World Bank Group Assignment
Content
The World Bank
Introduction The World Bank Group (WBG) was established in 1944 is headquartered in Washington, D.C. to rebuild post-World War II Europe under the International Bank for Reconstruction and Development (IBRD). Today, the World Bank functions as an international organization that fights poverty by offering developmental assistance to middleincome and low-income countries. By giving loans and offering advice and training in both the private and public sectors, the World Bank aims to eliminate poverty by helping people help themselves. Membership There are 186 member countries that are shareholders in the IBRD, which is the primary arm of the WBG. To become a member, however, a country must first join the International Monetary Fund (IMF). The size of the Bank's shareholders, like that of the IMF's shareholders, depends on the size of a country's economy. Thus, the cost of a subscription to the Bank is a factor of the quota paid to the IMF. There is an obligatory subscription fee, which is equivalent to 88.29% of the quota that a country has to pay to the Fund. In addition, a country is obligated to buy 195 Bank shares (USD 120,635 per share). Of these 195 shares, 0.60% must be paid in cash in U.S. dollars while 5.40% can be paid in a country's local currency, in U.S. dollars, or in non-negotiable non-interest bearing notes. The balance of the 195 shares is left as "callable capital", meaning the Bank reserves the right to ask for the monetary value of these shares when and if necessary. A country can subscribe a further 250 shares, which do not require payment at the time of membership but are left as "callable capital". The president of the Bank comes from the largest shareholder, which is the United States, and members are represented by a Board of Governors. Throughout the year, however, powers are delegated to a board of 24 Executive Directors (ED). The five largest shareholders - the U.S., U.K., France, Germany and Japan - each have an individual ED, and the additional 19 EDs represent the rest of the member states as groups of constituencies. Of these 19, however, China, Russia and Saudi Arabia have opted to be a single country constituency, which means that they each have one representative within the 19 EDs. This decision is based on the fact that these countries have
large, influential economies, which requires that their interests be voiced individually rather than diluted within a group. The World Bank gets its funding from rich countries as well as from the issuance of bonds on the world's capital markets.
The Parts That Make Up the Whole
1. 2. 3. 4. 5.
International Bank for Reconstruction and Development (IBRD) International Development Association (IDA) International Finance Corporation (IFC) Multilateral Investment Guarantee Agency (MIGA) International Centre for the Settlement of Investment Disputes (ICSID)
The IBRD offers assistance to middle income and poor but credit worthy countries , and it also works as an umbrella for more specialized bodies under the Bank. The IBRD was the original arm of the Bank which was responsible for the reconstruction of post-war Europe. Before gaining membership in the WBG's affiliates (the International Finance Corporation, the Multilateral Investment Guarantee Agency and the International Center for Settlement of Investment Disputes), a country must be a member of the IBRD.
The International Development Association offers loans to the world's poorest countries. These loans come in the form of "credits", and are essentially interest-free. They offer a 10-year grace period and hold a maturity of 35 years to 40 years.
The International Finance Corporation (IFC) works to promote private sector investments by both foreign and local investors. It provides advice to investors and businesses, and it offers normalized financial market information through its publications, which can be used to compare across markets. The IFC also acts as an investor in capital markets and will help governments privatize inefficient public enterprises.
The Multilateral Investment Guarantee Agency (MIGA) supports direct foreign investment into a country by offering security against the investment in the event of political turmoil. These guarantees come in the form of political risk insurance, meaning that MIGA offers insurance against the political risk that an investment in a developing country may bear.
Finally, the International Center for Settlement of Investment Dispute facilitates and works towards a settlement in the event of a dispute between a foreign investor and a local country.
Challenge of the World Bank At the World Bank they have made the world's challenge—to reduce global poverty—their challenge. The Bank focuses on achievement of the Millennium Development Goals that call for the elimination of poverty and sustained development. The goals provide with targets and yardsticks for measuring results. The mission is to help developing countries and their people reach the goals by working with partners to alleviate poverty. The Bank address global challenges in ways that advance an inclusive and sustainable globalization—that overcome poverty, enhance growth with care for the environment, and create individual opportunity and hope. Six strategic themes drive the Bank’s efforts. By focusing on these strategic themes, the Bank delivers technical, financial and other assistance to those most in need and where it can have the greatest impact and promote growth. To meet Global Challenges, the Six strategic themes
1.
The poorest countries: The World Bank is helping overcome poverty and spur sustainable growth in the poorest countries, especially in Africa.
2.
Post Conflict fragile states: The Bank is helping prevent conflict and support reconstruction remains a critical part of the World Bank's global mission of poverty
reduction; in fact, it was first founded to support reconstruction after World War II. The World Bank Group is working with many partners, including donor trust funds and the United Nations, to offer more responsive, flexible, and comprehensive solutions in difficult environments
3.
The Arab world: The World Bank Group is looking to forge a more effective partnership with countries in the Arab world. By disseminating global knowledge, facilitating learning, and piloting new approaches, we seek to foster broad-based growth, increase trading opportunities, and improve the environment for entrepreneurship and innovation. We aim to help expand social services, boost public accountability, address environmental issues, and connect education systems more effectively with the job market.
4.
The middle-income countries: The World Bank Group is working to meet middleincome countries' specific needs with tailored assistance that draws on an array of competitive financial products and knowledge and learning services. These countries are also increasingly important partners in our work to address critical cross-border and global issues, such as clean energy, trade integration, environmental protection, international financial stability, and the fight against infectious diseases.
5.
Global public goods issues: The World Bank Group is helping spur multilateral action and global partnerships involving governments, nonprofit organizations, and socially responsible corporations. The work on global public goods focuses on the environment, especially climate change; controlling communicable diseases, such as HIV/AIDS and malaria; preventing and mitigating crises in international financial systems; and promoting an open, multilateral trade system.
6.
Knowledge and learning services: The World Bank Group is committed to remaining the premier source of development knowledge through reports, data and analytical tools, conferences, and the Internet. We are enhancing our capacity to share this knowledge globally and are helping build partnerships and expertise in client countries. We are moving toward an open data platform, making our Web-based information more accessible and interactive, and improving the focus and depth of our learning and capacity-building programs.
THE INDIAN CONTEXT
“India is a country with many poor people but it is not a poor country.” -Shri Mohammad Hamid Ansari, Vice-President of India The World Bank is one of the world’s largest sources of funding and knowledge for developing countries, India being one of the oldest members, having joined the institution at its inception in 1944. In India, the World Bank works in close partnership with the Central and State Governments. It also works with other development partners: bilateral and multilateral donor organizations, nongovernmental organizations (NGOs), the private sector, and the general public—including academics, scientists, economists, journalists, teachers, and local people involved in development projects. WORLD BANK IN INDIA In the past decade, India has accelerated economic growth and improved most Millennium Development Goals (MDG). It is also a rising global power—and a leading player in information technology, telecommunications, and business processes outsourcing. India’s annual GDP growth has been strong and steady at more than 7% over the past decade, accelerating to over 9% in the three years before the 2008 global financial crisis. Growth followed wide-ranging structural reforms that began in 1991. Between 1997 and 2005, poverty rates fell from about 36% to 28%. Consistent with India's priorities, the World Bank has been particularly effective in supporting areas critical to the country's development goals. Education World Bank supports the Sarva Shiksha Abhiyan (Education for All) that caters to some 200 million primary school children in the country. Since 2001, nearly 20 million children have been brought into primary school. They include first-generation learners from long-deprived communities, minority communities, and children with special needs. Health
With the Bank's assistance, HIV prevalence has declined among sex workers particularly in the southern states. More than 1.1 million people with risky behavior have been reached. The World Bank has also helped scale up the Revised National Tuberculosis Control Program nationwide. More than 9.5 million people suffering from TB between 1997 and 2008 were diagnosed and placed on treatment, thus saving more than 1.7 million additional lives. Deaths from the disease were cut sevenfold from 29% to 4% and India met global targets for TB detection and cure. Social inclusion The Tamil Nadu Empowerment and Poverty Reduction Project focused on women and other disadvantaged groups in some 2,500 villages. In the first two years of the program, about 159,000 households increased their incomes by 60 to 80%. About 182,900 poorest and tribal households have formed into some 17,266 self-help groups. Access to credit has opened up, with self-help groups securing more than $9 million in microloans during the first two years of the program. Rural roads In 2000, about 40% of India’s 825,000 villages lacked all-weather roads. The World Bank is supporting the Government of India's Rural Roads program in the states of Himachal Pradesh, Rajasthan, Jharkhand, and Uttar Pradesh. With access to roads, incomes have soared. Household incomes rose by 50 to 100% on average. Farmers are receiving better prices for their products. Literacy has increased by 10% and the gender gap has narrowed with easier access to school for girls. For every 1 million rupees spent on rural roads, 163 people were lifted out of poverty. Rural water and sanitation In 2006, only half of Uttarakhand’s rural population had access to clean and safe drinking water. The Uttaranchal Rural Water Supply and Sanitation Project is using a community-led approach to ensure that services are efficient and sustainable. More than 130,000 people have already benefited from the village water supply schemes under the project.
Poverty reduction in rural areas The Andhra Pradesh Rural Poverty Reduction Project helped rural women, organize themselves into credit worthy-groups tapping private sector sources that had long overlooked this potential market. Assets and incomes have increased for almost 90% of poor rural households, including more than 9 million women. Health and nutrition programs are dramatically improving maternal and child health and infant nutrition. Annual credit flows have increased from less than $23 million in 2000 to $1.23 billion in 2009—more than a 50-fold increase. State-level economic development The Bank-financed Andhra Pradesh Economic Reform Project has helped transform the state to middle-income status, which is reflected in improved living standards for citizens. Per capita income has risen to nearly $700 in 2005-06 (from $385), the poverty ratio has fallen considerably, and nearly 94% of the state’s primary school-age children are in school. The fiscal deficit is at a manageable level of 3.5% of Gross State Domestic Product (GSDP) and falling. Among India’s major states, Andhra Pradesh now has the best-managed power sector, the thirdhighest credit rating, one of the best investment climates, and the fourth-lowest corruption levels.
RANKING BY WORLD BANK The table lists the overall "Ease of Doing Business" rank (out of 183 economies) and the rankings by each topic.
EASE OF
Doing Business 2010 rank 133 169 175
Doing Business Starting a Business Dealing with Construction Permits Employing Workers Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders
Doing Business 2009 rank 132 166 174
Change in rank
-1 -3 -1
104 93 30 41 169 94
102 92 27 38 171 97
-2 -1 -3 -3 +2 +3
Enforcing Contracts Closing a Business
182 138
182 142
0 +4
THE WORLD BANK’S PLAN OF ACTION IN INDIA The World Bank's work plan in India is spelt out in its Country Strategy (CAS). The Country Strategy for India is closely aligned with India's own development priorities and describes what kind of support and how much can be provided to the country over a period of around four years. The Country Strategy for India for 2009-2012 is aligned with the government's Eleventh Five Year Plan. It focuses on helping the country to fast-track the development of much-needed infrastructure, support the seven poorest states, and respond to the financial crisis. The strategy was arrived at after a series of consultations with a broad range of stakeholders, including members of the government and civil society. The strategy envisages total proposed lending of US$14 billion for 2009 - 2012. As private financing dries up in the wake of the global financial crisis, the Bank has agreed to provide an additional US$ 3 billion as part of the total financing envelope of US$ 14 billion. The strategy is implemented through lending, dialogue, analytical work, engagement with the private sector, and capacity building exercises. The Bank’s previous four-year Country Strategy for 2005-2008 focused on lending for infrastructure, human development, and improving rural livelihoods. PROJECTS The Bank’s method of operation is not to implement ―World Bank projects,‖ but to provide financing and advice for projects which are owned and supported by the Indian government and the people and form part of their overall development agenda. Various financing options are available based upon the type of assistance needed. It is important to note that the implementation of projects is managed by the government itself. The government designates an office, referred to as the Project Implementing Agency (PIU), which is responsible for aspects such as procurement and selection of consultants and day-to-day work, monitoring, and evaluation.
The Bank’s operational policies set guidelines to ensure that projects meet its own criteria such as social and environmental standards. Projects are evaluated to capture and share lessons for similar projects in future.
TOTAL IBRD/IDA COMMITMENTS AS OF END FY09: $14.9 BILLION (by fiscal year, in nearest US$ billion) Commitments New Total Commitments (Active Projects) Total No. of Active Projects FY 04 1.4 FY 05 2.9 FY 06 1.4 FY 07 3.7 FY 08 2.1 FY 09 2.3
12.0
12.8
11.3
14.3
13.8
14.9
63
64
56
67
60
61
COUNTRY STRATEGY FOR INDIA (CAS) 2009 TO 2012
The World Bank’s Country Strategy (CAS) for India for 2009-2012 focuses on helping the country to fast-track the development of much-needed infrastructure and to support the seven poorest states achieve higher standards of living for their people. The strategy envisages a total proposed lending program of US$14 billion, for the next three years, of which US$9.6 billion is from the International Bank for Reconstruction and Development (IBRD) and US$4.4 billion (SDR 2.982 billion equivalent at the current exchange rate) from the International Development Association (IDA). Maintaining rapid and inclusive growth Infrastructure: For India's rapid and sustained growth, major investments in power, transport, water, and urban development are needed. Inadequate power supply remains a critical constraint to growth; while GDP grew at an average of about 8% a year over the past five years, electricity generation only grew at an average of 4.9% per year. The national and state highway networks
have not kept pace with the tremendous growth in demand for road transport: only about 30% of state highways are two-lane and more than 50% are in poor condition. Inadequate urban infrastructure is hampering the expansion of growth centers. While the Eleventh Plan foresees a major role for private sector involvement in infrastructure development through PPPs, these may not materialize to the extent hoped for in the aftermath of the global financial crisis. The Government of India has requested the World Bank to specially focus on infrastructure investment in its new strategy, including on strengthening the capacity of government agencies to design and manage public-private partnerships(PPPs). Skills: The shortage of skills is preventing large segments of the population from being part of India's growth story. Nearly 44% of India’s labor force is illiterate, only 17% of it has secondary schooling, and enrollment in higher education is just 11%. This compares unfavorably with, for example, China, where access to secondary education is almost universal and enrollment in higher education exceeds 20%. Moreover, the quality of most Indian graduates is poor and employers offer very little skills upgrading (16% of Indian manufacturers offer in-service training to their employees, compared to over 90% of Chinese firms). The informal sector employs over 90% of the workforce, but there is very little investment or opportunity for formal `skilling’ for informal workers and enterprises. Agricultural Growth: Low agricultural productivity is keeping some 60 percent of India’s population behind. Shortages of basic rural infrastructure - from roads to electrification - are hindering the growth of off-farm activities. No doubt, agricultural growth has been faster over the past five years (4.7% per year)- facilitated by very good monsoons, greater production of high-value fruits, vegetables, and dairy products, an increase in the minimum support price for grains, and the sudden increase in global prices for agricultural products. But, sustaining this level of performance over the longer term will be difficult without addressing several policy and structural constraints, including a myriad of restrictions, subsidies, support prices, sector governance issues, as well as the tiny size of landholdings and years of underinvestment. The Indian Government has asked the World Bank to place special emphasis on agricultural development in its new strategy.
Making development sustainable Most environmental indicators suggest that growth is extracting an increasing toll on the country's natural resources - water, land, forests, soils and biodiversity - and leaving a larger pollution footprint. India is highly vulnerable to climate change; cyclones, floods and droughts are happening with increasing frequency, and the Himalayan glaciers that feed India’s largest rivers show clear signs of retreat. Indeed, climate change will impact India first and foremost through its water resources. Rising temperatures will also affect agricultural yields, forests, and marine and coastal biodiversity. India will need to better manage these resources (particularly water) and reduce the burden that environmental degradation is imposing on the population, particularly on the most vulnerable groups. Increasing the effectiveness of service delivery While much progress has been made on primary school enrollment, improvements have been elusive in other sectors, particularly health. Although deaths from TB have fallen and polio cases have reduced dramatically in 2008, child malnutrition levels are worse than in Sub-Saharan Africa, despite large expenditures. No Indian city provides water 24/7, only half the population has access to safe drinking water, and less than a third has access to sanitation. Public services fall short largely because they have little or no accountability to the ultimate client, and outdated management systems are unable to provide the information needed for decision-making. These issues are particularly acute in centrally sponsored schemes which are designed and funded by the central government but implemented by the states and lower echelons of government. Given the importance of these schemes, systemic improvements in design and governance are crucial to get results from public spending. The Government of India has requested the World Bank to place special emphasis in its new strategy on centrally sponsored schemes that aim to achieve the MDGs. The Bank will focus on increasing accountability to citizens, decentralizing responsibilities, and enhancing private sector participation in the delivery of these services. Strategies for states Given India’s enormous size and diversity, the Bank will adopt different strategies for states depending on their needs, stages of development, and capacity for project implementation. Special strategies will also be adopted for the Northeastern and Himalayan states.
Low-income states The new strategy devotes more resources to engaging with India’s seven low-income states Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, and Uttar Pradesh - which are home to more than half of India’s population. Here, the Bank will focus on poverty reduction and on achieving the Millennium Development Goals (MDGs). Intensive technical assistance will be provided to help these states develop their administrative capacity. Bank lending to these states will primarily be in the form of low-interest IDA credits as well as technical and advisory services. Middle-income states India's richest states already have incomes comparable to lower middle income countries, with incomes being some five times higher than those in the poorest states. This gap is higher than most other democratic societies.In these states, the Bank will provide support on two fronts: fighting poverty in their lagging regions, and addressing the complex challenges emerging from rapid growth. States such as Andhra Pradesh, Karnataka, Punjab, Tamil Nadu, Haryana, Gujarat, and Maharashtra will be helped to forge the institutions needed in a middle income economy. Cutting-edge analytical work and the best international expertise will be brought to bear upon complex problems where there are yet no clear solutions. Lending to these states will be in the form of competitively priced IBRD loans, with the International Finance Corporation (IFC) – the Bank’s private sector arm – providing support for private sector clients. Engaging the Center The World Bank will continue to assist the central government by providing comprehensive analytical work to underpin policy and institutional reform and to improve the implementation of central government projects on the ground. Under the Sarva Siksha Abhiyan (SSA) for example, while schools are now more accessible and gender parity has been reached, the focus will now be on improving the quality of education provided. In the power sector, the Bank will continue to support Powergrid, India’s national electricity transmission agency, which it has helped to grow into a world-class institution. Public Private Partnerships
The World Bank and IFC are collaborating to bring India cutting-edge expertise to deal with emerging issues in Public-Private Partnerships (PPPs), tailored to India’s needs. While this work has so far been the strongest in infrastructure - power transmission, roads, irrigation and rural infrastructure, urban development - it will now be extended to agribusiness, health and education, and renewable energy. The Bank and IFC are also working together on long-term finance: through the proposed India Infrastructure Finance Co. Ltd. Project (IIFCL).
Introduction The World Bank Group (WBG) was established in 1944 is headquartered in Washington, D.C. to rebuild post-World War II Europe under the International Bank for Reconstruction and Development (IBRD). Today, the World Bank functions as an international organization that fights poverty by offering developmental assistance to middleincome and low-income countries. By giving loans and offering advice and training in both the private and public sectors, the World Bank aims to eliminate poverty by helping people help themselves. Membership There are 186 member countries that are shareholders in the IBRD, which is the primary arm of the WBG. To become a member, however, a country must first join the International Monetary Fund (IMF). The size of the Bank's shareholders, like that of the IMF's shareholders, depends on the size of a country's economy. Thus, the cost of a subscription to the Bank is a factor of the quota paid to the IMF. There is an obligatory subscription fee, which is equivalent to 88.29% of the quota that a country has to pay to the Fund. In addition, a country is obligated to buy 195 Bank shares (USD 120,635 per share). Of these 195 shares, 0.60% must be paid in cash in U.S. dollars while 5.40% can be paid in a country's local currency, in U.S. dollars, or in non-negotiable non-interest bearing notes. The balance of the 195 shares is left as "callable capital", meaning the Bank reserves the right to ask for the monetary value of these shares when and if necessary. A country can subscribe a further 250 shares, which do not require payment at the time of membership but are left as "callable capital". The president of the Bank comes from the largest shareholder, which is the United States, and members are represented by a Board of Governors. Throughout the year, however, powers are delegated to a board of 24 Executive Directors (ED). The five largest shareholders - the U.S., U.K., France, Germany and Japan - each have an individual ED, and the additional 19 EDs represent the rest of the member states as groups of constituencies. Of these 19, however, China, Russia and Saudi Arabia have opted to be a single country constituency, which means that they each have one representative within the 19 EDs. This decision is based on the fact that these countries have
large, influential economies, which requires that their interests be voiced individually rather than diluted within a group. The World Bank gets its funding from rich countries as well as from the issuance of bonds on the world's capital markets.
The Parts That Make Up the Whole
1. 2. 3. 4. 5.
International Bank for Reconstruction and Development (IBRD) International Development Association (IDA) International Finance Corporation (IFC) Multilateral Investment Guarantee Agency (MIGA) International Centre for the Settlement of Investment Disputes (ICSID)
The IBRD offers assistance to middle income and poor but credit worthy countries , and it also works as an umbrella for more specialized bodies under the Bank. The IBRD was the original arm of the Bank which was responsible for the reconstruction of post-war Europe. Before gaining membership in the WBG's affiliates (the International Finance Corporation, the Multilateral Investment Guarantee Agency and the International Center for Settlement of Investment Disputes), a country must be a member of the IBRD.
The International Development Association offers loans to the world's poorest countries. These loans come in the form of "credits", and are essentially interest-free. They offer a 10-year grace period and hold a maturity of 35 years to 40 years.
The International Finance Corporation (IFC) works to promote private sector investments by both foreign and local investors. It provides advice to investors and businesses, and it offers normalized financial market information through its publications, which can be used to compare across markets. The IFC also acts as an investor in capital markets and will help governments privatize inefficient public enterprises.
The Multilateral Investment Guarantee Agency (MIGA) supports direct foreign investment into a country by offering security against the investment in the event of political turmoil. These guarantees come in the form of political risk insurance, meaning that MIGA offers insurance against the political risk that an investment in a developing country may bear.
Finally, the International Center for Settlement of Investment Dispute facilitates and works towards a settlement in the event of a dispute between a foreign investor and a local country.
Challenge of the World Bank At the World Bank they have made the world's challenge—to reduce global poverty—their challenge. The Bank focuses on achievement of the Millennium Development Goals that call for the elimination of poverty and sustained development. The goals provide with targets and yardsticks for measuring results. The mission is to help developing countries and their people reach the goals by working with partners to alleviate poverty. The Bank address global challenges in ways that advance an inclusive and sustainable globalization—that overcome poverty, enhance growth with care for the environment, and create individual opportunity and hope. Six strategic themes drive the Bank’s efforts. By focusing on these strategic themes, the Bank delivers technical, financial and other assistance to those most in need and where it can have the greatest impact and promote growth. To meet Global Challenges, the Six strategic themes
1.
The poorest countries: The World Bank is helping overcome poverty and spur sustainable growth in the poorest countries, especially in Africa.
2.
Post Conflict fragile states: The Bank is helping prevent conflict and support reconstruction remains a critical part of the World Bank's global mission of poverty
reduction; in fact, it was first founded to support reconstruction after World War II. The World Bank Group is working with many partners, including donor trust funds and the United Nations, to offer more responsive, flexible, and comprehensive solutions in difficult environments
3.
The Arab world: The World Bank Group is looking to forge a more effective partnership with countries in the Arab world. By disseminating global knowledge, facilitating learning, and piloting new approaches, we seek to foster broad-based growth, increase trading opportunities, and improve the environment for entrepreneurship and innovation. We aim to help expand social services, boost public accountability, address environmental issues, and connect education systems more effectively with the job market.
4.
The middle-income countries: The World Bank Group is working to meet middleincome countries' specific needs with tailored assistance that draws on an array of competitive financial products and knowledge and learning services. These countries are also increasingly important partners in our work to address critical cross-border and global issues, such as clean energy, trade integration, environmental protection, international financial stability, and the fight against infectious diseases.
5.
Global public goods issues: The World Bank Group is helping spur multilateral action and global partnerships involving governments, nonprofit organizations, and socially responsible corporations. The work on global public goods focuses on the environment, especially climate change; controlling communicable diseases, such as HIV/AIDS and malaria; preventing and mitigating crises in international financial systems; and promoting an open, multilateral trade system.
6.
Knowledge and learning services: The World Bank Group is committed to remaining the premier source of development knowledge through reports, data and analytical tools, conferences, and the Internet. We are enhancing our capacity to share this knowledge globally and are helping build partnerships and expertise in client countries. We are moving toward an open data platform, making our Web-based information more accessible and interactive, and improving the focus and depth of our learning and capacity-building programs.
THE INDIAN CONTEXT
“India is a country with many poor people but it is not a poor country.” -Shri Mohammad Hamid Ansari, Vice-President of India The World Bank is one of the world’s largest sources of funding and knowledge for developing countries, India being one of the oldest members, having joined the institution at its inception in 1944. In India, the World Bank works in close partnership with the Central and State Governments. It also works with other development partners: bilateral and multilateral donor organizations, nongovernmental organizations (NGOs), the private sector, and the general public—including academics, scientists, economists, journalists, teachers, and local people involved in development projects. WORLD BANK IN INDIA In the past decade, India has accelerated economic growth and improved most Millennium Development Goals (MDG). It is also a rising global power—and a leading player in information technology, telecommunications, and business processes outsourcing. India’s annual GDP growth has been strong and steady at more than 7% over the past decade, accelerating to over 9% in the three years before the 2008 global financial crisis. Growth followed wide-ranging structural reforms that began in 1991. Between 1997 and 2005, poverty rates fell from about 36% to 28%. Consistent with India's priorities, the World Bank has been particularly effective in supporting areas critical to the country's development goals. Education World Bank supports the Sarva Shiksha Abhiyan (Education for All) that caters to some 200 million primary school children in the country. Since 2001, nearly 20 million children have been brought into primary school. They include first-generation learners from long-deprived communities, minority communities, and children with special needs. Health
With the Bank's assistance, HIV prevalence has declined among sex workers particularly in the southern states. More than 1.1 million people with risky behavior have been reached. The World Bank has also helped scale up the Revised National Tuberculosis Control Program nationwide. More than 9.5 million people suffering from TB between 1997 and 2008 were diagnosed and placed on treatment, thus saving more than 1.7 million additional lives. Deaths from the disease were cut sevenfold from 29% to 4% and India met global targets for TB detection and cure. Social inclusion The Tamil Nadu Empowerment and Poverty Reduction Project focused on women and other disadvantaged groups in some 2,500 villages. In the first two years of the program, about 159,000 households increased their incomes by 60 to 80%. About 182,900 poorest and tribal households have formed into some 17,266 self-help groups. Access to credit has opened up, with self-help groups securing more than $9 million in microloans during the first two years of the program. Rural roads In 2000, about 40% of India’s 825,000 villages lacked all-weather roads. The World Bank is supporting the Government of India's Rural Roads program in the states of Himachal Pradesh, Rajasthan, Jharkhand, and Uttar Pradesh. With access to roads, incomes have soared. Household incomes rose by 50 to 100% on average. Farmers are receiving better prices for their products. Literacy has increased by 10% and the gender gap has narrowed with easier access to school for girls. For every 1 million rupees spent on rural roads, 163 people were lifted out of poverty. Rural water and sanitation In 2006, only half of Uttarakhand’s rural population had access to clean and safe drinking water. The Uttaranchal Rural Water Supply and Sanitation Project is using a community-led approach to ensure that services are efficient and sustainable. More than 130,000 people have already benefited from the village water supply schemes under the project.
Poverty reduction in rural areas The Andhra Pradesh Rural Poverty Reduction Project helped rural women, organize themselves into credit worthy-groups tapping private sector sources that had long overlooked this potential market. Assets and incomes have increased for almost 90% of poor rural households, including more than 9 million women. Health and nutrition programs are dramatically improving maternal and child health and infant nutrition. Annual credit flows have increased from less than $23 million in 2000 to $1.23 billion in 2009—more than a 50-fold increase. State-level economic development The Bank-financed Andhra Pradesh Economic Reform Project has helped transform the state to middle-income status, which is reflected in improved living standards for citizens. Per capita income has risen to nearly $700 in 2005-06 (from $385), the poverty ratio has fallen considerably, and nearly 94% of the state’s primary school-age children are in school. The fiscal deficit is at a manageable level of 3.5% of Gross State Domestic Product (GSDP) and falling. Among India’s major states, Andhra Pradesh now has the best-managed power sector, the thirdhighest credit rating, one of the best investment climates, and the fourth-lowest corruption levels.
RANKING BY WORLD BANK The table lists the overall "Ease of Doing Business" rank (out of 183 economies) and the rankings by each topic.
EASE OF
Doing Business 2010 rank 133 169 175
Doing Business Starting a Business Dealing with Construction Permits Employing Workers Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders
Doing Business 2009 rank 132 166 174
Change in rank
-1 -3 -1
104 93 30 41 169 94
102 92 27 38 171 97
-2 -1 -3 -3 +2 +3
Enforcing Contracts Closing a Business
182 138
182 142
0 +4
THE WORLD BANK’S PLAN OF ACTION IN INDIA The World Bank's work plan in India is spelt out in its Country Strategy (CAS). The Country Strategy for India is closely aligned with India's own development priorities and describes what kind of support and how much can be provided to the country over a period of around four years. The Country Strategy for India for 2009-2012 is aligned with the government's Eleventh Five Year Plan. It focuses on helping the country to fast-track the development of much-needed infrastructure, support the seven poorest states, and respond to the financial crisis. The strategy was arrived at after a series of consultations with a broad range of stakeholders, including members of the government and civil society. The strategy envisages total proposed lending of US$14 billion for 2009 - 2012. As private financing dries up in the wake of the global financial crisis, the Bank has agreed to provide an additional US$ 3 billion as part of the total financing envelope of US$ 14 billion. The strategy is implemented through lending, dialogue, analytical work, engagement with the private sector, and capacity building exercises. The Bank’s previous four-year Country Strategy for 2005-2008 focused on lending for infrastructure, human development, and improving rural livelihoods. PROJECTS The Bank’s method of operation is not to implement ―World Bank projects,‖ but to provide financing and advice for projects which are owned and supported by the Indian government and the people and form part of their overall development agenda. Various financing options are available based upon the type of assistance needed. It is important to note that the implementation of projects is managed by the government itself. The government designates an office, referred to as the Project Implementing Agency (PIU), which is responsible for aspects such as procurement and selection of consultants and day-to-day work, monitoring, and evaluation.
The Bank’s operational policies set guidelines to ensure that projects meet its own criteria such as social and environmental standards. Projects are evaluated to capture and share lessons for similar projects in future.
TOTAL IBRD/IDA COMMITMENTS AS OF END FY09: $14.9 BILLION (by fiscal year, in nearest US$ billion) Commitments New Total Commitments (Active Projects) Total No. of Active Projects FY 04 1.4 FY 05 2.9 FY 06 1.4 FY 07 3.7 FY 08 2.1 FY 09 2.3
12.0
12.8
11.3
14.3
13.8
14.9
63
64
56
67
60
61
COUNTRY STRATEGY FOR INDIA (CAS) 2009 TO 2012
The World Bank’s Country Strategy (CAS) for India for 2009-2012 focuses on helping the country to fast-track the development of much-needed infrastructure and to support the seven poorest states achieve higher standards of living for their people. The strategy envisages a total proposed lending program of US$14 billion, for the next three years, of which US$9.6 billion is from the International Bank for Reconstruction and Development (IBRD) and US$4.4 billion (SDR 2.982 billion equivalent at the current exchange rate) from the International Development Association (IDA). Maintaining rapid and inclusive growth Infrastructure: For India's rapid and sustained growth, major investments in power, transport, water, and urban development are needed. Inadequate power supply remains a critical constraint to growth; while GDP grew at an average of about 8% a year over the past five years, electricity generation only grew at an average of 4.9% per year. The national and state highway networks
have not kept pace with the tremendous growth in demand for road transport: only about 30% of state highways are two-lane and more than 50% are in poor condition. Inadequate urban infrastructure is hampering the expansion of growth centers. While the Eleventh Plan foresees a major role for private sector involvement in infrastructure development through PPPs, these may not materialize to the extent hoped for in the aftermath of the global financial crisis. The Government of India has requested the World Bank to specially focus on infrastructure investment in its new strategy, including on strengthening the capacity of government agencies to design and manage public-private partnerships(PPPs). Skills: The shortage of skills is preventing large segments of the population from being part of India's growth story. Nearly 44% of India’s labor force is illiterate, only 17% of it has secondary schooling, and enrollment in higher education is just 11%. This compares unfavorably with, for example, China, where access to secondary education is almost universal and enrollment in higher education exceeds 20%. Moreover, the quality of most Indian graduates is poor and employers offer very little skills upgrading (16% of Indian manufacturers offer in-service training to their employees, compared to over 90% of Chinese firms). The informal sector employs over 90% of the workforce, but there is very little investment or opportunity for formal `skilling’ for informal workers and enterprises. Agricultural Growth: Low agricultural productivity is keeping some 60 percent of India’s population behind. Shortages of basic rural infrastructure - from roads to electrification - are hindering the growth of off-farm activities. No doubt, agricultural growth has been faster over the past five years (4.7% per year)- facilitated by very good monsoons, greater production of high-value fruits, vegetables, and dairy products, an increase in the minimum support price for grains, and the sudden increase in global prices for agricultural products. But, sustaining this level of performance over the longer term will be difficult without addressing several policy and structural constraints, including a myriad of restrictions, subsidies, support prices, sector governance issues, as well as the tiny size of landholdings and years of underinvestment. The Indian Government has asked the World Bank to place special emphasis on agricultural development in its new strategy.
Making development sustainable Most environmental indicators suggest that growth is extracting an increasing toll on the country's natural resources - water, land, forests, soils and biodiversity - and leaving a larger pollution footprint. India is highly vulnerable to climate change; cyclones, floods and droughts are happening with increasing frequency, and the Himalayan glaciers that feed India’s largest rivers show clear signs of retreat. Indeed, climate change will impact India first and foremost through its water resources. Rising temperatures will also affect agricultural yields, forests, and marine and coastal biodiversity. India will need to better manage these resources (particularly water) and reduce the burden that environmental degradation is imposing on the population, particularly on the most vulnerable groups. Increasing the effectiveness of service delivery While much progress has been made on primary school enrollment, improvements have been elusive in other sectors, particularly health. Although deaths from TB have fallen and polio cases have reduced dramatically in 2008, child malnutrition levels are worse than in Sub-Saharan Africa, despite large expenditures. No Indian city provides water 24/7, only half the population has access to safe drinking water, and less than a third has access to sanitation. Public services fall short largely because they have little or no accountability to the ultimate client, and outdated management systems are unable to provide the information needed for decision-making. These issues are particularly acute in centrally sponsored schemes which are designed and funded by the central government but implemented by the states and lower echelons of government. Given the importance of these schemes, systemic improvements in design and governance are crucial to get results from public spending. The Government of India has requested the World Bank to place special emphasis in its new strategy on centrally sponsored schemes that aim to achieve the MDGs. The Bank will focus on increasing accountability to citizens, decentralizing responsibilities, and enhancing private sector participation in the delivery of these services. Strategies for states Given India’s enormous size and diversity, the Bank will adopt different strategies for states depending on their needs, stages of development, and capacity for project implementation. Special strategies will also be adopted for the Northeastern and Himalayan states.
Low-income states The new strategy devotes more resources to engaging with India’s seven low-income states Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, and Uttar Pradesh - which are home to more than half of India’s population. Here, the Bank will focus on poverty reduction and on achieving the Millennium Development Goals (MDGs). Intensive technical assistance will be provided to help these states develop their administrative capacity. Bank lending to these states will primarily be in the form of low-interest IDA credits as well as technical and advisory services. Middle-income states India's richest states already have incomes comparable to lower middle income countries, with incomes being some five times higher than those in the poorest states. This gap is higher than most other democratic societies.In these states, the Bank will provide support on two fronts: fighting poverty in their lagging regions, and addressing the complex challenges emerging from rapid growth. States such as Andhra Pradesh, Karnataka, Punjab, Tamil Nadu, Haryana, Gujarat, and Maharashtra will be helped to forge the institutions needed in a middle income economy. Cutting-edge analytical work and the best international expertise will be brought to bear upon complex problems where there are yet no clear solutions. Lending to these states will be in the form of competitively priced IBRD loans, with the International Finance Corporation (IFC) – the Bank’s private sector arm – providing support for private sector clients. Engaging the Center The World Bank will continue to assist the central government by providing comprehensive analytical work to underpin policy and institutional reform and to improve the implementation of central government projects on the ground. Under the Sarva Siksha Abhiyan (SSA) for example, while schools are now more accessible and gender parity has been reached, the focus will now be on improving the quality of education provided. In the power sector, the Bank will continue to support Powergrid, India’s national electricity transmission agency, which it has helped to grow into a world-class institution. Public Private Partnerships
The World Bank and IFC are collaborating to bring India cutting-edge expertise to deal with emerging issues in Public-Private Partnerships (PPPs), tailored to India’s needs. While this work has so far been the strongest in infrastructure - power transmission, roads, irrigation and rural infrastructure, urban development - it will now be extended to agribusiness, health and education, and renewable energy. The Bank and IFC are also working together on long-term finance: through the proposed India Infrastructure Finance Co. Ltd. Project (IIFCL).
