innovative thinking, and an em- and child care (also as a way to address popu- phasis on carrying out project preparation work lation policy issues), on specific diseases, and on with local staff only, who in the process learned state-level health system reform. Comments from a great deal. Overall about 50 million children the Ministry of Health and Family Welfare express have been involved, and large enrollment in- satisfaction with the Bank's contribution to phys- creases, especially of girls, have been reported ical capacity, but also note its modest past in the most deprived areas.4 Some questions achievements in institutional development. The have been raised among donors, scholars and government's withdrawal from the Tamil Nadu nongovernmental organizations (NGOs), how- nutrition model has been a big disappointment, ever, regarding the reliability of enrollment data, but the Bank has continued to encourage the in- the extent of quality improvements, the func- corporation of successful aspects of that expe- tioning of the village education committees, and rience in the Integrated Child Development the tight control by the government of school vis- Services projects. its and supervision reports.5 This suggests a Four projects addressing specific diseases- need for an independent verification. leprosy, blindness, tuberculosis, and malaria- were included in the program, and two HW/AIDS Public Financial Accountability: projects were added during the 1990s. The first A Promising Beginning of these, which closed in fiscal 1999, initiated sig- The risk of fraud, waste, and abuse of public nificant nationwide HIV/AIDS prevention and funds has been growing in the past decades, awareness activities. The program has dramati- partly fueled by the rapid economic growth that cally improved the blood supply and public has benefited many in the private sector and by knowledge of HIV and has increased condom the increased availability of luxury goods. Pub- use considerably in high-risk groups. Bank per- lic financial accountability is a recent area of em- formance on the design and supervision of this phasis for the Bank, whose knowledge of the complex project was rated highly satisfactory by issues in this area at the country and state lev- 32 SELECTED SECTORS AND TOPICS els is growing. That knowledge is centered on proved to be an ideal forum and first step for the financial management and internal control pro- Bank to articulate its views to a national audi- cedures in the central government and, very re- ence on the need for improvements in this area. cently, in a few focus states, especially Uttar Pradesh. But there are still significant gaps in Mainstreaming Participation, but knowledge-the most significant being the ef- Resettlement Safeguards Are Still fectiveness of the legislative scrutiny processes Contentious at the center and at the states. Social development received inadequate atten- The Bank has not yet articulated a compre- tion in Bank-assisted projects before the 1990s. hensive long-term assistance strategy for strength- Serious problems had accumulated, mainly ening public financial accountability in India. caused by poor involuntary resettlement prac- While elements of a strategy have been slowly tices, which seriously damaged the reputations emerging at the state level, the Bank has yet to of India and the Bank (the Morse Commission's deal with public financial accountability issues review in 1992 highlighted serious deficiencies at the country level. At the project level the on the part of the Bank) and forced remedial Bank has made efforts to improve accounting, work. Much of this work, however, was con- auditing, and budgeting systems at the imple- centrated on specific projects, with limited at- menting agency level and in specific operating tention to systemic issues. Numerous projects departments in state governments. Outside Uttar were canceled, suspended, or restructured.6 The Pradesh, however, these interventions were not Bank became reluctant to take on, and the gov- designed to address the significant capacity prob- ernment hesitant to seek Bank support for, proj- lems in the state or country's overall public fi- ects with resettlement implications, such as nancial accountability systems. large-scale irrigation, power generation, and Regarding Bank-financed projects, lessons road projects. with implementing the Loans Administration Recent Bank initiatives hold more promise, but Change Initiative suggest the importance of: to assess the longer-term results and sustain- ) Bank and borrower commitment to enhance ability of the steps taken so far, better monitor- financial management and control ing and evaluation systems are needed. The • Training and experience of Bank staff in pub- emphasis has expanded from "do no harm" in lic sector auditing, accounting, and scrutiny social safeguard policies to a more proactive systems approach in the second half of the 1990s: im- * Communication to the borrower of conse- proving Bank and borrower performance quences for less-than-satisfactory compliance through social assessment, participatory ap- with fiduciary obligations as specified in the proaches, decentralization, increased trans- loan agreements. parency and accountability, and community With the recent emphasis on programmatic empowerment. During fiscal 1994-98, India had lending in India, the adequacy of the overall pub- the second-highest percentage (81 percent) of lic financial accountability systems at the na- Bank-assisted projects approved with community tional and subnational level has assumed greater participation among all Bank borrowers with importance. The Bank has done pioneering more than 10 projects. Each later project round work in this area in Uttar Pradesh, but this ini- has built on the lessons of previous efforts to tiative alone may not be sufficient. Unless the achieve greater participation.7 Social development Bank engages in a productive dialogue and part- issues have indeed become more integrated and nership with the central government on the sys- mainstreamed in Bank operations. Although the tematic modernization of public financial government has made uneven progress in adopt- accountability systems in the country, its current ing participatory approaches, it is moving forward efforts in a few focus states may be neither ef- with Bank encouragement and assistance. fective nor sustainable. The June 2000 Lucknow The application of the Bank's resettlement pol- conference for speakers of state legislatures icy, however, remains contentious. In complaints 33 INDIA: THE CHALLENGES OF DEVELOPMENT raised by community organizations and NGOs to, rather than in conflict with, Indian laws and about the National Thermal Power Corporation practices. (NTPC) Power Generation project in 1997 and Given the impasse at the center, the Bank fo- the Ecodevelopment project in 1998, an inde- cused on sector and state policies where it has pendent inspection panel found merit to the had greater success. Sectoral resettlement poli- claims of project area residents and tribal peo- cies in line with Bank safeguards have been ple that they had been (or might be) harmed by adopted for the coal sector and for highways by involuntary resettlement and that their interests the central government and a few state govern- had been neglected. The Bank admitted policy ments. Similarly, some states have adopted safe- violations regarding the involuntary resettlement guards for all their public irrigation projects. complaint and implementation shortcomings re- The recently approved National Higbways HI garding the peoples' interests. It adopted cor- project, with full attention to safeguards. and the rective action plans. central government's application of the Bank's At the same time, the Bank is often seen as approach to resettlement and social assessment too rigid in applying its resettlement policy and to some other non-Bank financed road projects too accommodating of NGO agendas. Some sen- are strong evidence of commitment and own- ior NTPC and government officials raised with ership by at least some parts of the government. OED missions the issue of the Bank's insistence Nevertheless, the high-level policy dialogue has on retroactive application of its resettlement pol- been insufficient so far at the national and state icy to projects the Bank did not originally finance. levels. Drafts of a new national resettlement pol- The officials also raised the issue of differential icy and proposed amendments to the Land Ac- treatment of resettled people in Bank-financed quisition Act in line with Bank guidelines have projects compared with other projects, some been awaiting cabinet approval for the past five covering adjacent areas, where lower standards years. And the perception of unreasonableness were applied. They expressed dissatisfaction among some senior officials regarding the Bank's with field office staff's lack of authority to make application of its guidelines in central ministries decisions based on local realities and with such and in the NTPC remains an area of concern. issues being routinely referred to headquarters staff, who apply rigid interpretations of Bank Gender: Unsuccessful Mainstreaming guidelines on safeguards. The Bank has not succeeded in mainstreaming Despite the concems of some officials, for the gender issues across sectors. Attention to gen- most part the government accepts and supports der issues has been mainly confined to enclave the Bank's approach. The Bank has indeed pos- activities in the social sectors. While Bank lend- itively influenced the resettlement debate in ing and nonlending operations in education and India and its guidelines have become the de women's health have taken women's issues into facto standard against which civil society meas- account, the picture for operations in agriculture, ures government performance. During the 1990s, basic health, water supply and sanitation, irri- in an attempt to harmonize approaches, the gation, rural finance, rural transport, and envi- Bank engaged in policy dialogue about the dif- ronment is disappointing. The failure is in ferences between Bank and other donor guide- implementation rather than conceptualization. lines and Indian laws and practices. The major The Bank's sector work in these areas recognized difference is that, while the Indian approach is women's issues, and many project documents ad- limited to compensation for loss of land and dressed gender concerns at entry. However, at other assets, Bank standards require that atten- implementation these concerns often take a back tion also be given to potential loss of livelihood seat. Moreover, monitoring of gender disaggre- for poor and vuinerable people. Thus, Bank-sup- gated results of lending operations remains de- ported projects require a broader set of sup- ficient. Finally, in such sectors as industry, energy, portive measures for affected people. Such transport, and finance, there has been little or no additional support, however, is complementary recognition of gender issues. 34 - I R_~~~~~ THE DEVELOPMENT EFFECTIVENESS OF BANK ASSISTANCE The Elusive Counterfactual T nhere are no easy ways to construct a counterfactual to the Bank's as- sistance efforts in a large country such as India, which was always more important to the Bank than vice versa (see Chapter 2). With- out Bank support for adjustment in the early 1990s, would India have un- dertaken reforms and experienced the same acceleration of income growth and urban poverty reduction? The broad thrust of the reforms would likely have been carried out without the Bank on the strength of the high degree of country ownership and commitment, reinforced by the collapse of the Soviet Union (India's political ally) and its planned economy and by China's spectacular growth since it opened to the global economy. The Bank brought technical expertise, but Indian economists (inside and outside the country, in the public and private sectors) are world renowned for their an- alytical strength and could have provided similar advice. If Bank management had been bolder in its turn to the international capital markets, strength- public pronouncements on fiscal issues (as it was ening the fiscal authorities' efforts to rein in at the May 2000 Paris donors meeting) and had spending pressures and raise tax collection made fiscal balance a condition for the two ad- against the background of a deep-rooted polit- justment operations that followed the first Struc- ical opposition to such reforms. tural Adjustment Credit/Structural Adjustment If Bank assistance had been more focused on Loan and also for its overall lending volume, rural development and agricultural policy issues would the country have a smaller deficit today? and rainfed agriculture since the early 1990s, Louder warnings might have better focused the would the country have achieved deeper re- internal political and academic debate on sub- ductions in rural poverty? Former Bank officials sidy reduction and civil service downsizing. stress the difficulty of addressing these issues They might also have limited India's quick re- rather than lack of effort arising from diffuse and 35 INDIA: THE CHALLENGES OF DEVELOPMENT overlapping institutional responsibilities. For- institutional framework expanded to other sec- mer senior government officials, moreover, be- tors (especially water resources) and to the states, lieve that the government could not have opened and thanks to its in-depth study of India's rural another battlefront with critics of the reform development strategy and heightened attention program of the early 1990s and could not have in its lending program to social development weathered the political implications of sensitive and rural poverty. Relevance has improved fur- reforms, such as the withdrawal of input subsi- ther in the past three years, as the Bank has rec- dies from farmers. At a minimum, an earlier ognized the importance and urgency of focus by the Bank on institutional reform, par- comprehensive fiscal adjustment, sharpened and ticipation, and decentralization in project de- operationalized its state focus, and intensified its sign, implementation, and monitoring and decentralized and participatory interventions. evaluation would have led to better project per- The achievements of the Bank's strategic ob- formance. Equally, widely disseminated sector jectives in the 1990s are undeniable. Creditwor- work and an explicit sector assistance strategy thiness, stabilization, and faster growth on the might have helped the internal debate and ac- heels of the fiscal and structural reforms of the celerated high-level consideration of agricultural early 1990s were already in hand by the mid- reform issues. 1990s. Some progress has also been made in If the Bank had focused earlier and with more rational pricing and institutions for power more effort on analyzing sectorwide policy and and, to a limited extent, water. Social indicators institutional constraints, widely disseminated its have continued to improve. Urban poverty has conclusions beyond the small group of com- declined. With the support of the Bank and mitted reformers in government with whom it other external partners, India's mindset is more worked closely, and withheld sectoral lending open and relies more on markets and the pri- until satisfied with actions or commitments taken vate sector. From a closed and controlled econ- to overcome such constraints, it might have con- omy, India has indeed moved far toward tributed to a faster pace of domestic reform. integration in the global economy. This is what happened in the power sector after However, macroeconomic stability has been the Bank refused to lend unless policies and in- at risk since 1997 because of the fiscal deficit. Eco- stitutions were reformed. With the benefit of nomic growth has come down to between 5 to hindsight, it can be seen that budgetary, agri- 6 percent beginning in 1997, partly as a result of cultural, or social safety net reforms, for in- the slowdown in the pace of structural reform, stance, could already have started (in the mid- and partly due to the ripples in Indian export or late-1990s), with a positive long-term impact competitiveness from the East Asian crisis. Poverty on rural poverty. reduction has been limited, with severe poverty in rural areas associated with inadequate social Development Effectiveness: Improving and infrastractural services. A large reform agenda still remains a decade after India broke away from Relevance and Efficacy the old development model. Although the Bank neglected rural poverty in the All in all, the efficacy of the Bank's assistance first half of the 1990s, it provided timely support is rated modest for both the first and second to structural adjustment for the resumption of halves of the 1990s. For the decade overall, ex- economic growth, which was the most pressing cellent results in power and good results in in- priority. It also showed increased concern for the creasing competition, openness and the role of the adequacy of the policy and institutional frame- private sector, health, and education must be bal- work in the energy sector and gave much at- anced against modest impacts on rural and urban tention to human development. development, financial sector development, pub- The relevance of Bank assistance continued lic sector management, environmental protection, to be substantial in the second half of the 1990s, and gender (see Chapter 4); the limited impact of as its concern for the adequacy of the policy and economic and sector work; and the mediocre 36 THE DEVELOPMENT EFFECTIVENESS OF BANK ASSISTANCE performance of completed projects. Efficiency has the sustainability of the benefits from past and been adequate-somewhat behind other large ongoing Bank assistance remains uncertain. countries but higher than for most countries. It is still too early to gauge the efficacy of the Bank and Borrower Performance: Mixed most recent Country Assistance Strategy. More- over, the sanctions imposed in the wake of nu- Exogenous Factors clear testing undermined the implementation of As the global environment remained favorable key aspects of the 1997 assistance strategy. In par- overall throughout the 1990s, with only a slight de- ticular, they blurred the link between the over- terioration between mid-1997 and the end of 1998 all volume of lending and the country's macro due to the impact of the East Asian crisis on In- and sectoral performance, infrastructure reforms, dian export competitiveness and foreign invest- and the quality of its public investment. ment, the contribution of exogenous factors to the achievement of Bank objectives was positive. Outcome On balance, therefore, in light of substantial rel- Bank Performance evance but modest efficacy, this Country Assistance Bank performance in the design and delivery of Evaluation finds the outcome of Bank country as- its assistance has greatly improved since the sistance moderately satisfactory for both the first 1980s, while ensuring borrower ownership. In- and the second halves of the 1990s. However, the creasingly during the 1990s the Bank: higher relevance and promising steps taken fol- * Supported important reforms initiated by the lowing the 1997 strategic shift in Bank assistance center and some states with timely and well- promise better efficacy and, thus, presage a sat- regarded analyses, advice, and creative lend- isfactory outcome for current Bank efforts, pro- ing instruments vided India intensifies its reform efforts. * Withheld or reduced lending to some agen- cies and states reluctant to embrace necessary Institutional Development Impact reforms (for example, in power), even at the The institutional development impact of past cost of painful negative consequences for its Bank assistance is modest, although here again lending volume and staff job security the Bank's recent attention to governance issues * Greatly expanded its assistance in the social (as in Uttar Pradesh); its heightened link of lend- sectors, critical to its long-term mission of ing to overall policy and institutional perform- poverty reduction ance; and the mainstreaming of participation in * Recognized the increasing importance of the project design, implementation, and monitor- states, adjusted its assistance accordingly, and ing presage a substantial impact ahead. focused on those interested in reform . Devoted more resources and management Sustainability attention to improving participation Broader appreciation of the need for continuing * Improved portfolio performance reforms and the fruits of increased interstate * Embarked on a deep (and ongoing) review competition for private investment and eco- of its sectoral assistance strategies (in urban nomic and social progress suggest further and rural development and in water resource progress ahead. But the economy remains vul- management) where development results had nerable to macroeconomic shocks, which may been unsatisfactory. cause reversal of structural reforms. The econ- But the Bank did not: omy's ability to sustain investment and current * Pay enough attention (until recently) to in- growth rates and to further reduce poverty is adequate agricultural policies and stagnating threatened by the continuing large fiscal imbal- rural poverty (the slow-down in agricultural ances and new military spending pressures, en- wages should have been enough of a warn- vironmental damage, populist approaches to ing bell, even before poverty estimates be- subsidies and trade, and poor governance. Hence came available) 37 INDIA: THE CHALLENGES OF DEVELOPMENT * Sufficiently emphasize the need for public assistance in the social sectors to increase the ab- sector management and judicial reforms in its sorption of available external funds for devel- economic and sector work and policy opment and supported the Bank's firm stance on dialogue power reform and its recent direct policy * Improve the reach and impact of its eco- dialogue with the states. The committed lead- nomic and sector work ership of a handful of states seized the oppor- * Broaden the aim of its project assistance to tunities for strengthening their development achieve sectoral policy or institutional reform strategies offered by the Bank's eager search objectives for new channels to support policy and institu- * Mainstream gender across all sectors in a tional reforms. country with a high gender gap At the same time, Indian authorities failed to * Track the gender and poverty-reduction im- resolve the fiscal deficit problem; to shift spend- pacts of its own projects ing toward operations and maintenance, infra- * Withhold financial assistance to sectors with structure investment, and the social sectors; to inadequate commitment to reform (agriculture accelerate the pace of structural reforms and and banking). extend them to agriculture; to design a more pro- poor rural development strategy; and to address Borrower Performance adequately governance and environmental prob- The central government's core economic min- lems. Indian authorities must share responsibil- istries initiated and sustained several very im- ity with the Bank for the slow disbursement of portant reforms that substantially opened the Bank loans and credits and the mediocre out- private sector to internal and external competi- come and institutional development impact of the tion. The ministries pushed for expanding Bank overall portfolio. 38 IMPROVING ASSISTANCE FOR HIGHER REACH AND IMPACT W x T Tlth more than a quarter (more than 300 million) of the world's poor, India's performance is critical to achieving the International De- velopment Goals, which include halving poverty worldwide by 2015.1 As India has become more open to the world economy, it has also become more receptive to external contributions to its development policies. The Bank's capacity and credibility remain high and its new emphasis on knowledge transfer is welcome in India. Resource transfer, however, remains critical to the Bank's capacity to engage the Indian authorities in a dialogue about policy and institutional reforms and to influence their design and im- plementation. In such an environment the comparative advantage of the Bank lies in the combination of money and knowledge transfer-that is, policy and technical analyses and advice-targeted to high-impact development issues. In the past three years the Bank has moved in tral and state governments exhibit strong own- the right direction and has been more selective ership of policy and institutional reform pro- than it was earlier in the 1990s in its lending and grams, as it has successfully done in the energy nonlending services. The five pillars and the fis- sector. Adaptable program loans are appropri- cal and structural reform triggers of the 1997 ate instruments to support sectorwide public in- Country Assistance Strategy remain valid. Thus, vestments when there is commitment to an except for adjustments to accelerate and assure adequate policy and institutional framework, the full application of those pillars and triggers, but the future pace of progress is also less than no substantive changes in the assistance strategy certain. Program or adjustment quick-disbursing appear necessary. lending is also appropriate for supporting statewide comprehensive reform efforts. As seen Lending Instruments in Uttar Pradesh, a planned series of single The Bank should scale up and direct new lend- tranche operations rewarding the adoption of ing assistance only to those sectors where cen- concrete actions taken before presentation to the 39 INDIA: THE CHALLENGES OF DEVELOPMENT board of directors is preferable to multiyear, finished reform agenda for poverty reduction de- condition-laden operations, in light of the coun- scribed in Chapter 1. Specific sectoral priorities try's sensitivity to external interference. for Bank assistance, however, should emerge from a renewed dialogue and an explicit divi- Lending Linkage sion of responsibilities among the Bank, gov- The Bank should link overall lending volumes ermnent, civil society, and development partners. to progress in structural reforms in agriculture There is an urgent need to reduce macro- and implementation of an effective rural de- economic vulnerability and public deficits velopment strategy, as progress in these areas (through reductions in subsidies, public em- is crucial for rural poverty reduction. This would ployment, public enterprise losses, and tax re- be in addition to maintaining the current link be- forms) and to increase economic efficiency, tween the overall lending volume and fiscal international competitiveness, and the labor in- discipline and between sectoral lending vol- tensity of growth (through trade liberalization, umes and sector-specific policy and institutional privatization, labor market reform, and judicial frameworks or reform programs. The Bank al- reform). The Bank should continue to cover ready has an internal management system for these areas with policy analyses (such as those country performance scoring, but its component relevant for India in World Trade Organization weights and the quality, transparency, and com- negotiations) and economic and sector work. prehensiveness of the criteria used need adap- And it should offer lending support for easing tation to India's circumstances in consultation the pain of labor dislocations to accelerate the with government and civil society. The Bank's pace of reform, especially of the government's most recent economic report is a good basis for divestment plans. such consultations. There is also an urgent need for the Bank to scale up assistance for capacity building in pub- State Focus lic financial accountability from the project to na- Given the states' important responsibilities in tional and subnational levels. The Bank should infrastructure and social services, their greater au- augment its skill base in project financial man- tonomy from the central government, and their agement with specialists in public accountabil- diversity in institutional, policy, human, and so- ity systems. cial capabilities, an intensified state focus by In power, transport, urban development (es- the Bank is appropriate. The Bank should con- pecially in the area of safe and adequate water centrate new lending in reforming states, where supplies and sanitation facilities), and the envi- it has agreed on an assistance strategy with gov- ronment, the Bank's experience in India and ernments (as piloted in Uttar Pradesh).2 In non- around the world, the large gap between needs reforming states, assistance should be limited to and available resources, and the scope for pric- policy dialogue, clarification of performance cri- ing, regulatory, and other policy and institu- teria, economic and sector work to contribute to tional reforms (say, for water and power) justify the internal debate (including work through rep- the Bank's continuing involvement. Bank assis- utable Indian institutes), and pilot projects that tance should help maximize private sector par- can demonstrate the benefits of policy and in- ticipation and competition in these areas through stitutional reforms. In parallel the Bank should guarantees, appropriate incentives for good man- assist the government (and relevant commit- agement of public agencies, and strengthening tees) in introducing performance-based alloca- of capacity for enforcing environmental regula- tions of central government and external tions and safeguards. resources to the states. For rural development, especially in rainfed areas, the Bank should support policy reforms Program Priorities in agriculture, capacity building at the district and The priority areas of engagement for India's ex- village levels, and enhanced community partic- temal development partners mirror the large, un- ipation in project planning, implementation, 40 IMPROVING ASSISTANCE FOR HIGHER REACH AND IMPACT maintenance, and evaluation (as through proj- efforts to mainstream gender beyond the social ects of the District Poverty Initiative type). And sectors. the Bank should help expand public investment for rural infrastructure, agricultural technology, Participation and sustainable forestry. The Bank should continue to foster participatory In health, the Bank should continue its dual institutions and to assist Indian ownership and focus on nationwide diseases (including HIV capacity for comprehensive social development. infections) and statewide institutional reforms. In A balanced approach needs to be pursued that future assistance to education, the Bank should focuses on implementation as much as prepa- focus on poor people's access to basic educa- ration. It should also give the same weight to un- tion in all districts of the country, rather than only derstanding and improving incentive structures in District Primary Education project districts; im- of the institutions responsible for social devel- proved availability of teachers; and higher qual- opment programs as to prescriptive rules. ity of instruction. It should also recommend an independent impact evaluation and verification Safeguards of the flow of funds to the beneficiaries at the Bank management should, as a matter of prior- local level, an integrated study of and assistance ity, clarify with the government and other donors approach to education subsectors, direct lend- the mandatory nature, rationale, and scope of the ing to states, and a better use of international safeguard standards to be applied in Bank-sup- technical expertise. ported projects, especially for resettlement. To help engender gradual improvements in India's Analytical Work standards, the Bank should engage "focus state" To maximize the impact of economic and sec- governments in a dialogue on such standards as tor work on policy analysts and decisionmakers, part of its discussions about reforms and policy- the Bank should intensify its partnerships with based lending. Indian research and policy institutes and focus on relevant international experiences and cost- Aid Coordination benefit analyses of policy options. A new pub- To foster client leadership and ownership in aid lic expenditure review focused on incidence coordination, the Bank should continue to en- analysis would be an important tool for the dorse government preparation and direction of Bank in providing policy advice on reform of so- formal aid coordination meetings and provide lo- cial safety net programs and on the restructur- gistical support as required. At such meetings, ing of public expenditures. The Bank should also the Bank should also continue to present a trans- ensure wide dissemination among stakeholders parent and candid scorecard of country devel- and the general public, preferably through gov- opment performance, as it did in 2000. To ernment agencies or local think tanks. Conclu- enhance the effectiveness of external assistance sions from economic and sector work should be and partnerships and to enable greater selectiv- drawn more sharply, but detailed proposals ity in its own assistance, the Bank should should continue to be discussed confidentially strengthen informal, in-country donor coordi- with government officials. nation on Country Assistance Strategies and on critical sector strategies where consultations Monitoring among donor and development agencies have Although the Bank's assistance has become more been lacking (for example, agriculture and rural pro-poor, the Bank should systematically mon- development). The Bank should also endeavor itor the poverty and gender impacts of Bank-as- to reverse the decline in cofinancing for its op- sisted projects and programs. It should also help erations, seek out donors' expertise more sys- government agencies do the same for their pub- tematically, and encourage other agencies to lic expenditure programs. Given the large gen- take the lead in external assistance in their areas der gap the Bank should also make greater of strength. 41 INDIA: THE CHALLENGES OF DEVELOPMENT The Bank's Efficiency preparation (to Board approval) for India than for Finally, the Bank should analyze sources and justi- other large countries. It may consider shifting more fications for the higher budgetary costs for project project preparation responsibilities to the client. 42 -~~~~~~~~ THE CLIENT'S EVALUATION OF BANK ASSISTANCE G iven India's importance to the Bank, extensive exit consultations on the India Country Assistance Evaluation (CAE) took place from March 14 to April 7, 2000, including a series of workshops. These were or- ganized jointly with the South Asia Region, which took the opportunity for beginning consultations on the next Country Assistance Strategy (CAS).1 Civil Society's Views from the with urban development, and in support of CAE/CAS Synthesis Workshop the country's decentralization) In general, the series of workshops was much ap- * The Bank's lack of attention to public sector preciated by Indian stakeholders, as they showed management the face of a new Bank willing to confront frankly * The centrality of rural development to poverty and openly its past weaknesses and interested in reduction and the need for the Bank to ad- the suggestions of a broader audience on its fu- dress it ture assistance program. All the voices heard, even * The limited access to and dissemination of when critical of the Bank, wanted more and bet- economic and sector work ter involvement by the Bank rather than less. Sum- * The desirability of involvement of policy re- mary minutes of the sectoral workshops can be searchers around the country in economic found in annexes to their respective CAE back- and sector work ground papers (see Bibliography). The follow- * The need for the Bank to mainstream gender ing is a summary of the views expressed by concerns and to form real partnerships at the discussants and participants at the CAE/CAS syn- local level to go beyond the token partnerships thesis workshop on April 6, 2000. * The need to improve project implementation The panel discussants stressed some of the performance themes in the CAE, including: * The wisdom of continuing to support power * The need to help restore fiscal health at the sector reforms. center and in the states A discussant challenged the CAE's endorse- * Long-standing poor performance by the Bank ment of the shift in Bank assistance strategy to- in institutional development (for example, ward the "reforming states," cautioning that the with technical assistance and the railways, states least likely to succeed are the ones trying 43 INDIA: THE CHALLENGES OF DEVELOPMENT hardest to lure the Bank. The same discussant Academic and government officials supported also challenged the Bank's shift toward soft sec- the Bank focus on power sector reforms, and also tors and soft issues, and stressed the need for mentioned the need to expand Bank assistance long-term capital financing of infrastructure proj- to the urban transport sector. Some noted a sense ects (irrigation, urban development, transport, of dispersion of Bank efforts and resources and and power). The discussant also challenged the wished it would concentrate its human and fi- Bank's comparative advantage to support the pol- nancial resources on infrastructure. But many icy and institutional reform requirements, as expressed reservations about the strategies for well as the financing, of such investments. focus states of the Bank and other development Another discussant thought that OED had agencies because the strategies implied neglect overplayed the influence of the Bank on policy of the needs (including advice) of states deemed (see the counterfactual questions in Chapter 5) "not sufficiently reforming." There was also con- regarding the reforms of the early 1990s and the cern expressed that the criteria for the Bank's def- fiscal deficit, and challenged the OED view that inition of "reforming states" are not transparent, the Bank was at fault for not emphasizing agri- because the analytical and reform work in the re- cultural reform issues in its policy dialogue dur- forming states is not being adequately dissemi- ing the early and mid-1990s. The Bank was nated to other states, and that states that are criticized for its "zeal for participation," which reforming may not like to be channeled to only often leads it to set up organizations that paral- one international donor or lender. Academic and lel existing ones (that is, the Panchayats). government officials also expressed deep con- The discussants also suggested new (but some- cems about the effect of a strict application of the times conflicting) priorities for future assistance. Bank's environmental and resettlement safe- These included capacity building for existing in- guards, the latter being seen as creating islands stitutions at the local level; vocational education of affluence with respect to government- and technical training for industry and the health supported or other donor-supported programs. sector; focus assistance on the 125 poorest dis- Other participants, mainly representatives of tricts, in addition to the reformiing states; close col- nongovernmental organizations (NGOs), cau- laboration with the Planning Commission on tioned that power should not dominate the Bank common development and poverty reduction assistance agenda and that there is a need to keep strategies; investment in power generation (which a balance with other sectors. They expressed a the Bank had avoided during the late 1990s); and preference for less selectivity and more holistic investment in social sectors, which a participant approaches. The participants stressed the need saw as the only justifiable area for Bank financ- for the Bank to pay close attention to the poor ing given India's easy access to international (endorsing the idea of a focus on the 125 poor- capital markets for infrastructure projects. est districts) above growth and, regardless of the In the open discussion that followed, the choice of reforming states, to make better use of high quality and positive impact of the Bank's local partnerships and to pay more attention to work was recognized ("The Bank has been a the social dimensions of the structural reforms and consistent force for the past decades for inte- to the environment. For instance, one of the par- grating India in the world economy, which today ticipants mentioned that the Bank's focus on is an unqualified success"). Most participants specific diseases (malaria, HIV/AIDS) overlooks agreed on the need to work with states, given other serious diseases, such as diarrhea. their increased autonomy from the center and their primary responsibilities in health, education, Feedback from the India-Based CAE water, power, and the like; on the need to reach Advisers beyond the "focus" states of assistance; and on Reflecting on the main messages from the synthesis the necessity and desirability of the Bank's rec- workshop, the India-based CAE advisers stressed:2 ommended agenda of structural reforms. But * The high payoff of better dissemination of eco- beyond this, two strands of comments emerged. nomic and sector work 44 THE CLIENT'S EVALUATION OF BANK ASSISTANCE * The importance of the Bank's long-term lend- In conclusion, the key ingredients for effec- ing role tiveness for the Bank in India were identified as * The centrality of the fiscal/power sector cri- focusing on key areas ahead of time and stay- sis and of fiscal discipline for both central and ing with them over the long term; widespread state governments dissemination of analysis and recommendations; * The need for the Bank to remain engaged with providing support at the right time; and bring- the central government and not put all its eggs ing international experience to bear. in reforming states' baskets * The need to be honest about the fiscal health Feedback from the Government of reforming states During the April 2000 exit consultations in New * The need to help capacity building at the Delhi, the OED mission held meetings on an ear- Pancbayat level lier version of the CAE (a draft dated January 31, * The need to focus on a few areas of assistance 2000) with officials of the Ministry of Finance and where a critical mass of expertise is built up the Planning Commission, senior economic ad- over time and then maintained (unlike in visers to the government and the main opposi- urban development). tion party, a former minister of finance in the One of the advisers remarked that the current early 1990s, and the former counterpart in the lending mix (a third social, a third rural, a third Ministry of Finance (until end-1999) of the Bank infrastructure) is about right and that the Bank country director. cannot deal only with fiscal/power issues, as it OED's interpretation of the rural poverty has done in recent years. Others stressed that trends (amended in the current CAE draft to lending ought to consider the Bank's compara- better reflect the controversy over poverty esti- tive advantage in infrastructure (especially by mates) and its criticism of the Bank for not pay- helping public institutions build public-private ing more attention to agricultural and rural partnerships, as in housing finance or through development policy issues (still standing in the support to the Industrial Credit and Investment current CAE draft) were challenged by some Corporation of India) and focus on the lack of within this group. But otherwise no other major an adequate policy and institutional framework concerns or differences were raised with the in agriculture. Another adviser thought that the substance and tone of the evaluation. CAE draft needed a better distillation of generic Government officials were supportive of the lessons from successes and failures and a sharper Bank's new approach of focusing on reforming discussion of the Bank's comparative advantage. states, which in their view had been quite effective Finally, the neglect by the 1997 CAS of trade is- in nudging states to move forward. But they sues was noted, with the implication that the CAE would like the Bank to be more proactive in talk- should give trade more emphasis than the Jan- ing to nonreforming states and to support some uary 31 draft did. On the delicate question of the islands of excellence in those states as well (note, Bank's policy influence, advisers sided with the however, that the Ministry of Human Resource camp that thinks the Bank succeeded only in Development had reservations on this point). those areas where India had decided to go on Well aware of the risk of macroeconomic insta- its own and that there are no known instances bility, government officials also believe that fis- where the Bank's influence caused, rather than cal pressures need to be dealt with both at the supported, a policy shift. center and the state levels. In fact, were the On the CAE draft in particular, the advisers focus exclusively on the states, some of them thought the tone was right-balanced and frank- would try to pass on their fiscal problems to the and that the open discussion process had been- federal government. and will be-much appreciated. The concluding To reduce poverty, the priority reforms should chapter (Chapter 6 in the current version) needed be to address agricultural policies and reduce the a better reflection of the controversy heard over anti-labor and anti-export bias of the current in- alternative directions for Bank assistance. dustrial regulations. Diversified agriculture must 45 INDIA: THE CHALLENGES OF DEVELOPMENT be a focal area of assistance, more so than irri- net. Economic and sector work can be subcon- gated agriculture. tracted to local institutions, but India still has much In resource transfer, the Bank may not be to learn from the Bank's knowledge of interna- large, but it brings standards, learning, and dis- tional experience and best practices. Officials cipline. These byproducts are very valuable. stressed that the Bank's economic and sector Even from a strict financial standpoint, the Bank's work has been "extremely helpful in policy for- contribution is not trivial, as long-term sources mulation and its implementation." For instance, of financing are still limited for India in both the the value in the most recent Bank economic re- domestic and international capital markets. As for port is that it stimulates thinking and debate the actual lending volume, it was not the gov- about important issues, without committing the ernment's decision to borrow only $1.1 billion government to any specific point of view or sug- in fiscal 1999, as it was and still is eager to bor- gestion. row more in the $2.4-3 billion range. The qual- Some officials expressed concern at the length ity of current financial auditing work is high. The of the Bank's project preparation cycle (two years, Bank and government do not need any other par- with the third Madras Water Supply project under allel auditing system. preparation for seven years). Learning and inno- Other officials, however, stressed that Bank fi- vation loans from the Bank are not worth the trou- nancing is paltry compared with total public ex- ble for the government, as there is too little money penditures and that it would be more productive involved. Shifting goalposts during project prepa- for the Bank to focus on improving the quality ration is a problem (for example, the Bank is mak- of public expenditures. Given the shrinking (ab- ing the Tamil Nadu desalinization plant shut solute and relative) size of Bank lending to India, down before the Bank will give assistance). the Bank role should be catalytic and innovative. While government officials agree in principle The dual goals of Bank assistance should be on the thrust of the Bank's resettlement safe- growth and equality of opportunity. Because guards, various officials argued that the Bank agricultural liberalization may well have an ad- was often blind in its interpretation. ("In one verse effect in the short term on rural welfare, un- case, Bank staff even insisted on a specific room less the employment effect is very strong, the size. If India were to adopt and publicize the Bank may be needed to help cushion the blow. Bank's position on squatters' right, it would Other priorities should be in infrastructure, so- make it impossible to acquire more land for pub- cial sectors, quality of education, ways to support lic projects.") the first student in a family to attend school, and In addition to the feedback recorded above capacity building, especially at the Panchayat on the January 31, 2000, draft, the government level. also had the opportunity to comment on the Oc- Officials noted that monitoring and evaluation tober 24, 2000, draft, which already reflected is one of the weakest areas in the country, and feedback from the government and the South an area where the Bank should help. They Asia Region. With respect to the October 24, stressed the need for easy dissemination of eco- 2000, CAE draft, only the Ministry of Human Re- nomic and sector work, especially on the Inter- source Development provided comments. 46 ANNEXES ANNEX A: REFERENCE TABLES 47 Table A.1: Economic and Social Indicators for India and Selected Comparators India India India India India Pakistan Sri Lanka China Low Income A. PEOPLE AND QUALITY OF LIFE 1986-90 1991-93 1994-97 1998 1999 1994-99 1994-99 1994-99 1994-99 Population and labor force Land area (000's sq km.) 2,973 2,973 2,973 .. .. 771 65 9,326 30,175 Population, total (million) 850 898 961 980 998 135 19 1,250 2,417 Population growth (%) 2.1 1.9 1.7 1.8 1.8 2.4 1.1 0.9 1.9 Population density, rural (people per sq km) 388 407 410 .. .. 388 1,601 675 487 Labor force, total (million) 361 384 416 431 439 50 8 750 1,085 Labor force growth (growth rate %) -0.3 1.8 4.1 1.8 2.4 1.2 0.9 1.7 Labor force, female (% of total) 31.4 31.5 31.9 32.1 27.7 36.2 45.2 40.6 Size of the economy GDP at market prices (current US $ b) 323 280 421 430 460 60 16 991 1,067 GNPatmarketprices(currentUS$b) 319 276 417 426 446 61 15 975 1,838 GNP rank (percentile) 95th 96th 95th 95th 94th 100th 100th 89th 78th GNP per capita, Atlas method (current US$) 400 330 430 440 450 470 820 780 410 GNP per capita Atlas method (growth, %) 3.5 3.1 3.2 4.3 4.9 1.2 2.7 6.3 2.5 GNP per capita rank (percentle) 99th 100th 100th 100th 100th 99th 99th 99th 99th GNP per capita, PPP (current international $) 1,365 1,570 2,019 2,060 2,149 1,757 3,056 3,291 1,790 GNP per capita, PPP rank (percentile) 97th 97th 96th 96th 92nd 97th 94th 93rd 96th Private consumption (annual % growth) 3.8 4.7 3.9 11.9 5.9 5.1 7.2 17.5 5.8 Poverty and inequality (%) Population below national poverty line (headcount) 34.1 40.9 35.0 .. .. 34.0 35.3 6.0 Rural 34.3 43.5 36.7 .. .. 36.9 38.1 7.9 Urban 33.4 33.7 30.5 .. .. 28.0 28.4 1.9 Population below US$1 a day (headcount) .. 52.5 47.0 .. .. 11.6 4.0 22.2 Poverty gap at US$1 a day .. 15.6 12.9 .. .. 2.6 0.7 6.9 Population below US$2 a day (headcount) .. 88.8 87.5 .. .. 57.0 41.2 57.8 PovertygapatUS$2aday .. 45.8 42.9 .. .. 18.6 11.0 24.1 Labor force, children 10-14 (% of age group) 16.7 13.5 .. .. 16.8 2.3 10.1 20.8 GINI coefficient .. 33.8 29.7 .. .. 31.2 30.1 41.5 Percentage share, lowest 10% .. 3.7 4.1 .. .. 4.1 3.8 2.2 Percentage share, lowest 20% 8.8 8.5 9.2 .. .. 7.4 8.9 5.5 Percentage share, highest 20% 41.3 42.6 39.3 .. .. 41.2 39.3 47.5 Education Illiteracy rate, adult total (% of people 15+) 51.8 .. 46.0 44.3 43.5 55.0 8.6 16.5 38.5 Illiteracy rate, adult male (% of males 15+) 38.2 .. 33.3 32.9 32.2 41.1 5.7 8.8 29.1 Illiteracy rate, adult female (% of females 15+) 66.3 .. 60.0 56.5 55.5 70.0 11.4 24.5 48.0 School enrollment, primary (% gross) 97.0 101.0 101.0 .. . 74.0 109.0 120.0 93.1 School enrollment, primary, female (% gross) 84.0 90.0 90.0 .. .. . 108.0 120.0 82.3 School enrollment, primary, male (% gross) 110.0 112.0 109.0 .. .. .. 110.0 120.0 101.4 School enrollment, secondary (% gross) 44.0 49.0 49.0 .. .. .. 75.0 70.0 41.9 School enrollment, secondary, male (% gross) 55.0 59.0 59.0 .. .. .. 83.0 93.0 49.6 School enrollment, secondary, female (% gross) 33.0 38.0 39.0 .. .. .. 83.0 94.0 33.2 Expected years of schooling gender gap (M-F) .. .. .. .. .. .. Public expenditure on education (% of GNP) .. .. 3.4 .. .. 3.0 3.4 2.3 Health Life expectancy at birth, total (years) 59.8 61.0 63.1 63.1 .. 62.4 73.3 69.9 63.1 Life expectancy at birth, female (years) 60.0 62.0 64.0 63.9 .. 63.3 75.6 71.5 64.3 Life expectancy at birth, male (years) 59.0 61.0 62.0 62.4 .. 61.5 71.1 68.3 61.9 Safe water (% of population with access) 54.0 .. 81.0 .. .. 62.0 65.0 Safe water, rural (% of rural pop. with access) 47.0 .. 79.0 .. .. 56.0 88.0 Safe water, urban (% of urban pop. with access) 80.0 .. 85.0 .. .. 85.0 Sanitation (% of population with access) 14.0 .. 29.0 .. .. 39.0 Sanitation, urban (% of urban pop. with access) 44.0 .. 70.0 .. .. 75.0 Mortality rate, infant (per 1,000 live births) 83.4 74.0 62.9 69.8 .. 91.5 16.4 31.1 67.6 Mortality rate, under-5 (per 1,000 live births) 110.0 . .. 83.0 .. 120.0 18.0 36.0 92.1 Malnutrition prevalence (% of children under 5) .. .. .. .. .. .. Contraceptive prevalence (% of women 15-49) .. 43.0 . .. .. .. .. 20.0 Fertility rate, total (births per woman) 3.7 3.4 3.1 3.2 .. 4.9 2.1 1.9 3.1 Mortality ratio, maternal (per 100,000 live births) .. 437.0 440.0 .. .. .. 30.0 115.0 702.8 Health expenditure, public (% of GDP) 1.3 0.8 0.7 .. .. 0.9 1.4 2.1 1.0 Note: Latest single year when available. $ = US dollar. Source: World Development Indicators (World Bank, 1999), Heritage Foundation, World Competitiveness Yearbook (1997), International Country Risk Guide, Comprehensive Development Review (6/30/99). 48 Table A. 1: Economic and Social Indicators for India and Selected Comparators (continued) India India India India India Pakistan Sri Lanka China Low Income B. ENVIRONMENT, PHYSICAL INFRASTRUCTURE AND KNOWLEDGE 1986-90 1991-93 1994-97 1998 1999 1994-99 1994-99 1994.99 1994-99 Land use and agricultural productivity Land use, perm. cropland (% of land area) 2.1 2.4 2.4 ... 0.7 15.5 1.2 12.0 Irrigated land (% of crop land) 26.6 29.5 33.6 . .. 81.0 29.2 37.0 24.2 Arable land (hectares per person) 0.20 0.18 0.17 . 0.17 0.05 0.10 0.19 Value added per hec. of agricultural land (1 987 US$) 417.7 448.2 471.2 .. . . 1,118.7 256.4 Agriculture value added / worker (1 987 US$). 327.0 334.8 343.0 419.7 .. 624.1 735.9 316.9 346.2 Food production index (1 989-91 = 1 00) 99.9 108.8 118.5 119.7 123.3 141.4 114.3 158.8 128.2 Water use, deforestation, and protected areas Freahwater resources (cubic meters per capita) . .. 2,167 1,947 .. 1,936 2,329 2,265 4,330 Annual freshwater withdrawals.. . .. . ... Level (billion cubic meters) . .. 380.0 ... 155.6 6.3 460.0 % of total resources . .. 18.2 ... 37.2 14.6 16.4 % for agriculture . .. 93.0 ... 97.0 96.0 87.0 90.0 % for industry . .. 4.0 ... 2.0 2.0 7.0 5.0 % for domestic use . .. 3.0 ... 2.0 2.0 6.0 5.0 Annual deforestation Square kilometers .. 650.0 ... 0.8 0.3 8.8 65.5 Average annual % change 0.6 .. -0.01 ...3.4 1.4 0.7 0.8 Nationally protected areas Thousand square kilometers . .. 142.9 ... 37.2 8.6 598.1 1,650.0 % of total land area . .. 4.8 ... 4.8 13.3 6.4 5.5 Energy use and emissions Commercial energy use (kg of oil eqv. per capita) 423.6 442.9 476.2 445.8 371.2 902.4 461.0 Commercial energy use (kt of oil equivalent) 359,846 397,853 450,287 55,902 6,792 1,096,800 837,277 Commercial energy use, avg. annual growth ()1.6 1.0 1.3 2.1 3.0 3.8 1.2 GDP per unit of energy use (1 987 US$ per kg of oil equiv.) 0.7 0.7 0.8 1.1 2.0 0.7 Energy imports, net (% of commercial energy use) 7.3 10.1 13.3 25.7 38.1 -0.3 -9.2 Electric power consumption (kwh per capita) 253.6 300.8 346.6 332.8 203.0 686.8 278.5 Electric power trans. and dist. loss I% of output) 18.2 16.8 18.0 23.1 17.0 7.1 19.3 C02 emissions, industrial (metric tons per capita) 0.8 0.9 1.1 0.8 0.4 2.7 0.7 C02 emissions, industrial (kt, thousands) 675.3 804.3 997.4 ... 94.3 7.1 3,363.5 1,448.1 C02 emissions, industrial (kg per 1987 $ of GDP) 2.6 2.8 2.8 ...1.5 0.5 4.4 2.1 Transportation Roads, paved (%) .. 47.2 45.7 . . 57.0 95.0 ..18.7 Roads, goods transported (million ton-kin) .. . . .. . 3,020 1,360,000 Railways, goods transported (ton-km per PPP $m. of GOP) 247,773 217,846 176,994 . 26,598 .. 304,775 Air transport, passengers carried (thousands) 10,862 9,442 13,995 16,521 .. 5,414 1,212 53,234 104,082 Communications, Information, science, and technology Daily newspapers (per 1,000 people) 27.0 ..21.0 29.0 Radios (per 1,000 people) 79 80 105 92 210 195 117 Television sets (per 1,000 people) 31.9 50.1 69.1 .. . 87.9 92.0 269.0 57.3 Telephone mainlines (per 1,000 people) 5.9 8.9 18.6 22.0 .. 19.4 28.4 69.6 36.8 Telephone ave. cost of local call (US$ per 3 min.s) 0.04 . 0.02 . .0.1 0.04 0.01 0.1 Mobile phones (per 1,000 people) . .. 0.9 1.2 ..1.4 9.4 19.0 7.9 Personal computers (per 1,000 people) 0.3 0.6 2.1 2.7 ..3.9 4.1 8.9 6.2 Internet hosts (per 1 0,000 people) .. . 0.1 0.1 0.1 0.2 0.3 0.1 0.3 Scientists and engineers in R&D (per million) .. . 149 .. . .173 High-tech. exports I% of manufactured expas) 9.0 8.2 10.9 ...0.1 .. 14.5 12.6 Number of patent applications filed by residents . .. 6,632 ...1 6 50 11,698- Number of patent applications filed by nonresidents . .. 1,660 ... 782 21,138 41,016 Note: Latest single year when available. $ = US dollar. Source: World Developmenf Indicators (World Bank, 1999), Heritage Foundation, World Competitiveness Yearbook (1 997), Intemafional Counfry Risk Guide. 49 Table A. 1: Economiic and Social Indicators for India and Selected ComparatorS (continued) India India India India India Pakistan Sri Lanka China Low inconme C. ECONOMY 1986-90 1991-93 1994-97 1998 1999 1994-99 1994-99 1994-99 1994-99 Growth of the economy (avg. annual, %) GDP growth (annual %) 8.6 3.7 7.0 6.1 6.2 3.9 4.7 7.1 3.6 Inflation, GDP deflator (annual %) 8.4 10.6 7.5 8.9 5.5 7.8 8.8 -1.1 Agriculture, value added (annual % growth) 4.7 2.8 2.0 7.6 3.0 0.4 2.5 2.8 4.2 Industry, value added (annual % growth) 8.2 3.2 8.9 4.0 7.5 3.8 5.8 8.1 4.2 Services, etc., value added (annual % growth) 7.1 6.0 8.9 6.3 6.9 4.1 4.9 7.5 3.6 Exports of goods and services (annual % growth) 9.2 10.3 14.7 4.2 4.2 -1.2 1.0 7.9 6.1 Imports of goods and services (annual % growth) 4.9 5.8 8.2 12.0 5.5 -8.2 11.5 18.0 2.4 Structure of output Agriculture, value added (% of GDP) 31.0 30.5 25.0 29.3 28.5 25.9 21.1 17.3 23.0 Industry, value added (% of GDP) 29.3 27.8 30.0 24.7 25.1 25.4 27.5 49.7 38.9 Manufacturing, value added (% of GDP) 18.7 17.4 19.0 16.0 15.9 16.8 16.5 24.4 27.3 Services, etc., value added (% of GDP) 39.7 41.6 44.0 45.9 46.4 48.7 51.4 32.9 38.1 Structure of demand (% of GDP) Exports of goods and services (%/of GOP) 7.7 10.8 11.5 11.0 10.7 14.9 36.0 21.8 23.7 Imports of goods and services (% of GDP) 10.6 12.2 15.5 13.8 14.2 19.2 42.4 19.9 22.1 Domiestic absorption (% of GOP) 102.8 101.4 103.9 102.7 103.5 104.3 106.5 98.1 104.8 Private consumiption, etc. (% of GDP) 66.1 68.6 70.0 68.6 69.0 78.3 71.3 49.7 58.9 General government consumption (% of GDP) 11.5 11.1 10.0 10.5 10.5 11.2 9.8 8.5 10.6 Gross domestic investment as %of GOP 23.2 21.3 24.0 23.6 17.1 25.4 38.3 28.9 Gross domestic fixed investmnent (% of GDP) 22.5 .. 23.1 22.7 23.1 13.3 25.3 36.7 Public Private Gross domestic savings (% of GDP) 22.4 20.3 20.0 20.9 20.5 10.5 18.9 41.8 30.4 Gross nvational savings, including NCTR (% of GOP) 21.7 20.7 22.4 22.4 19.7 16.2 23.5 41.3 29.8 Public Private Foreign savings (current account of BOP) .. . . . .. Central government finances (% of GDP) Tax revenue (% ofGDP) 10.8 9.2 10.8 8.6 14.9 12.6 14.5 4.9 Curr. revenue excluding grants - Taxes (% of GOP) 2.6 3.2 3.3 2.5 ..3.1 2.3 0.6 Current expenditure (as %of GDP) 15.3 14.9 14.7 12.8 .. 18.8 19.7 Wages and salaries (% of total expenditure) 10.8 9.8 12.6 11.5 ... 21.2 Subsidies & other cur. transfers (%/ of tot. exp.) 43.0 40.0 38.0 37.9 ..8.6 18.5 Interest payments (% of GOP) 3.7 4.3 4.5 ... 26.7 24.1 Capital expenditure (% of GOP) 1.9 1.9 1.7 1.0 ..2.8 5.0 Primary deficit/surplus (as % of GOP; ES; GOI) 4.0 2.7 1.3 1.5 . Overall budget deficit, including grants (% of GOP) -8.1 -7.5 -7.8 -5.2 -10.4 -6.3 -8.0 -1.6 -5.6 Role of government and Institutional quality State-owned enterprises (SOE). economic activity (% of GOP) 13.0 14.7 . . . . SOE investment (%/ of GDI) 32.2 32.7 .. . . 32.5 .. 19.2 Military expenditure (% of GNP) 2.9 2.7 2.4 ...6.1 4.6 2.3 Transparency International corruption index . .. 2.8 ..2.5 ..2.9 ICRG: Risk rating, composite (scale...) . . . . .. Law and order index . .. 4 [B] 4[(B] 4 [B] 3 [B] 3[(B] 4 [B] Corruption index . .. 3 [B) 3 [B] 3 [B] 2 [C] 4 [A] 1 [C] Bureaucratic quality index . .. 3 [A] 3 [A] 3 [A] 2 [B] 2 [B] 2 [B] 1.0 World Competitiveness Yearbook (decile rank out of 46 countries) .. 9th 9th ...6th of which: WCY Government .. 9th 10Oth ... 2nd Heritage government intervention index'. . 3 [B) 4 [B] 3 [B] 3 [B] 2 [C] 4 [A] Heritage regulation index'. . 4 C] 4[B] 4 [B] 4 [B] 3 [C] 4 [B] Heritage wage and price control index'. . 4 [C] 4 [Al 4 [A] 3 [B] 2 [C] 3 [B] Highest marginal tax rate, individual . .. 33 .. . .30 45 Highest marginal tax rate, corporate (). .. 35 .. . .35 30 'Institutional Investor' credit rating (scale...). .. .... 'Euromoney' creditworthiness rating' . .. . 51.8 [A] 52.6 [A] 30.9 [C] 41.4 [B] 57.6 [A] 'Moody's LT foreign currency debt rating .. . . Ba 2 Ba2 Caa 1 ..A3 'Dunn & Brad Street' risk rating .. .I3.O3c OB3c B5c D134d OB33a Note., Latest single year when available. $ = US dollar. a. A: High outlier B: Medium C: Low outlier Source: Worfd Development Indicators (World Bank, 1999), Heritage Foundation, World Competitiveness Yearbook (1997), Intemnational Country Risk Guide, Comprehensive Development Review (6/3099). 5 0 Table A.1: Economic and Social Indicators for India and Selected Comparators (continued) India India India India India Pakistan Sri Lanka China Low income D. FINANCIAL SECTOR AND GLOBAL LINKS 1986-90 1991-93 1994-97 1998 1999 1994-99 1994-99 1994-99 1994-99 Financial sector Financial depth (M2, % of GDP) 42.4 45.0 47.8 44.3 44.4 29.8 124.3 Real interest rate (%) 5.0 6.2 7.9 4.3 6.7 ..-2.6 7.5 Dom. credit provided by banking sector (% of GOP) 54.7 52.6 49.7 45.1 44.9 47.0 31.9 130.4 42.5 Credit to private sector (%/ of GDP) 26.8 25.8 25.7 ... Market capitalization of listed co.sa(US$ b.) 38.8 98.0 128.5 105.2 184.6 6.9 1.6 330.7 268.1 Listed domestic companies, total 6,200 6,800 8,800 5,860 5,863 765 239 950 8,332 Interest rate spread (lending rate minus LIBOR) 8.19 13.0 8.1 8.0 ...0.4 0.8 Interest rate spread (lending rate minus deposit rate) . . .. ...-7.0 3.6 -4.8 Heritage banking index [A--High outlier, C=low . .. 4 [C] 4 [A) 4 [A] 3 [B] 3 [B] 4 [A] Openness Trade share of GOP (%) 18.3 23.0 27.1 24.8 25.0 34.1 78.4 41.7 45.8 Termnsof Trade (1 987=1 00) 110.0 114.7 94.8 89.1 105.6 106.2 101.5 Mean tariff (%of all products) 81.8 . . 30.0 ... 20.0 17.6 Manufactures exports (% of merchandise exports) 70.7 73.8 73.5 .. 77.6 68.9 72,5 88.9 76.7 Heritage trade policy ince0 5... S[C] 5 [A] 5 [A] 5 [A] 3 [C] 5 [A] Heritage foreign investment inde'.. . 3 [B] 4 [A] 4 [A] 3 [B] 3 [B] 4 [A] Current account balance (BoP, current US $ b.) -10.3 -1.9 -5.8 -4.9 -9.2 -1.6 -0.28 29.3 4.9 Official exchange rate (LCU per US$, period average) 17.5 30.5 36.3 41.3 43.1 49.1 70.4 8.3 Real effective exchange rate index (1 990 = 1 00) 100.0 71.5 76.1 73.3 91.4 119.3 106.9 Black market premium (%; Pick' Currency Y.B.)a 9.6 4.6 .. . . 8.3 9.8 73.9 Debt, aid, and financial flows Total external debt stock (US$m.) 83,717 94,524 94,404 98,232 .. 29,665 7,638 146,697 387,326 External debt, present value (% of GNP) 28.5 37.1 24.9 . .. 47.5 81.2 16.6 47.6 Multilateral debt (% of total external debt) 26.0 29.4 31.2 31.1 .. 40.1 37.7 12.9 30.1 Concessional debt I% of total external debt) 46.3 45.2 41.2 41.3 .. 50.3 79.5 12.3 44.9 Short-term debt (% of total extemal debt) 10.2 3.8 5.3 4.4 .. 8.4 6.3 21.4 10.8 Aggregate net resource flows & Transfers (US$ in.) 4,719 7,264 6,918 7,604 .. 3,058 984 65,370 90,500 Oebt outstanding (US$m.) 72,550 85,676 88,694 93,616 .. 25,902 6,725 115,233 Net flows on debt (US$m) 3,940 4,388 682 4,151 .. 1,935 338 12,449 Official creditors (US$m.) 2,334 1,755 -312 .. 803 292 4,315 Private creditors (USim.) 1,710 2,069 953 .. 790 54 6,823 Grants, exc. tech, cooperation (DRS, cur. US$ in.) 512 485 543 476 .. 158 118 228 14,929 Foreign dir. investment by rep. country (BoP, US$m.) 97 586 3,197 2,511 .. 1,106 430 41,673 Portfolio investment, equity (DRS, US$m.) 105 1,840 2,116 1,742 .. 252 98 8,457 2,373 Short-term debt (% of Gross international reserves) 151.6 24.7 17.8 .. 138.2 23.5 21.5 Total debt service (%of exports) 31.4 26.6 19.6 17.7 .. 35.2 6.4 8.6 16.9 Aid (% of central government expenditures) 2.6 3.3 2.6 2.5 .. .0 12.5 4.1 Aid (% of GNP) 0.5 0.6 0.4 0.4 .. 1.7 3.2 0.3 1.3 Aid (% of gross domestic investment) 1.8 2.6 1.8 1.6 .. 9.7 12.3 0.6 4.3 Gross international reserves ($m.) 5.6 14.7 28.4 30.6 32.7 1.5 1.6 157.8 234.6 Gross international reserves (months of imports) 1.9 5.0 5.4 5.7 5.5 1.4 3.4 9.7 6.4 Net aid from Dev. Assistance Commt. members and official lenders (Sm.) Asian Development Bank (1 995) . .. 250.0 ..315.0 79.0 511.0 1,660.0 Japan (1997) . .. 491.8 ..92.2 134.6 576.9 2,228.0 Denmark (1 997) . .. 34.4 ..-2.7 1.5 13.7 522.0 UK (1997) -. . 154.0 ..42.5 17.4 46.2 906.0 UN System (1 997) -. . 122.5 ..59.4 27.9 111.9 2471.0 World Bank (included in Net Flows on Debt, above) . ., 301.8 ..474.7 61 .9 1,897.9 3576.0 Total . .. 930.2 ..449.7 232.5 1,147.8 5,316.0 Worid Bank flows (cumulatives of each period In Sm.) lBRD flows a. Gross commitments 633.8 681.8 1085.6 400.0 93.4.3 1,646.0 0.0 9,221.0 b. Gross disbursements 79.6 70.4 146.3 359.5 749.2 1,445.0 0.0 5,686.2 c. Principal repayments 554.2 222.4 939.4 517.4 1164.7 830.6 26.8 1,359.8 d. Net flows (b-c) -474.6 -152.1 -793.1 -157.8 -415.5 614.4 -26.8 4,326.4 e. Interest payments and tees 10.9 0.0 0.0 292.9 506.6 635.6 17.4 1,827.9 g. Net transfers (d-e) -485.5 -152.1 146.3 -450.7 -922.1 -21.2 -44.2 2,498.5 IDA flows a. Gross commitments 711.7 368.7 323.2 326.7 866.4 922.2 323.2 2,250.0 b. Gross disbursements 402.3 391.5 366.1 588.0 948.9 1,085.6 366.1 3,014.8 c. Principal repayments 7.2 17.1 34.4 171.3 336.0 146.3 34.4 68.0 d. Net flows (b-c) 395.1 374.4 331.7 416.6 612.9 939.4 331.7 2,946.8 e. Interest payments and Fees 25.8 23.3 42.3 75.3 140.4 95.0 42.3 198.7 g. Net transfers (d-e) 369.3 351.1 289.4 341.4 472.5 844.4 289.4 2,748.1 Nota: Latest single year when available. For China, Pakistan and Sri Lanka, the available year is 1993. $ =US dollar. a. A=High outlier; B=Medium C=Low outlier Source: World Development Indicators (World Bank, 1999), Heritage Foundation, World Competitiveness Yearbook (1 997), fnfemational Country Risk Guide. 51 Table A.2: OED Summary Ratings for India Projects closed, total Number Percent Net Commitments Sm Percent FY81-90 m9-00 FY81-90 m9-00 F781-90 FT91-00 FY81-90 F191-00 Adjustment Loans 0 4 0 3 0 1,450 0 8 Non-Adjustment Loans 107 117 100 97 9,785 16.583 100 92 Total 107 121 100 100 9,785 18,033 100 100 Projects evaluated: OED outcome ratings Satisfactory Outcome Adjustment Loans 0 3 0 75 0 1,300 0 90 Non-Adjustment Loans 77 79 72 68 6,997 11,745 72 71 Total 77 82 72 68 6,997 13,045 72 72 SAR Region 187 217 73 71 9,493 20.452 70 72 Bankwide 1.310 1,554 68 69 50,906 129,645 68 77 OED sustainability ratings Likely Sustainability Adjustment Loans 0 2 0 50 0 800 0 55 Non-Adjustment Loans 27 55 47 47 3,284 9,733 53 59 Total 27 57 47 47 3,284 10,533 53 58 SAR Region 55 143 40 47 3,821 15,667 45 55 Bankwide 415 1,094 43 49 21,851 101,559 49 61 OED institutional development ratings Substantial ID Adjustment Loans 0 1 0 33 0 500 0 43 Non-Adjustment Loans 10 41 18 36 1,514 6,129 26 38 Total 10 42 18 36 1,514 6,629 26 38 SAR Region 24 93 19 31 1,830 8,819 25 32 Bankwide 244 760 26 34 12,563 66,026 30 41 Disconnect ratio for projects closed' ARPP % Sat OED Sa Net disconnect at exi FY81-90 FY91-00 FY81-90 FY91-00 FY81-90 FY91-00 India 96% 85% 76% 70% 20% 15% SAR Region 93% 86% 73% 73% 20% 13% Bankwide 90% 82% 68% 69% 22% 13% Aggregate project performance indicator (APPI) b PT96-00 FfY98-0 XQs APm Std.Dev. o. APP Std. De India 50 6.73 1.89 28 7.01 1.86 Region 135 6.52 1.85 80 6.71 1.87 Bankwide 1086 6.64 1.86 630 6.70 1.87 ARPP ratings of ongoing projects' Number Percent Net Commitments Sm Percent Development Objectives Satisfactory Adjustment 0 0 0 0 Non-Adjustment Loans 62 94 10,488 93 Total 62 94 10,488 93 SAR Region 120 93 14,388 92 Bankwide 1,371 94 92,661 94 Implementation Progress Satisfactory Adjustment 0 0 0 0 Non-Adjustment Loans 61 94 10,468 93 Total 61 94 10,468 93 SAR Region 114 90 14,181 91 Bankwide 1,303 90 87,518 89 Note: Computations are based on ARPP exit FY from OED data as of August 31. 2000. a. The net disconnect is the difference between ARPP % satisfactory at exit and OED % satisfactory outcome rating; the Region and Bankwide net disconnect is for the period FY90-97 (ARPP review). b. See page 4 of table A.3 for an explanation of this indicator. c. ARPP ratings for ongoing projects as of December 31, 2000. 52 Table A.3: Portfolio of Bank Lending to India (Exit/Approval FY1990-00) institutional BroeLtstARPP Net commitment Approval date Closing date Outcomear Sustainability developnent APPI' Bank pertornmae tAD at riPk P Le r. exit % Lates Project ID Project namne u$n A trs rr US$m. ~~~~~~~~~~~~~~~~~~~ev~inat Performance from PSR Rro PSA Agriculture 9786 Madhya Pradesh Major Irrgation 186.5 09/15/81 06/30/91 Sat Uncertain Not Rated nr nr 1991 15.2 9788 West Bengal social forestry project 28.8 10/06/81 03/31/91 Sat Uncertain Modest 6.75 nr nr 1991 0.7 9802 Jammu & Kashmir and Haryana social forestry projecl 33.0 08/03/82 03/31/91 Sat Uncertain Modest 6.75 nr nr 1991 0.0 9798 Haryana irrigaiton 11 project 133.8 01/25/83 03/31/92 Sat Likely Substantial 8.25 nr nr 1992 10.8 9799 Uttar Pradesh Tubewells 2 101.0 03/08/83 03/31/91 Unsat Unlikely Substantial 5.25 nr nr 1991 0.0 9797 Himalayan Watershed Management 28.3 05/31/83 09/30/92 Marg Unsat Uncertain Modest 5.25 nr nr 1993 38.8 9801 Maharashtra water utilization project 31.4 06/09/83 08/31/91 Unsat Uncertain Modest 4.50 nr nr 1992 42.5 9812 Rainfed Areas Watershed Dev 20.1 12/08/83 12/31/93 Sat Uncertain Modest 6.75 nr nr 1994 35.2 9817 Karnataka social forestry project 24.7 12/20/83 03/31/92 Sat Unlikely Negligible 6.00 nr nr 1992 8.6 9814 Periyar Vaigai Irrigation 2 33.1 05/01/84 10/31/93 Sat Likely Substantial 8.25 nr nr 1994 5.4 9813 Upper Ganga Irrigation 100.4 05/24/84 09/30/94 Sat Uncertain Modest 6.75 nr nr 1995 19.7 9815 Gujarat Medium Irrigation 2 145.2 06/12/84 03/31/94 Sat Uncertain Substantial 7.75 nr nr 1994 15.6 9811 3rd. National cooperative dev. corporation project 188.6 06/19/84 06/30/92 Unsat Unlikely Modest 4.25 nr nr 1992 14.3 9834 Kerala Social Forestry 25.8 07/31/84 03/31/93 Sat Unlikely Modest 6.50 Sat Sat 1993 19.0 9832 National agricultural extension project 33.0 10/02/84 03/31/93 Marg Sat Uncertain Substantial 7.00 nr nr 1993 15.5 9829 Narmada River Dev. (Gujarat) S. S. Dam & Power 118.5 03/07/85 06/30/95 Marg Sat Uncertain Modest 6.00 nr nr 1993 60.5 9830 Narmada Riv Dev (Gujarat) Water Delivery & Drainag 145.2 03/07/85 07/01/92 Marg Sat Uncertain Substantial 7.00 nr nr 1993 3.2 9833 Second national agricultural extension project 37.1 03/26/85 03/31/93 Marg Sat Uncertain Modest 6.00 nr nr 1993 24.2 9848 National Social Forestry 154.1 06/18/85 03/31/93 Sat Likely Modest 7.25 Sat Sat 1993 6.6 9845 West Bengal Minor Irrigation 39.4 07/02/85 03/31/94 Sat Likely Substantial 8.25 nr nr 1994 60.2 9893 Maharashtra Composite Irrigation III 128.8 07/16/85 12/31/96 Unsat Unlikely Negligible 3.75 Unsat Unsat 1997 19.5 9847 Nat. Agricultural Res. 2 57.2 10/22/85 06/30/96 Sat Uncertain Substantial 7.75 Sat Sat 1996 20.6 9828 Nabard credit project 375.0 02/25/86 06/30/91 Unsat Uncertain Modest 4.50 nr nr 1991 0.0 9843 Andhra Pradesh Irrigation 2 140.0 03/20/86 06/30/94 Highly Unsat Uncertain Negligible 2.25 nr nr 1994 48.3 9859 Bihar Public Tubewell 22.3 10/16/86 05/31/94 Unsat Unlikely Negligible 3.75 nr nr 1994 67.2 9863 Nat. Agricultural Exten. 3 66.6 01/20/87 03/31/95 Marg Unsat Unlikely Modest 5.00 Sat Sat 1995 21.6 9846 National Water Management 114.0 03/24/87 03/31/95 Unsat Unlikely Negligible 3.75 Highly Unsat Unsat 1995 0.0 9962 National Dairy 2 277.1 12/15/87 04/30/96 Sat Likely Substantial 8.25 Unsat Sat 1996 23.0 9922 National Seeds 3 147.2 08/25/88 06/30/96 Sat Uncertain Modest 6.75 Sat Unsat 1996 1.8 9898 Upper Krishna (Phase II) Irrig 166.8 05/04/89 06/30/97 Unsat Unlikely Modest 4.25 Unsat Unsat 1997 48.7 9996 National Sericulture 106.3 05/18/89 12/31/96 Unsat Uncertain Modest 4.50 U nsat Unsat 1997 39.9 9965 Punjab Irrigation & Drainage 145.3 12/14/89 07/31/98 Unsat Uncertain Negligible 4.00 Unsat Unsat 1999 11.9 10362 Emergency Reconstruction 210.0 10/04/90 03/31/94 Sat Uncertain Substantial 7.75 nr nr 1994 0.0 9958 Agricultural Dev - Tamil Nadu 112.8 03/12/91 12/31/98 Sat Likely Substantial 8.25 Sat Sat 1999 0.0 9921 Shrimp & Fish Culture Dev. 36.0 1/14/1992 12/31/1999 Actual Sat Unsat 57.6 10390 Mahashastra Forestry 108.0 1/14/1992 3/31/2000 Mod. Sat Non Evaluable Substantial Sat Sat Nonrisky Sat Sat 12.9 10391 West Bengal Forestry 34.0 03/17/92 12/31/97 Marg Sat Uncertain Modest 6.00 Sat Sat 1998 0.0 9959 Rubber 55.0 7/2/1992 9/30/1999 Nonrisky Sat Sat 40.2 10407 ADP - Rajastan 106.0 11/12/1992 9/30/1999 Nonrisky Sat Sat 0.0 9961 UP Sodic Lands Reclamation 55.0 6/10/1993 3/31/2001 Nonrisky Sat Sat 0.0 10448 Forestry Research Ed. 47.0 2/24/1994 12/31/1999 Nonrisky Sat Sat 0.0 10449 Andra Pradesh Forestry 77.0 2/24/1994 9/30/2000 Nonrisky Sat Sat 0.0 9964 Water Resources Consolidation 258.0 3/29/1994 12/31/2000 Sat Usat 0.0 10503 Agricultural Human Resources Development 60.0 3/30/1995 12/31/2000 Nonrisky Sat Sat 0.0 10506 MP Forestry 58.0 3/30/1995 12/31/1999 Sat Likely Substantial Sat Sat Nonrisky Sat Sat 0.0 10522 Assam Rural Infrastructure Development 126.0 5/25/1995 12/31/2003 Nonrisky Sat Sat 0.0 10476 Tamil Nadu WRCP 283.0 6/20/1995 3/31/2002 Nonrisky Sat Sat 0.0 10529 Orissa WRCP 291.0 12/19/1995 9/30/2002 Nonrisky Sat Sat 0.0 36062 Ecodevelopment 28.0 9/5/1996 6/30/2002 Nonrisky Sat Sat 0.0 35158 AP Irrigation III 325.0 5/20/1997 1/31/2003 Nonrisky Sat Sat 0.0 35169 U.P. Forestry 53.0 12/9/1997 7/31/2002 Nonrisky Sat Sat 0.0 10561 National Agricultural Technology 197.0 3/17/1998 12/31/2003 Nonrisky Sat Sat 0.0 49477 Kerala Forestry 39.0 3/24/1998 12/31/2002 Nonrisky Sat Sat 0.0 35824 UP Diversified Agricultural Support 130.0 6/30/1998 3/31/2004 Nonrisky Sat Sat 0.0 50646 UP Sodic Lands II 194.0 12/15/1998 9/30/2005 Nonrisky Sat Sat 0.0 41264 Watershed Management Hills II 135.0 6/15/1999 3/31/2005 Nonrisky Sat Sat 0.0 Education 9990 Vocational Training 116.7 04/27/89 12/31/98 Sat Likely Modest 7.25 Sat Sat Sat Sat 1999 58.3 9989 Technician Education 216.2 05/01/90 09/30/98 Highly Sat Likely Substantial 10.00 Highly Sat Sat Hsat Hsat 1999 16.9 9988 Technical Education II 256.0 3/28/1991 10/31/1999 Higly Sat Likely I Substantial Sat Sat Nonrisky Hsat Hsat I__ 16.6 hote: This table include evaluated projects with OED ratngs (176) and active proejcts with and without QAG / ARPP ratungs (80 as of Docmber 31 2000. r: not rated. Table A.3: Portfolio of Bank Lending to India (Exit/Approval FY1990-00) (continued) Institutional sroLtetPLst oAAPP ProjectD Probetnom Net onrrmnt Approva date Closing date Outcom e Sudtalnabimty demiatoprant APPIr sonkprtomnre Late QAG 50 zkomPSR frot PSD O xt %Canoeltd _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ~~~~~~~~~~~~~~~~~~~~~~~~~~~Inpact PR year cn 9955 UP Basic Education 165.0 6/10/1993 9/30/2000 Nonrsky Sat Sat 0.0 At 10464 District Primary Education 260.0 11/22/1994 3/31/2002 Nonrisky Sat Sat 0.0 35821 District Primary Education 2 425.0 6/6/1996 6/30/2003 Nonrisky Sat Sat 0.0 38021 DPEP IlIl (BIHAR) 152.0 12/4/1997 9/30/2003 Potential Sat Sat 0.0 50638 UP Basic Education 11 59.0 12/4/1997 9/30/2000 Nonrisky Sat Sat 0.0 45050 Rajasthan DPEP 86.0 6/8/1999 12/31/2004 Nonrisky Sat Sat 0.0 50667 UP DPEP IlIl 182.4 12/16/1999 9/30/2005 Sat Sat Electric power and other energy 9794 Second Korba thermal power project 386.5 07/07/81 12/31/91 Sat Likely Substantial 8.25 nr nr 1992 3.4 9793 Second Ramagundam thermal power project 277.2 12/22/81 03/31/92 Sat Likely Substantial 8.25 nr nr 1992 7.6 9805 Upper Indravati Hydro 170.4 05/10/83 06/30/95 Unsat Uncerlain Modest 4.50 nr nr 1995 47.8 9806 Central power transmission project 131.5 05/19/83 03/31/92 Sat Likely Modest 7.25 nr nr 1992 47.5 9822 Indira Sarovar Hydroelectric 15.3 05/17/84 06/30/94 Unsat Likely Modest 5.00 nr nr 1994 94.9 9824 Farakka Thermal Power 2 246.1 06/14/84 04/30/94 Unsat Likely Negligible 4.50 Unsat Sat 1994 18.2 9823 Trombay Thermal Power 4 134.4 06/27/84 06/30/92 Sat Likely Not Rated nr nr 1992 0.7 9839 Chandrapur Thermal Power 191.3 05/16/85 03/31/94 Marg Sat Uncertain Negligible 5.50 nr nr 1994 36.2 9853 Rihand Power Transmission 185.9 05/28/85 12/31/92 Sat Likely Substantial 8.25 nr nr 1993 25.6 9838 Kerala Power 99.6 06/13/85 12/31/94 Unsat Uncertain Negligible 4.00 nr nr 1995 43.4 9947 Combined Cycle Power 485.0 04/01/86 12/31/93 Sat Likely Modest 7.25 nr nr 1994 0.0 9948 Kamataka Power 69.6 06/04/87 12/31/95 Highly Unsat Uncertain Negligible 2.25 nr nr 1994 78.9 9925 Talcher Thermal Power 272.8 06/17/87 03/31/97 Marg Sat Likely Modest 6.50 Unsat Unsat 1997 27.3 9854 Nat. Capital Power Supply 322.8 06/17/87 12/31/95 Unsat Unlikely Negligible 3.75 Unsat Unsat 1996 33.4 9901 Karnataka Power 2 24.0 05/10/88 12/31/96 Highly Unsat Unlikely Negligible 2.00 nr nr 1994 90.8 9920 Uttar Pradesh power project 24.4 06/15/88 12/31/96 Highly Unsat Unlikely Negligible 2.00 nr nr 1993 93.0 9869 Nathpa Jhakri Hydro Project 485.0 3/2/1989 12/31/2002 Nonrisky Sat Sat 0.0 9941 Maharashtra Power 337.3 06/15/89 12/31/98 Unsat Uncertain Negligible 4.00 Sat Unsat Nonrisky Sat Sat 1999 15.7 9900 Private Power UtilRies (TEC) 98.0 06/26/90 06/30/95 Sat Likely Substantial 8.25 nr nr 1995 0.0 9982 NOR REG TRANSM 485.0 6/26/1990 9/30/1999 Nonrisky Sat Sat 0.0 9993 Private Power Utilities (BSES) 195.0 06/13/91 12/31/96 Highly Sat Likely Substantial 10.00 Highly Sat Highly Sat 1997 2.5 10385 Oil and Gas Sector Development 150.0 07/23/91 06/30/92 Unsat Uncertain Negligible 4.00 nr nr 1992 0.0 9888 Power Utilities Efficiency 208.2 01/28/92 06/30/98 Marg Sat Unlikely Modest 5.75 Sat Sat Nonrisky Sat Sat 1998 21.4 10400 Maharashtra Power 2 112.3 06/25/92 06/30/98 Unsat Uncertain Modest 4.50 Sat Unsat Usat Sat 1998 67.9 10416 PGC Power System 275.0 3/23/1993 6/30/2000 Nonrisky Sat Sat 21.4 10422 Tech Assist(Private Power Dev) 1.2 06/24/93 12/31/96 Unsat Unlikely Modest 4.25 Unsat Unsat Unsat Unsat 1997 94.0 10423 NTPC power generatio 400.0 6/29/1993 9/30/1998 Sat Likely Substantial Sat Sat Unsat Unsat 0.0 35170 Orissa Power Sector 350.0 5/14/1996 12/31/2002 Nonrisky Sat Sat 0.0 35160 Haryana Power APL-1 60.0 1/15/1998 12/31/2000 Nonrisky Usat Usat 0.0 49537 AP Power APL I 210.0 2/1 8/999 8/31/2003 Nonrisky Sat Sat 0.0 35172 UP Power Sector Restructuring Project 150.0 4/25/2000 12/31/2004 Nonrisky Sat Sat 0.0 49770 Renewable Energy II 130.0 6/22/2000 3/31/2006 Nonrisky Sat Sat 0.0 Environment 9860 Waterdhed Management Plains 55.0 5/15/1990 3/31/1998 Sat Likely Substantial Nonrisky Sat Sat 0.0 9882 Waterdhed Management Hills 13.0 3/6/1990 6/30/1997 Sat Likely Substantial Nonrisky Sat Sat 0.0 9877 Dam Safety 93.0 5/14/1991 9/30/1999 Marg Sat Uncertain Modest Sat Sat Nonrisky Sat Sat 39.2 10463 Industrial Pollution Prevention 166.0 7/26/1994 3/31/2002 Actual Unsat Unsat 1.2 10485 Hydrology Project 142.0 8/22/1995 3/31/2002 Nonrisky Sat Sat 0.0 43728 Environmental Capacity Building TA 50.0 12/23/1996 6/30/2003 Potential Sat Sat 0.0 Finance 9850 Industrial Export Engineering Products 244.8 10/29/85 06/30/92 Sat Likely Substantial 8.25 nr nr 1992 2.1 9991 Export Development 187.3 05/12/89 03/31/96 Unsat Unlikely Modest 4.25 Sat Sat 1996 36.5 9956 Electronics Industry Development 79.1 06/15/89 O031/97 Sat Likely Substantial 8.25 Sat Sat 1997 62.3 9895 Industrial Technology Deve. 166.9 09/12/89 12/31/97 Highly Sat Likely Substantial 10.00 Highly Sat Highly Sat 1998 16.6 10563 Financial Sector Development 450.0 3/23/1995 10/31/2002 Nonrisky Sat Sat 35.7 39935 ILFS-lnfrastructure Finance 205.0 3/28/1996 9/30/2001 Nonrisky Sat Sat 0.0 Industry 9819 Madhya Pradesh fertilizer project 165.7 05/17/84 06/30/92 Highly Sat Likely Substantial 10.00 nr nr 1992 18.6 9836 Maharashtra Petrochemical 03/19/85 09/30/91 Sat Likely Substantial 8.25 nr nr 1992 0.0 9914 Cement Industry 196.5 03/20/86 06/30/94 Sat Likely Substantial 8.25 Sat Sat _I_II _ 1994 1.8 Note: Thistable dio ievaluated proerts wIm OED raings (176)8 nd active roects vith andwithoutOAG/ ARPP rangs (801 S raoDecomber31,2000. onr: not rated. Table A.3: Portfolio of Bank Lending to India (Exit/Approval FY1990-00) Pmlwt ID Project narn. ~~Net comrndtnint lnstitutInalBorwraetp __AP Protect ID Projectnane usSnt Approvald.t. Csosinn.Approval data Closing data outcome Sutainabllty davalopment Appr Bank perfornmance Btri o PSR Latest D eiR % Canld Impact pefrac mnPRfrom PSR yer_____ 9949 Cooperative Fertilizer Ind 256.9 06/26/86 06/30/93 Sat Likely Modest 7.25 nr nr 1993 15.0 9985 Industrial Fin & Tech Assist 311.9 03/31/88 12/31/95 Unsat Unlikely Modest 4.25 Unsat Sat 1995 13.4 9981 Cement Industry Restructuring 273.8 05/15/90 06/30/97 Sat Likely Substantial 8.25 Highly Sat Highly Sat 1997 8.7 9885 Petrochemicals Develop 2 157.3 09/13/90 03/31/98 Sat Likely Substantial 8.25 Sat Sat 1998 35.8 9906 Industrial Pollution Control Project 84.0 9/31/92 6/30/1998 Marg Unsat Uncertain Modest Unsat Unsat 2000 10.0 10410 Renewable Resources 190.0 12/17/1992 12/31/1999 Highly Sat Nonrisky Sat Sat 0.0 Mining 9820 Dudhichua Coal 100.2 03/20/84 03/31/93 Sat Likely Substantial 8.25 nr nr 1993 33.6 9837 Jharia Coking Coal 55.3 03/07/85 12/31/92 Unsat Uncertain Modest 4.50 nr nr 1993 77.7 9888 Coal (Mining & Quality Imp.) 300.3 04/21/87 09/30/95 Sat Likely Negligible 6.75 Unsat Sat 1996 11.7 10411 Jharia Mine Fire Control 7.9 12/17/92 09/30/97 Marg Unsat Uncertain Substantial 6.25 Sat Unsat Nonrisky Sat Sat 1998 34.3 43310 Coal, Environmental & Social sector Mitigation 63.0 5/16/1996 6/30/2001 Nonrisky Sat Sat 0.0 9979 Coal Sector Rehabilitation 517.0 9/9/1997 6/30/2003 Actual Unsat Unsat 2.8 Multisector 10389 Structural Adjustment 500.0 12/05/91 12/31/92 Sat Uncertain Substantial 7.75 nr nr 1993 0.0 9907 External Sector Adj. 300.0 06/24/93 12/31/93 Highly Sat Likely Not Rated nr nr Nonrisky Hsat Hsat 1994 0.0 59501 Technical Assistance for Economic Reforem 45.0 05/12/00 12/31/05 nr nr Nonrisky Sat Sat 65471 UP Fiscal Reform & Public Sector Restructuring 251.3 4/25/2000 Oil and gas 9818 Cambay Basin petroleum project 213.5 03/29/84 10/31/92 Highly Sat Likely Negligible 8.50 nr nr 1993 12.0 9952 Oil India Petroleum 138.5 03/10/87 09/30/94 Highly Sat Likely Substantial 10.00 nr nr 1995 1.1 9896 Westem Gas Development 283.3 02/02/88 06/30/94 Sat Likely Negligible 6.75 nr nr 1993 4.0 9986 Petroleum Transport 43.6 04/27/89 06/30/95 Sat Likely Modest 7.25 Sat Sat 1995 87.2 10381 Gas Flaring Reduction 450.0 06/25/91 12/31/97 Marg Sat Likely Modest 6.50 Unsat Sat Nonrisky Sat Sat 1998 0.0 Population, health, and nutrition 9821 Third population project (Kerala and Karnataka) 54.0 12/13/83 03/31/92 Sat Uncertain Modest 6.75 nr nr 1992 22.8 9852 Fourth population project 37.6 07/23/85 03/31/94 Sat Uncertain Modest 6.75 nr nr 1994 26.3 9887 (Bomby & Madras) Populat. 5 51.8 06/21/88 03/31/96 Sat Likely Substantial 8.25 Sat Sat 1996 9.1 9910 Population 6 69.9 06/29/89 05/31/97 Sat Likely Modest 7.25 Sat Sat 1997 43.9 9940 Population 7 64.0 05/17/90 06/30/98 Sat Likely Modest 7.25 Sat Sat Nonrisky Sat Sat 1998 33.9 9932 Tamil Nadu Integated Nutrition 2 66.0 06/14/90 12/31/97 Marg Sat Uncertain Modest 6.00 Sat Unsat Nonrisky Sat Sat 1998 31.1 10361 Integrated Child Development Services 74.3 09/04/90 12/31/97 Unsat Likely Modest 5.00 Unsat Unsat Nonrisky Sat Sat 1998 29.9 10387 Child Survival and Safe Motherhood 214.5 09/17/91 09/30/96 Marg Sat Likely Modest 6.50 Sat Sat Nonrisky Sat Sat 1997 0.0 10393 National AIDS Prevention & Control Project 139.8 03/31/92 09/30/97 Sat Likely Substantial Highly Sat Sat 9963 Population VIII 79.0 6/18/1992 6/30/2001 Nonrisky Sat Sat 0.0 9977 ICDS II (BIHAR & MP) 194.0 3/9/1993 9/30/2000 Nonrisky Sat Sat 0.0 10424 National Leprosy Elimination 76.0 6/29/1993 3/31/2000 Nonrisky Sat Sat 10.6 10455 Blindness Control 118.0 5/12/1994 6/30/2001 Nonrisky Sat Sat 0.0 10457 Population IX 89.0 6/16/1994 12/31/2001 Nonrisky Sat Sat 0.0 10489 AP 1ST Referral Health System 133.0 12/1/1994 3/31/2002 Nonrisky Sat Sat 0.0 35825 State Health Systems II 350.0 3/21/1996 3/31/2002 Nonrisky Sat Sal 0.0 10473 Tuberculosis Control 142.0 1/30/1997 12/31/2002 Actual Usat Usat 0.0 10531 Reproductive Health 248.0 5/28/1997 3/31/2003 Nonrisky Sat Sat 0.0 10511 Malaria Control 165.0 6/12/1997 3/31/2003 Nonrisky Sat Sat 0.0 10496 Orisaa Health Systems 76.0 6/29/1998 3/31/2004 Nonrisky Sat Sat 0.0 35827 Women & Child Development 300.0 6/29/1998 9/30/2003 Actual Usat Usat 0.0 50651 Mahashastra Health Systems 134.0 12/8/1998 3/31/2005 Nonrisky Sat Sat 0.0 45051 2ND National AIDS/HIV 191.0 6/15/1999 7/31/2004 Nonrisky Sat Sat 0.0 67330 Immunization Strengthening Project 142.6 4/25/2000 6/30/2004 Nonrisky Sat Sat 50657 UP Health System Dev. Project 110.0 4/25/2000 12/31/2005 Nonrisky Sat Sat Social sector /protection 9987 Social Safety Nets 500.0 12/17/92 08/31/94 Marg Sat Likely Negligible 6.00 Unsat Sat Nonrisky Sat Sat 1995 0.0 cn 44449 Rural Women's Development 20.0 3/27/1997 12/31/2003 Nonrisky Sat Sat 0.0 Cn 49385 AP Economic Reconstruction 543.0 6/25/1998 3/31/2004 Nonrisky Sat Sat 0.0 45049 AP DPIP 111.0 4/11/2000 12/31/2005 Nonrisky Sat Sat 10505 Rajastan DPIP 100.5 4/25/2000 12/31/2005 _ Nonrisky Sat Sat Note. This table include evaluated projects edth OED rangs (t176) and actrve proejcts with and withoutOAG/ARPP raings (SO)asofDecember3l,2000. r nrot rated. Table A.3: Portfolio of Bank Lending to India (Exit/Approval FY1990-00) (continued) Net commitment Institutional ~~~~~~~dBorrwer Latest IP Latest DO ItAR anele Project ID Project nam USem Approval date Closing date Outcomec Sustalnability Idetvelomen APP Bank performance OAt at rik t xit % Cancell d Cal Telecommunications 9849 Telecommunications 9 163.2 05/14/87 12/31/93 Marg Sat Likely Modest 6.50 nr nr 1994 52.7 55456 Telecoms Sector Reform TA 62.0 12/31/2004 Nonrisky Sat Sat Transportation 9807 2nd. Railway modernization and maintenance project 400.0 11/16/82 09/30/89 Sat Likely Modest 7.25 nr nr 1990 0.0 9825 Nhava Sheva port project 229.0 03/13/84 06/30/92 Sat Uncertain Negligible 6.25 nr nr 1992 8.4 9826 Railway Electrification 272.3 05/17/84 03/31/93 Unsat Uncertain Negligible 4.00 nr nr 1993 3.0 9840 National highway project 103.4 05/09t85 12/31/93 Unsat Unlikely Negligible 3.75 nr nr 1994 48.3 9855 Gujarat Rural Roads 84.3 02/17/87 12/31/95 Sat Likely Modest 7.25 Sat Sat Nonrisky Hsat Sat 1996 29.5 9871 Railway Modernization 3 245.4 05/05/88 12/31/95 Sat Likely Modest 7.25 Sat Sat 1996 37.1 9973 States Road 183.4 10/20/88 06/30/98 Unsat Uncertain Modest 4.50 Unsat Unsat Nonnsky Usat Sat 1998 26.6 9946 National Highways II 306.0 5/12/1992 6/30/2001 Nonrisky Sat Sat 0.0 10408 Bihar Plateau 117.0 11/19/1992 6/30/2000 Nonrisky Sat Sat 0.0 9870 Container Transport 94.0 6/9/1994 12/31/2000 Nonrisky Sat Sat 0.0 45600 TA State's Road Infrastructure Development 52.0 12/5/1996 12/31/2001 Nonrisky Sat Hsat 0.0 49301 A.P. Emergency Cyclone 150.0 5/6/1997 7/31/2000 Nonrisky Sat Sat 0.0 9995 State Highways l(AP) 350.0 6/17/1997 1/31/2003 Nonrisky Sat Hsat 0.0 9972 National Highways III 516.0 6/12/2000 6/30/2006 Nonrisky Sat Sat Urban development 9808 Calcutta Urban Development 3 81.5 05/19/83 03/31/92 Unsat Unlikely Modest 4.25 nr nr 1992 44.5 9809 Madhya Pradesh Urban Dev 12.5 06/28/83 06/30/91 Sat Uncertain Modest 6.75 nr nr 1991 48.3 9841 Bombay Urban Development 93.7 01/29/85 09/30/94 Marg Sat Unlikely Modest 5.75 Sat Sat 1994 32.1 9856 Gujarat Urban Development 49.5 12/17/85 03/31/95 Unsat Uncertain Modest 4.50 Unsat Unsat 1995 20.1 9873 Uttar Pradesh Urban Deve. 111.0 04/21/87 03/31/96 Unsat Unlikely Negligible 3.75 Unsat Unsat 1996 26.0 9976 Housing development finance corporation project 250.0 03/31/88 09/30/91 Sat Likely Substantial 8.25 nr nr 1991 0.0 9872 Tamil Nadu Urban Development 254.7 06/15/88 09/30/97 Sat Likely Modest 7.25 Sat Sat Nonrisky Sat Sat 1998 15.1 34162 Maharashtra Emerg Earthquake 216.8 03/31/94 12/31/98 Highly Sat Likely Substantial 10.00 Sat Sat Nonrisky Hsat Hsat 1999 11.9 Water supply and sanitation 9810 Water Supply & Sewerage 54.4 07/06/82 12/31/91 Marg Sat Unlikely Negligible 5.25 nr nr 1992 24.5 9827 Tamil Nadu Water Supply 73.0 03/29/84 12/31/94 Sat Likely Substantial 8.25 nr nr 1995 0.0 9858 Ker. Water Supply & Sanitation 20.8 07/16/85 03/31/94 Marg Sat Uncertain Substantial 7.00 Unsat Sat 1994 49.3 9857 Bombay Water Supply and Sewerage 3 124.2 12/16/86 06/30/96 Unsat Likely Negligible 4.50 Unsat Unsat 1996 32.8 9954 Madras Water Supply & Sanit. 64.3 06/17/87 03/31/96 Sat Likely Substantial 8.25 Unsat Sat 1996 6.9 9890 Hyderabad Water Supply & Sanitation 73.5 03/27/90 03/31/98 Sat Uncertain Substantial 7.75 Sat Sat Nonrisky Sat Sat 1998 18.2 10369 Maharashtra Rural Water Supply 99.8 05/02/91 06/30/98 Marg Unsat Uncertain Modest 5.25 Unsat Unsat Nonrisky Sat Sat 1998 9.2 10418 Kamataka Water Supply & Environment 92.0 4/20/1993 12/31/1999 Nonrisky Sat Sat 0.0 10461 Madras Water Supply II 87.0 6/20/1995 6/30/2002 Nonrisky Sat Sat 68.5 10480 Bombay Swage Disposal 192.0 7/6/1995 12/31/2002 Nonrisky Sat Sat 0.0 10484 UP Rural Water 60.0 6/25/1996 5/31/2002 Nonrisky Sat Sat 0.0 50637 TN Urban Development II 105.0 5/27/1999 11/30/2004 _ 1 INonrisky Sat Sat 0.0 Standard Number ro Evaluated projects since FY93 APPI average deviation rolects Ratins (current): India 6.26 1.94 89 Outcome Highly satisfactory, satisfactory, moderately satisfactory, moderately unsatisfactory, Pakistan 6.42 1.80 43 unsatisfactory, highly unsatisfactory Sri Lanka 6.43 1.48 26 Sustainability Likely, uncertain, unlikely China 7.57 1.50 68 ID Impact High, substantial, modest, negligible SAR 6.30 1.80 213 Bank performance Highly satisfactory, satistactory, unsatisfactory, highly unsabsfactory AFR 5.83 1.80 525 Borrower performnance Highly satisfactory, satisfactory, unsatisfactory, highly unsatisfactory EAP 7.07 1.75 256 Nore: Bankwide 6.43 1.89 1,579 (a) Outcome was initiated as satisfactory/unsatisfactory, expanded to highly satisfactory and highly Nofe: The APPI (Aggregate Project Performance Indicator) is a cardinal index, ranging trorn 2 to 10, which summarizes the unsatisfactory in 1993, marginally unsatisatisfactory in 1 994 and moderately satisfactory projet-specific ordinal ratings on outcome, sustainabilty, and institutional developmrent impact (a score of 6.75 corresponds and moderately unsatisfactory in 2000. to a project with satisfactory outcome, uncertain sustainability, and modest ID impact). The average APPI in the Bankwide (b) Sustainability and inatitutional development impact were initiated in 1989 on a 3-point marginally satisfactory portfolio for all projecs evaluated since FY93 is 6.42, and the SD = 1.9. Data as of December 31, 2000. scale, the latter was expanded to a 4-point scale in 1994. (c) Bank pertormance was initiated on a 3-point scale in 1991, similarly for borrower performance in 1993; both were adjusted to a 4-point scale in 1994. Nrxo: This atiae include evaluated prqoctuerih OED ra5ings (176) and active pxoects wit andt elIt(ut QAG I AIRPP ratingS (SOfas o IDecembet 31,2000. nr: not rated. ANNEX B: REPORT FROM THE COMMITTEE ON DEVELOPMENT EFFECTIVENESS Informal Subcommittee's Report on the Management welcomed the CAE and the les- India Country Assistance Evaluation sons learned through the preparation process. The Informal Subcommittee of the Committee on However, Management questioned the feasibility Development Effectiveness (SC) met on March of carrying out a single evaluation exercise for a 16, 2001, to discuss the CountryAssistance Eval- country as large and complex as India and sug- uation (CAF)forIndia (CODE2001-18). OED re- gested that it was difficult to evaluate the impact marked that the evaluation had been OED's of the many aspects of the Bank's programs given largest and most complex CAE exercise, with in- the size of the country. Management considered tensive involvement from all stakeholders. OED that the CAE simplified the richness and com- particularly thanked the Government of India plexity of the issues faced both by the country and (Gol) and Management for the collaborative ap- the Bank's program as a result. Management proach in CAE preparation. OED reported that agreed with the importance of addressing rural in the 1990s, Bank assistance was timely and ef- poverty and stressed that this played a central role fective in supporting India's structural adjust- in the upcoming CAS. While acknowledging that ment program, energy sector reforms, water the dissemination of ESW needed improvement, resource management at the state level, and Management noted that the CAE underestimated human development. While there was progress the ultimate impact of the Bank's ESW. in the Government's reform program at this The SC welcomed the CAE and thanked OED time, it was well below India's potential and the for a well-written and comprehensive study not- sustainability of the reforms remain uncertain. ing the challenge presented by the large scale Moreover, there was insufficient attention to of the country and the Bank's programs. The SC rural poverty reduction, and the gender and so- recognized the tensions (as outlined in Man- cial gaps are persistent problems. OED stressed agement's remarks) in evaluating the Bank's that an important weakness in Bank assistance program in a country as large and complex as had been neglecting the policy reform needs of India and there was debate about the most ef- the agriculture and rural sectors. OED welcomed fective approach to undertaking evaluations in the Region's agreement to link the Bank's over- large countries. The SC particularly welcomed the all lending volumes with the implementation of broad consultations in the preparation of the CAE an effective rural and agricultural development and hoped that the chapter outlining feedback strategy, and to improve monitoring of the from the Gol and civil society would become a poverty and gender impacts of the GoI's pro- regular feature in all CAEs. grams. OED emphasized that the next CAS The Chair representing India also thanked needed to provide quantifiable indicators to OED for its efforts and noted that the CAE was measure the future success of Bank assistance a useful report for the Gol and was the result of in this and other areas. Lastly, OED stressed the an intensive consultative process. He stressed, importance of increasing the impact of Eco- however, that the CAE should be understood as nomic Sector Work (ESW), improving the coun- an evaluation of the Bank's program in India and try's resettlement safeguards, and strengthening not of India's reform program as a whole. He also aid coordination as outlined in the CAE. noted that the report was not an exhaustive 57 INDIA: THE CHALLENGES OF DEVELOPMENT commentary on the range of development issues the state of Bihar was the only left in the cate- affecting a country as complex as India and gory of "poor performers." The new CAS was ad- often did not convey the nuances of the coun- dressing this issue. try and the Bank's program. With regard to the In this regard, the SC also noted that the CAE recommendations, he noted that the GoI complexities in a country as large as India cre- supported the state-focused approach, including ated a tension between focusing Bank assis- the proposal to engage poor and non-reforming tance on states versus the center. Some speakers states with nonlending services and demonstra- stressed that while working with the states was tion projects, but that it did not wish to see the welcome, this should not be done at the expense Bank concentrate its social sector lending on the of attention to the central government, which was focus states alone as the GoI had a responsibil- still the Bank's primary counterpart and client. ity in this area to all states, regardless of their re- form inclinations. Finally, he stressed that the GoI Donor Coordination objected to the linkage of lending volumes to re- The SC expressed concern about weak donor co- forms in agricultural and rural development as ordination in India as a continuing problem. proposed by the CAE. While acknowledging and welcoming the GoI's lead in this matter, the Subcommittee stressed the Rural Development need for the Bank to play a role and asked how The SC shared OED's concerns on the lack of the Bank planned to improve coordination with progress in addressing rural poverty and stressed other donors. One member noted, however, that the Bank needed to focus more aggres- that donor coordination would be far more ef- sively on implementing a rural and agricultural fective if tackled on a sector-by-sector basis and development strategy. Members emphasized that given the sophisticated democratic processes in rural poverty must be tackled if the Interna- India, should be led by the Gol. The Subcom- tional Development Goals were to be attained. mittee urged Management to immediately address Management responded that this was a pillar of the Bank's role in improving donor coordination, the new CAS. particularly leveraging the decentralization of the Bank's programs in India. Assistance to States Many members welcomed Management's ap- Economic and Sector Work proach of focusing efforts on reforming states but Many speakers welcomed the quality of ESW also stressed that the remaining states had seri- done by the Bank in India but expressed con- ous development needs and the Bank should not cem at the lack of dissemination, noting that only disengage entirely with them. Members agreed a small group of Indian experts seemed to be with the CAE approach that support to the poorer using Bank ESW. The SC urged Management to performers take the form of ESW and Technical work with the GoI to improve ESW dissemina- Assistance programs, but supported recent shifts tion and ensure broader access to the Bank's in the Bank's program in favor of good per- work as recommended in the CAE. Some mem- formers and selectivity in Bank interventions bers questioned why ESW was still necessary based on receptivity to reform. One member given the capacity, human resources, and ex- asked whether reform was a political issue in pertise available locally in India and questioned many states and whether lack of political con- the relevance and audience for the over 200 ESW sensus on reform had led to "poor performers." reports done in India in the past decade. Mem- The SC encouraged the Bank to create demon- bers further stressed that the CAE needed more stration projects through its work with reform- in-depth analysis on ESW, focusing on rele- ing states to be replicated in other states. vance, duplication, presence of local knowl- Management commented that the Bank's current edge and expertise, and selectivity from the support to the states included some of the poor- Bank. In this regard, the Subcommittee ex- est and most populous states in India and that pressed concern that only one Public Expendi- 58 ANNEX B ture Review had been carried out and there evaluated the PIU issue in India in detail as it did had been no ESW on corruption and governance not appear to be a concern for the Gol. How- issues in this time period. Speakers stressed ever, OED's overall view has been that PIUs are that limited International Development Associ- generally found to not be conducive to sustain- ation resources, the fungibility of funds, and the able institutional development though there are shift toward programmatic lending necessitated cases where low capacity or emergency situations a PER at the central level. Though many mem- warrant establishing PIUs. The Subcommittee bers agreed with Management that it was diffi- emphasized that the Bank needed to move away cult to undertake a traditional public expenditure from the PIU concept and build capacity within review (PER) in a country as large and complex ministries. as India and that innovative approaches may be required, they, nonetheless, noted that a PER- Evaluation Methodology type exercise was necessary. Management re- Some members questioned whether the CAE sponded that a PER was in the work program was meant to be an evaluation of the Bank's pro- for the coming year. Management also re- gram or India's reform program. Members sponded that the Bank's economic reports had stressed that the development paradigm was addressed public expenditure issues, at both the shifting toward collaborative and comprehensive central and state levels, although these reports (that is, Programmatic Adjustment Lending) ap- were not formally called PERs. Furthermore, proaches and thus, it was difficult to clearly de- the Bank's engagement at the state level placed marcate the Bank's program from the country's particular emphasis on fiscal performance and program. extensive advisory and analytical work was done to develop programs of fiscal adjustment Process and improved public expenditure. Management Many members of the SC questioned the timing also noted that while governance was not a of the CAE discussion and the process for Board pillar of the 1997 CAS, it was central to the up- input, noting that the CAS had already been cir- coming CAS. culated for Board discussion. They wondered how members' comments on the CAE would be Project Implementation Units incorporated into the CAS. Management responded Many speakers expressed concerns about the en- that it had been logistically difficult to schedule the clave nature of project implementation units CAE discussion prior to the finalization of the (PIUs) and urged Management to mainstream CAS but that the CAS had been prepared in close implementation through the line ministries in consultation with the OED CAE team and incor- India. One member stressed, however, that the porated the lessons from the CAE. Furthermore, role of PIUs should be decided on a country by the CAS would be revised after the April 5 Board country basis as many line ministries did not have discussion, leaving an opportunity to incorporate the required capacity and PlUs served the im- the Subcommittee's comments as required. portant function of creating a critical mass of re- formers that moved development programs Pieter Stek forward. OED noted that the India CAE had not Chairman 59 ENDNOTES Chapter 1 10. Some policy changes have recently been 1. See paper by Singh (1999), which pro- made and more are under consideration. For in- vides an interesting discussion of India's unique stance, in 2000, state governments in Haryana cultural heritage and the contribution of that and Rajasthan reduced electricity subsidies to culture to its democratic and social institutions. rural users. The central government has raised 2. The following three paragraphs are based prices for wheat and rice in the Public Distrib- largely on Srinivasan (2001), a background paper ution System. The government is also propos- for this evaluation, and Basu and Pattanaik ing to restructure and merge the 36-odd rural (1997). A detailed and comprehensive economic development schemes and to revamp the credit history of India through 1991 can be found in delivery system so that the funds granted to it Joshi and Little (1994). are more likely to reach the end users. 3. The official national poverty line is defined as allowing a daily per person caloric intake of Chapter 2 2,400 in rural areas and 2,100 in urban areas, in 1. This section and part of the next section addition to basic dothing and transport items. The summarize the first four phases in the India-Bank rural poverty line was Rps. 274 a month in 1997, relationship as described in a 1997 background equivalent to less than $0.25 a day at then cur- paper byJochen Kraske (a former Bank manager rent exchange rates. The 1966-79 per capita GNP with direct India experience). growth rate was 0.7 percent. 2. In July 1989, just before the macroeco- 4. This section draws from Khatkhate (1994), nomic crisis, the Bank sent a country brief to Joshi and Little (1996), Bajpai and Sachs (1997), its executive directors affirming the good Basu and Pattanaik (1997), Ahluwalia and Little growth prospects of the country and the sound- (1998), Ahluwalia (1999), and Srinivasan (2001). ness of its development strategy and policy 5. About 60 percent of this environmental framework, with only minor qualifications. damage stems from economic losses from unsafe Mild warnings about the increasing stress in the domestic water supplies and unsanitary excreta balance of payments and public sector finances disposal; another 20 percent is from soil degra- were overshadowed by the extensive coverage dation. of the positive achievements of the govern- 6. This section is based largely on Joshi and ment's policies in the late 1980s and the implicit Little (1996), Bajpai and Sachs (1997), Basu and endorsement of the institutional and policy Pattanaik (1997), Ahluwalia and Little (1998), framework underpinning them. However, in the Ahluwalia (1999), and Srinivasan (2001). For a 1970s, Bhagwati and Desai (1970) and Bhag- comprehensive analysis of the unfinished re- wati and Srinivasan (1975) had already pre- form agenda see the World Bank's recent eco- dicted a serious macroeconomic crisis stemming nomic report (World Bank 1999a). from the faulty policy framework. 7. For the 1990s, military expenditures have been about 15 percent of central government ex- Chapter 3 penditures, ranging between 2.1 percent and 1. For example, the sole public expenditure 2.7 percent of GDP. review (PER) for the decade (1993), a costly, 8. For example, 23 of 26 states had not reg- three-year effort, was discussed with only a ularized extra-budgetary (unauthorized by the small group of government officials, was never legislature) spending in the past five years. published, and had little impact. Regional staff 9. However, 19 new private banks began op- strongly dispute this assessment, which is based erations during the 1990s. The new govern- on the findings of a review of the quality and ment's reform agenda includes improving debt impact of the India PER commissioned by OED recovery mechanisms, reducing the government as an input to its Bankwide PER review, and was stake in public banks to 33 percent, and for- substantially confirmed in interviews with Indian mulating the first voluntary retirement scheme for officials during the May 1999 Country Assistance the banking sector. Evaluation mission. Regional staff argue that this 60 ENDNOTES study reviewed comprehensively not only the donor resources ($686, or about 30 percent of content of public spending but also the institu- total cofinancing), more than 85 percent of co- tional context in which spending decisions were financing in fiscal 1995-99 has been for the en- made; that the PER raised for the first time the ergy and mining sectors, with export agencies issue of central government transfers and lend- providing more than half of the total (as in ear- ing to the states, and the lack of performance cri- lier years). teria in such transfers and lending; that these 6. The Bank's internal South Asia Region issues have gradually become part of the policy took exception to such critical remarks about debate in India; that several of the sector reports partnerships and about cooperation with IFC. It underlying the review (ports, agriculture, social noted that the extent of partnership should not sectors) were widely disseminated in India; and be judged by the scope of cofinancing only. that the PER was discussed among a small cir- Other factors are at play, such as a move away cle of senior officials who felt that it would be from large infrastructure projects and toward easier to implement the PER recommendations projects (such as in education) where various if they were not associated with the Bank. donors all finance one program directly to the 2. A recent QAG review reached similar over- government, not as cofinanciers of the Bank all conclusions but also pointed to some weak- projects. It also noted that IFC has just invested nesses-inadequate treatments of the fiscal in Orissa's newly privatized power distribution problem, of a possible trade-off between growth sector. and equity, and of issues related to labor-inten- 7. Of 14 donors solicited by OED, 8 repre- sity of growth and employment opportunities for sentatives in Delhi responded with a written the poor. The panel also found poor prioritiza- questionnaire. Most donors indicated that an as- tion and inadequate analysis of the "actionabil- sessment of the Bank's effectiveness in aid co- ity" of key policy recommendations. However, ordination was not possible because the the panel underscored the value of Bank eco- government was in charge. nomic and sector work in India, even when it may not lead to policy changes in the short Chapter 4 term, as long as it contributes to setting the re- 1. Tables containing the evaluators' ratings of form agenda and shaping the public debate. the Bank assistance in all the sectors covered by 3. QAG panels rate projects' quality at entry OED sector studies or CAE background papers good, satisfactory, marginal, or poor on the fol- and descriptions of sectoral assistance strate- lowing criteria: project concept, objectives, and gies' objectives and achievements, as well as approach; technical, economic, and financial summaries of all sectoral evaluation inputs (CAE analyses; environmental analyses; social and background papers and OED sector reviews) are stakeholder analyses; institutional capacity analy- published under separate cover in OED's Work- ses; readiness for implementation; and risk as- ing Paper Series and are available upon request. sessment and sustainability. The other projects 2. In its comments on an earlier draft, the QAG evaluated in 1997 were AP Emergency Cy- Bank's internal South Asia Region noted that it clone, AP Irrigation III, Malaria Control, Repro- has an ongoing, very detailed, and meaningful ductive Health, and State Highways I. dialogue on a number of issues relating to rural 4. These annexes are published under sepa- development and poverty reduction at the state rate cover in OED's Working Paper Series and level. According to the Region, there is no dis- are available upon request. agreement in India, at least at the policy levels, 5. Donor resources directly mobilized by about the need to revise fertilizer, water, and Bank projects fell from $2.2 billion in fiscal power subsidies to agriculture. And the central 1990-94 to $0.9 billion in fiscal 1995-99 (spread government has been moving, albeit cautiously, among 11 cofinanciers, down from 19 during the in the same directions recommended by the earlier period). While in the first half of the Bank's sector work. The Region also maintains decade adjustment lending attracted substantial that public debate on the need to remove do- 61 INDIA: THE CHALLENGES OF DEVELOPMENT mestic and external trade restrictions is quite 5. In its comments, the Ministry of Human Re- healthy, with the Bank having taken every op- source Development argued that there is no portunity to bring this issue to the notice of pol- merit to such questions. The Ministry's view is icymakers in the "focus" states. In the Region's that, under the District Primary Education Pro- words: "For example, the establishment of the gramme, many extensive research studies and rural poverty reduction task force in Andhra more than 250 evaluations have been made; Pradesh and the proposed rural policy review in data reporting systems have been effectively Karnataka will give an opportunity to lay these strengthened over the years; there are effective issues out and discuss them with major partner monitoring and training components for the Vil- states. In Uttar Pradesh and Rajasthan, the Water lage Education Committee; and the elaborate Sector Restructuring projects offer an opportu- joint supervision mechanism, involving donors, nity to come to grips not only with the pricing national research institutes, and other local ex- issue with regard to water but also with institu- perts, is very collaborative, with no question of tional reform of water management agencies." government domination. A number of states are finally "taking water re- 6. Including withdrawal of support for the Sar- sources management seriously. Cost recovery in dar Sarovar dam and a power project on the Nar- irrigation is no longer a controversial issue. The mada River. issue is rather one of when and how it must be 7. For example, the Karnataka Rural Water phased in." Supply and Environmental Sanitation project (ap- 3. In its comments on an earlier draft, the proved in fiscal 1993) built on lessons of a pre- South Asia Region noted that while the Bank has vious project in Maharashtra, which in turn led indeed been working closely with a few states to improvements and greater investments (7 per- and its sector lending has expanded in the state cent of project budget devoted to participation road subsector, the Bank continued to have a compared with 2 percent in the Karnataka proj- strong program with the National Highway Au- ect) in the Uttar Pradesh Water Supply project (ap- thority. Indeed, looking at recent lending oper- proved in fiscal 1998). The state of the art District ations (fiscal 2000) and the lending program for Poverty Initiative projects and Integrated Water- fiscal 2001-03, about 40 percent of the Bank's shed Development projects, some of which have lending volume will be for national highway already been approved, are founded on a social projects. development approach of empowering the poor 4. For example, in the Uttar Pradesh Basic Ed- through community groups. ucation project, enrollments in the 1991-2000 pe- riod reportedly increased by 67 percent at the Chapter 6 primary level and by 74 percent at the lower sec- 1. For the full list of International Develop- ondary level. The gross enrollment ratio in- ment Goals see http://www.oecd.org/dac/ creased from a baseline level of 66 percent to Indicators/htm/goals.htm 107 percent (including overage children), al- 2. The Ministry of Human Resource Devel- though the target level was only 78 percent. opment took exception to this recommenda- Girls' enrollment increased significantly, re- tion. The Ministry's view is that "education, portedly by 97 percent. The dropout rate de- especially elementary schooling, needs to be creased, textbooks were provided on a large viewed differently from other sectors. It is the ob- scale and were available in classes, while 100,000 ligation of the government to provide universal teachers received in-service training through education up to the age of 14. The GOI's [gov- block and cluster resource centers. Large num- ernment's] inputs to the states, particularly in the bers of teachers were appointed, particularly lo- education sector, depend on several factors, cally residing para-teachers. Instructional such as educational backwardness and regional methodology was emphasized and child-cen- disparities, and the like. It would, therefore, not tered methodologies were disseminated to teach- be appropriate to link the external funding to the ers and parents. reforms in other sectors." 62 ENDNOTES Chapter 7 workshop was held on April 6, 2000, where pre- 1. There were 12 half-day, sectoral CAE/CAS sentations by OED of the preliminary CAE find- workshops on outreach (March 14, 2000), urban ings and by South Asia staff of thoughts about development (March 24), education (March 29), future Country Assistance Strategy were discussed energy (March 30, South Asia presentation only), by two panels and by a larger audience of stake- transport (March 30), private sector develop- holders (about 60-80). The draft CAE (dated Jan- ment/financial sector development (March 31), uary 31, 2000), however, given the need for public sector management (March 31), social de- confidentiality and privileged consultations, was velopment (April 3), gender (April 3), environ- only shared and discussed (in additional ses- ment (April 4), health (April 4, South Asia sions) with the CAE advisers, Bank staff, current presentation only), agriculture and rural devel- government officials, a small number of former opment (April 5), where presentations of the officials, and the CAE/CAS workshop panel dis- preliminary findings of the CAE background pa- cussants. All other workshop participants only had pers and thoughts by Bank staff on future sec- the benefit of a presentation, albeit a substantive toral assistance strategies were discussed by one, of the draft CAE findings. groups of 20-30 stakeholders from the central and 2. R. Mohan, A. Ray, G. Sen, and A. Sen- state government and parastatals, academics and gupta. The feedback from all other CAE re- policy analysts, and representatives from non- viewers had already been incorporated into the governmental organizations and other elements January 31, 2000, draft on which the India-based of civil society. An all-day CAE/CAS synthesis advisers commented. 63 BIBLIOGRAPHY Background Papers/Working Papers Rural Development in the 1990s. OED Work- ing Paper. Washington, D.C. Published aspart of OED's Working Paper Series . 2001b. Evaluating Bank Assistance to and available on request. India for Poverty Reduction in the 1990s. OED Working Paper. Washington, D.C. Abadzi, Helen. 2001. Evaluating Bank Assis- Van Wicklin, Warren. 2001. Evaluating Bank As- tance to India for Education Sector Develop- sistance to Indiafor Social Development. OED ment in the 1990s. OED Working Paper. Working Paper. Washington, D.C. Washington, D.C. Zanini, Gianni. 2001. 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