india: the challenges of development...4 1.1 selected economic indicators 4 1.2 key social...

INDIA: THE CHALLENGES OFDEVELOPMENTA Country Assistance Evaluation

Gianni Zanini

2001The World Bank

Washington, D.C.

W O R L D B A N K O P E R A T I O N S E V A L U A T I O N D E P A R T M E N T

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Copyright © 2001

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v Acknowledgmentsix Forewordxiii Executive Summaryxx Abbreviations and Acronyms

1 1. India’s Development Record1 From Independence through the 1980s2 The 1990s: Far-Reaching Reform5 Strong Foundations for Development5 A Large, Unfinished Reform Agenda

9 2. The India–World Bank Historical Relationship9 External Development Assistance and the Bank’s Contribution9 Through the 1970s: A Cyclical Relationship10 The 1980s: Lending Push in a Poor Policy Environment12 The 1990s: Enhanced Relevance of the Bank Assistance Strategy

15 3. The Bank’s Products and Services15 Analytical Services: High Quality but Limited Outreach16 Lending Priorities: Toward Social Sectors17 Completed Project Performance: Mediocre21 Ongoing Portfolio: Sound21 Efficiency: Adequate22 Aid Coordination and Effectiveness: Uneven

25 4. Selected Sectors and Topics25 Overview of Sectoral Assistance32 Public Financial Accountability: A Promising Beginning33 Mainstreaming Participation, but Resettlement Safeguards Are Still Contentious 34 Gender: Unsuccessful Mainstreaming

35 5. The Development Effectiveness of Bank Assistance35 The Elusive Counterfactual36 Development Effectiveness: Improving37 Bank and Borrower Performance: Mixed

39 6. Improving Assistance for Higher Reach and Impact39 Lending Instruments40 Lending Linkage40 State Focus40 Program Priorities41 Analytical Work41 Monitoring41 Participation41 Safeguards41 Aid Coordination42 The Bank’s Efficiency

43 7. The Client’s Evaluation of Bank Assistance43 Civil Society’s Views from the CAE/CAS Synthesis Workshop44 Feedback from the India-Based CAE Advisers45 Feedback from the Government

C O N T E N T S

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47 Annexes47 A: Reference Tables

48 Table A.1: Economic and Social Indicators for India and Selected Comparators

52 Table A.2: OED Summary Ratings for India53 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 Boxes10 2.1 Strong Local Institutions and the Right Incentives: Operation Flood13 2.2 Poverty Reduction Focus of Bank Assistance16 3.1 The Bank’s Outreach Has Improved but Still Falls Short17 3.2 A Strong Link Between Analysis and Policy Dialogue27 4.1 Cautious Conclusions Cloud the Policy Dialogue for Rural Development28 4.2 An Extraordinary Failure—The Upper Krishna Irrigation II Project29 4.3 Strong Local Institutions and the Right Incentives: Uttar Pradesh Sodic

Lands Projects31 4.4 Best Practice Projects

Text Figures2 1.1 Poverty, Inequality, and Consumption per Capita, 1971–9711 2.1 Commitments, Disbursements, and Net Transfers, 1985–200018 3.1 Net Lending Commitments by Sector, 1986–90 and 1996–200018 3.2 India’s Poverty Distribution and Bank Lending20 3.3 OED Project Evaluation Ratings by Commitment, Fiscal 1976–2000

Text Tables4 1.1 Selected Economic Indicators4 1.2 Key Social Indicators, 1980–9819 3.1 OED Project Evaluation Ratings, Comparative Performance,

Various Fiscal Years20 3.2 OED Project Evaluation Ratings, Sectoral Performance, Fiscal 1996–2000

I N D I A : T H E C H A L L E N G E S O F D E V E L O P M E N T

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ACKNOWLEDGMENTS

This Country Assistance Evaluation (CAE)builds on evaluations of sector assistanceprograms, projects, and nonlending serv-

ices to assess the development effectiveness ofBank assistance to India during the 1990s. Ituses the Operations Evaluation Department’s(OED) standard evaluation categories: outcome(that is, relevance, efficacy, and efficiency), sus-tainability, and institutional development.

The areas covered by the evaluation workbroadly mirror those emphasized in the Coun-try Assistance Strategy (CAS) documents of thelate 1990s. They reflect the main assessmentcategories of country performance proposed inthe replenishment paper for IDA12 and are gen-erally consistent with the comprehensive de-velopment framework: private and financialsector development; public sector managementreform; rural and urban development; energy,water management, and transport; human andsocial development; and the environment.

Reviewers who commented on early drafts(but who cannot be held responsible for er-rors, omissions, or for OED’s evaluation judg-ments) include, among current or formerWorld Bank staff, Mark Baird, country direc-tor for Indonesia, East Asia and Pacific Region(EAP); Vinay Bhargava, country director for thePhilippines, EAP; Pieter Bottelier, consultant(former country director for China, EAP); Sar-war Lateef, senior adviser, Poverty Reductionand Economic Management Network; Martin

Ravallion, lead adviser on poverty, Develop-ment Economics and Chief Economist (DEC);Anandarup Ray, consultant (former senioreconomic adviser, DEC); Daniel Ritchie, con-sultant (former director for the Asia Techni-cal Department); and Anwar Shah, principalevaluator and public sector management clus-ter leader, OED. Outside reviewers includeMarc Lindenberg, Dean, Graduate School ofPublic Affairs, University of Washington (for-mer Senior Vice-President, CARE) and the fol-lowing Indian experts: S. Aiyar, U.S.-basedcorrespondent, Economic Times of India; R.Mohan, Director, National Council of AppliedEconomic Research, New Delhi; G. Sen, Pro-fessor, Indian Institute of Management, Ban-galore, and Chair of the External GenderConsultative Group, World Bank; A. Sengupta,Professor, J.N. University, New Delhi, (for-mer member of the Planning Commission andExecutive Director, International MonetaryFund); T. N. Srinivasan, Professor, EconomicsDepartment, Yale University; and Isher J.Ahluwalia, Director and Chief Executive, In-dian Council for Research on InternationalEconomic Relations, New Delhi, who alsoprovided feedback on early drafts of the back-ground papers dealing with poverty and coremacroeconomic issues.

Bank staff and Indian officials and observerswere interviewed during 1999 and 2000 in Wash-ington, D.C., and in India. During a CAE mission

in April and May 1999, which included visits toAhmedabad, Delhi, Hyderabad, Lucknow, andMumbai, group discussions were held in Delhion a number of sectoral topics and cross-cuttingthemes. Further sectoral consultations and jointCAE/CAS workshops (jointly organized by OEDand the South Asia Region) took place fromMarch to May 2000 (for health and forestry in1999). In April 2000, a second CAE mission heldfinal consultations on a preliminary CAE draft anda CAE/CAS synthesis workshop (also joint withthe Region).

Various background papers and notes wereprepared by consultants and OED staff and areavailable as part of the OED Working Paper Se-ries. They all have taken into account commentsreceived from peer reviewers, Bank staff, civilsociety, and the government. Their findings,however, remain entirely the responsibility ofthe individual authors. These papers are avail-able on request.

The core team members produced evalua-tive papers in their areas of responsibility: Di-nanath Khatkhate, on private sector andfinancial sector development; Jack van HolstPellekaan, on rural development and onpoverty; and Baran Tuncer, on public sectormanagement and state focus. Other contribu-tors included: Swaminathan Aiyar (consult-ant) on the Bank’s external communicationsstrategy; Anaya Basu (Development Econom-ics Research Group, World Bank) on gender;Helen Abadzi (Operations Evaluation Depart-ment Sector and Thematic Evaluation, OEDST,World Bank), Sukhdeep Brar, and Aklilu Habte(consultants) on education; Hernan Levy(OEDST, World Bank) on transport; OmPrakash Mathur (consultant) on urban devel-opment; T. N. Srinivasan (consultant) on eco-nomic challenges for poverty reduction andgrowth; A. Vaidyanathan (consultant) on irri-gation (this paper was used as an input to therural development and the water resourcemanagement background papers); Warren VanWicklin III (Operations Evaluation Depart-ment Corporate Evaluation and Methods, WorldBank) on social development; and Vinod Sah-gal and Deepa Chakrapani (OEDCM) on pub-lic financial accountability.

The CAE also relied on various ongoing OEDsector assistance reviews (which were also casestudies for Bankwide sector assistance reviews):by R. Berney and J. Levine (OEDST) on energy;Uma Lele (OEDST) and N. Kumar (consultant)on forestry; Keith Pitman (OEDST) and I. J.Singh (consultant) on water resource manage-ment; R. Ridker (consultant) and S. Stout (Op-erations Evaluation Department Office of theDirector) on health, nutrition, and population;and K. Ringskog (OEDST) and Nola Chow (con-sultant) on environment. Also, Rema Balasun-daram and Patricia Laverley (OEDPK) reviewedthe lessons from other donors’ evaluations andBarbara Yale (OEDCM) analyzed the aid coor-dination survey. Finally, the CAE and some ofthe background papers drew on recent OED andQuality Assurance Group evaluations on thedairy industry, NGOs, resettlement, rural watersupply, and sanitation.

Stephen Howes and Mandakini Kaul of theNew Delhi Office (among other staff) and Chi-tra Bhanu (OED consultant) were instrumentalin the organization of the extensive consultationsheld in March–May 2000 and in coordinating allthe comments required of regional staff on themany background papers.

J. Gwyer and O. Rajakaruna (consultants)provided inputs on portfolio management andperformance, quality at entry, and research andgave statistical assistance. W. Hurlbut (OEDST)provided editorial advice. R. Baba, N. Namisato,C. Diaw, and D. Flex invaluably supported theentire CAE team.

Gianni Zanini (task manager, Operations Eval-uation Department Country Evaluation and Re-gional Relations) produced the main CAE reportwith close assistance from Jack van HolstPellekaan (consultant). The main report hastaken into account comments from the review-ers mentioned above, OED staff and manage-ment, former and current Bank staff andmanagement working on India, and former andcurrent officials in the Government of India. Of-ficial government comments on the October 24,2000, draft of the CAE were received only fromthe Ministry of Human Resource Development.Those comments were taken into account inpreparing this version of the CAE and are dis-


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cussed in the background paper titled “Evaluat-ing Bank Assistance for Education Sector De-velopment.”

The study was published in the Partnershipsand Knowledge Group (OEDPK) by the Out-reach and Dissemination Unit. The task team in-cludes Elizabeth Campbell-Pagé (task teamleader), Caroline McEuen (editor), and JuicyQureishi-Huq (administrative assistant).

Director-General, Operations Evaluation Department:

Robert Picciotto

Director, Operations Evaluation Department:

Gregory K. Ingram

Manager, Country Evaluation & Regional Relations:

Ruben Lamdany

Task Manager: Gianni Zanini

AC K N OW L E D G M E N T S

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PRÓLOGO

En este documento se evalúa laeficacia de la asistencia prestada por elBanco a la India en los años noventa conel propósito de impulsar el proceso dedesarrollo de ese país. La India, miem-bro fundador del Banco, sigue siendouno de sus prestatarios más grandes einfluyentes. El Banco ha sido el mayorproveedor externo de capital a largoplazo del país y ha financiado una pro-porción considerable de las inversionesdel sector público; asimismo, ha sum-inistrado servicios crediticios y no cred-iticios, con objetivos muy diversos, anumerosos organismos del gobiernocentral y de los estados.

La India comenzó el decenio connotables logros económicos y sociales,pero también con regímenes cerradosde comercio e inversiones, desequi-librios fiscales y un sector públicogrande e inmanejable. Tras la crisis debalanza de pagos de 1991, desregulódichos regímenes. El crecimientoeconómico se recuperó rápidamentey resistió, incluso, los embates de lacrisis que sacudió al este asiático en1997. También los indicadores so-ciales mejoraron. Sin embargo, la Indiano consiguió mantener el proceso dereformas en el campo fiscal ni ampli-arlo a otros sectores estructurales.Además, la pobreza se redujo muypoco en las zonas rurales, en gran me-dida debido a la ausencia de una es-trategia eficaz de desarrollo agrícola yrural y al escaso crecimiento de los es-tados más pobres del norte y el este. Enla segunda mitad del decenio de 1990,algunos estados emprendieron impor-tantes reformas normativas e institu-

PREFACE

Cette étude évalue l’efficacitéde l’assistance de la Banque audéveloppement de l’Inde pendant lesannées 1990. L’Inde est l’un des mem-bres fondateurs de la Banque est restel’un de ses emprunteurs les plus im-portants et les plus influents. La Banqueest la principale source de capitauxextérieurs à long terme du pays et fi-nance une part notable de ses in-vestissements publics. Ses prêts et sesactivités non financières concernentune multitude d’agences des états et dugouvernement fédéral et poursuiventun grand nombre d’objectifs divers.

Au début des années 1990, l’Indeavait déjà fait d’importants progrès surle plan économique et social, maisson développement était freiné pardes réglementations restrictives enmatière de commerce et d’in-vestissement, par les déficits budgé-taires et par la taille et la lourdeur dusecteur public. À la suite d’une crisede la balance des paiements en 1991,le gouvernement a libéralisé le com-merce et les investissements. La re-lance économique a été rapide et arésisté à la crise qui a frappé l’AsieOrientale en 1997. Les indicateurssociaux se sont améliorés. Cepen-dant, l’Inde n’a pas réussi à maintenirle rythme des réformes budgétaireset à étendre le processus à d’autresproblèmes structurels. En outre, peude progrès ont été faits vers une ré-duction de la pauvreté rurale, en l’ab-sence d’une stratégie agricole et dedéveloppement rural efficace et dufait de la faible croissance des étatsles plus pauvres du nord et de l’est.

FOREWORD

This evaluation assesses thedevelopment effectiveness of Bankassistance to India during the 1990s.India was one of the Bank’s foundingmembers and remains one of itslargest and most influential borrowers.The Bank has been India’s largestsource of external long-term capitaland has financed a sizable share ofits public investment. Its lending andnonlending services have been thinlyspread over many central and stateagencies and have addressed manydifferent objectives.

India entered the decade withsubstantial economic and socialachievements but also with closedtrade and investment regimes, fiscalimbalances, and a large and un-wieldy public sector. After a bal-ance of payments crisis in 1991 itderegulated the trade and invest-ment regimes. Economic growth re-bounded quickly and provedresilient even during the 1997 EastAsian crisis. Social indicators alsoimproved. India, however, failed tosustain the reform process in thefiscal area and to broaden it to otherstructural areas. Moreover, there waslittle progress in reducing ruralpoverty, largely due to the absenceof an effective agricultural and ruraldevelopment strategy and lowgrowth in the poorer northern andeastern states. In the second half ofthe 1990s, a few states initiated sub-stantial policy and institutionalchanges, but there remains a largeoutstanding reform agenda at boththe state and federal levels.

F O R E WO R D

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The Bank provided strongsupport for the reforms ofthe early 1990s, beginningwith three adjustment loans.It expanded assistance to thesocial sectors; devoted moreattention to improving par-ticipation; and, where de-

velopment results had beenunsatisfactory, reduced lending (tovirtually zero in power) and em-barked on comprehensive sectorwork—for example, in rural devel-opment and irrigation. After themid-1990s the Bank focused assis-tance on reforming states, with anotable measure of success. Still,more emphasis on fiscal manage-ment, on public sector and judicialreforms, on improvement in agri-cultural policies and rural devel-opment, and on gender equity mayhave led to greater impact.

Overall, the strategic goals of theBank were relevant and the designof the assistance strategy improvedas the decade unfolded. Efficacywas modest, mainly on account ofthe Bank’s limited impact on fiscaland other structural reforms, the fail-ure to develop an effective assis-tance strategy for rural povertyreduction, and the mediocre qualityat exit of projects. Institutional de-velopment impact has also beenmodest and sustainability uncertaingiven the remaining serious fiscalimbalances, high environmentalcosts, and governance weaknesses.Thus, the overall outcome of the as-sistance for the decade is rated asmoderately satisfactory.

The relevance of the assistancestrategy, however, has improved sub-stantially over the past two yearsthrough a more sharpened focus onpoverty reduction, a more selectiveapproach to state assistance, and

cionales, pero son muchos loscambios pendientes, tanto enel gobierno federal como enlos estados.

El Banco proporcionó unfuerte respaldo para las refor-mas de principios de los añosnoventa, comenzando con

tres préstamos para fines de ajuste.Amplió su asistencia a los sectores so-ciales; dedicó mayor atención a mejo-rar la participación; y, donde losresultados no habían sido satisfacto-rios en términos de desarrollo, re-dujo el financiamiento (prácticamentea cero para el sector de la energía) einició amplios estudios sectoriales,por ejemplo, en la esfera del riego yel desarrollo rural. En la segundamitad del decenio, el Banco centró suasistencia en la reforma de los esta-dos, con bastante éxito. No obstante,se podrían haber logrado mejores re-sultados si se hubiera hecho más hin-capié en la administración fiscal, lareforma del sector público y el poderjudicial, el mejoramiento de las políti-cas agrícolas y el desarrollo rural, yla igualdad entre los géneros.

En general, los objetivos es-tratégicos del Banco fueron perti-nentes y el diseño de la estrategia deasistencia fue mejorando a medidaque avanzaba el decenio. La eficaciaresultó moderada, fundamentalmentedebido a la limitada incidencia delBanco en las reformas fiscales y otrasreformas estructurales, la incapaci-dad para elaborar una estrategia deasistencia eficaz para reducir la po-breza en las zonas rurales y lamediocre calidad final de los proyec-tos. Los efectos para el desarrollo in-stitucional también han sido escasos yla sostenibilidad, incierta, en vista de losgraves desequilibrios fiscales que aúnexisten, los elevados costos ambientalesy las deficiencias de la gestión pública.

Pendant la deuxième moitiédes années 1990, quelquesétats ont commencé à ré-former leurs politiques et leursinstitutions; néanmoins, c’estun vaste programme de ré-formes que l’Inde doit encoreentreprendre au niveau des

états et du gouvernement fédéral.Au début des années 1990, la

Banque a fortement soutenu les ré-formes, au moyen tout d’abord de troisprêts d’ajustement. Elle a ensuite étenduson assistance aux secteurs sociaux eta accordé une attention particulière àune meilleur participation; là où lesrésultats obtenus étaient décevants,elle a réduit ses prêts (à virtuellementzéro dans le secteur de l’énergie), maisa entrepris un vaste programme d’é-tudes sectorielles, par exemple dans ledéveloppement rural et l’irrigation.Depuis le milieu des années 1990, laBanque a concentré avec succès sonassistance sur les états réformateurs.Néanmoins, l’aide de la Banque auraitpeut-être été plus efficace si l’institutionavait accordé une plus haute prioritéà la gestion budgétaire, à la réforme dusecteur public et du pouvoir judiciaire,à l’amélioration des politiques agri-coles et de développement rural et àl’égalité des sexes.

Ce document a une distributionrestreinte et ne peut être utilisé par sesdestinataires que dans l’exercice deleurs fonctions officielles. Son con-tenu ne peut être divulgué qu’avecl’autorisation de la Banque Mondiale.

Dans l’ensemble, les objectifsstratégiques de la Banque étaientsains et la structure de la stratégied’assistance s’est améliorée tout aulong de la décennie. Le programmea eu une efficacité modeste, du faitsurtout de l’influence limitée de laBanque sur la réforme budgétaire etd’autres réformes structurelles, de son


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greater attention to gover-nance and institutions. But itis too early to gauge the effi-cacy of these recent initiatives.

India has built strong foun-dations for development. TheBank’s main challenge is tosupport far-reaching reforms,

at both the state and central govern-ment levels, with high-quality andwidely disseminated policy studiesand policy-based sector and programloans. The five pillars and the fiscaland structural reform triggers of the1997 Country Assistance Strategy re-main valid. Thus, only adjustments toaccelerate and assure the full appli-cation of those pillars and triggers ap-pear necessary.

The Bank should link the overalllending volumes to fiscal disciplineat the central government level andto progress in structural reforms inagriculture and the implementationof an effective rural developmentstrategy, as progress in these areasis crucial for rural poverty reduc-tion. New lending should be con-centrated in reforming states, wherean assistance strategy has beenagreed with the state government,while maintaining a strong policydialogue with the center and sup-porting analyses of state finances,policies, and institutions in nonre-forming states. Similarly, sectorallending volumes should be linked toagreements on sector-specific poli-cies and institutional frameworks.

While in recent years Bank assis-tance has become more pro-poor,the Bank should make greater ef-forts to monitor systematically thepoverty and gender impacts of Bank-assisted projects and programs, aswell as to mainstream gender be-yond the social sectors. It should alsoassist government agencies to do the

En consecuencia, el resultadogeneral de la ayuda prestadadurante el decenio en su con-junto se califica como moder-adamente satisfactoria.

Sin embargo, la pertinenciade la estrategia de asistenciaha mejorado considerable-

mente en los últimos dos años, gra-cias a una dedicación especial a lareducción de la pobreza, un criteriomás selectivo frente a la ayuda a losestados y una mayor atención a lagestión de gobierno y las institu-ciones. Pero todavía es demasiadopronto para evaluar la eficacia deestas iniciativas recientes.

La India también ha sentado basessólidas para el desarrollo. La principaldificultad, para el Banco, consiste enrespaldar reformas profundas, tantoen los estados como en el gobiernocentral, con estudios sobre políticas, deexcelente calidad y amplia difusión, ypréstamos para programas y reformasde políticas sectoriales. Los cinco pilaresy los mecanismos de activación de lareforma fiscal y estructural establecidosen la estrategia de asistencia al país de1997 siguen siendo válidos. Por ello,sólo parecen ser necesarios los ajustesdestinados a acelerar y asegurar laplena aplicación de dichos pilares ymecanismos.

El Banco debería condicionar elvolumen global del financiamiento ala disciplina fiscal del gobierno cen-tral, así como al avance de las refor-mas estructurales en el sector agrícolay la ejecución de una estrategia efi-caz de desarrollo rural, puesto que elprogreso en estos campos es crucialpara reducir la pobreza en las zonasrurales. Los nuevos préstamos de-berían concentrarse en la reforma delos estados con cuyas autoridades sehubiera acordado una nueva estrate-gia de asistencia, a la vez que se

incapacité de mettre au pointune stratégie efficace de ré-duction de la pauvreté ruraleet de la qualité médiocre desprojets achevés. L’impact dela Banque sur le développe-ment institutionnel a égale-ment été modeste et la

durabilité des effets de ses inter-ventions est incertaine, compte tenude l’importance des déficits budgé-taires, de graves problèmes d’envi-ronnement et d’une faiblegouvernance. Bref, les résultatsglobaux de cette assistance pendantl’ensemble de la décennie sont con-sidérés comme modérément satis-faisants.

Néanmoins, la pertinence de lastratégie s’est nettement améliorée aucours des deux dernières années, dufait d’une plus grande concentrationsur la réduction de la pauvreté, d’uneaide plus sélective aux états et d’uneattention plus forte aux problèmes degouvernance et de développementinstitutionnel. Toutefois, il est encoretrop tôt pour évaluer l’efficacité deces nouvelles initiatives.

L’Inde a bâti de solides fondationspour son développement futur. Pourla Banque, le principal défi est d’ap-puyer de profondes réformes auniveau des états et du gouvernementfédéral, grâce à des études de hautequalité largement disséminées et à desprêts programmes et des prêts secto-riels pour la réforme des politiques. Lescinq principales composantes du doc-ument de stratégie de 1997 et les con-ditions relatives à la réforme budgétaireet aux réformes structurelles restent val-ables. Seuls quelques ajustementsparaissent nécessaires pour accéléreret renforcer l’exécution des com-posantes et des conditions.

La Banque doit lier le volumeglobal de ses prêts à la discipline

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mantiene un intenso diálogosobre políticas con el gobiernocentral y se respaldan los análi-sis de las finanzas, políticas einstituciones de los estadosque no han iniciado reformas.Análogamente, los volúmenesde financiamiento sectorial de-

berían vincularse a acuerdos sobremarcos normativos e institucionalespropios de cada sector.

Aun cuando en los últimos años laasistencia del Banco se ha orientadomás a reducir la pobreza, el Banco de-bería desplegar mayores esfuerzospara realizar un seguimiento sis-temático de los efectos de los proyec-tos y programas que financia en lapobreza y en la situación de la mujer,así como para incorporar la prob-lemática del género a otros sectores,además de los sociales. Debería,asimismo, ayudar a los organismospúblicos a hacer lo mismo en relacióncon los programas globales de gastopúblico. Por último, debería mejorarla coordinación de la ayuda en las es-trategias de asistencia al país y en lasestrategias para sectores de impor-tancia crítica (como la agricultura y eldesarrollo rural) a fin de mejorar la efi-cacia de la asistencia externa y per-mitir una mayor selectividad en lospropios programas del Banco.

budgétaire au niveau du gou-vernement central, au progrèsdes réformes structurelles dansl’agriculture et à la mise enœuvre d’une stratégie efficacede développement rural; eneffet, des progrès dans ces do-maines sont essentiels pour la

réduction de la pauvreté rurale. Lesprêts nouveaux doivent être concentréssur les états réformateurs, sur la based’un accord sur la stratégie d’assistanceavec chaque gouvernement; dans lesétats qui refusent les réformes, laBanque doit maintenir un bon dialoguede politiques et appuyer des étudesde la situation financièr, des politiqueset des institutions des états. De la mêmefaçon, le volume des prêts sectoriels doitêtre lié à des accords précis sur lespolitiques et les institutions du secteur.

Au cours des dernières années, l’as-sistance de la Banque à été de plus enplus orientée sur les problèmes depauvreté; néanmoins, la Banque doitintensifier ses efforts pour organiser unsuivi systématique de l’impact de sesprogrammes et projets sur la pauvretéet la condition féminine; elle doit aussiintégrer les problèmes d’égalité dessexes dans l’ensemble de ses opéra-tions, au delà des seuls secteurs soci-aux. La Banque doit aussi aider lesagences gouvernementales a étendrecette pratique aux programmes dedépenses publiques. Enfin, elle doitrenforcer la coordination des stratégiesd’assistance des bailleurs de fonds etdes stratégies sectorielles pour lessecteurs critiques (par exemple l’agri-culture et le développement rural),afin d’améliorer l’efficacité de l’aideextérieure et d’accroître la sélectivité deses propres programmes.


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same for overall public ex-penditure programs. Finally,it should strengthen aid co-ordination on country assis-tance strategies and on criticalsector strategies (for exam-ple, agriculture and rural de-velopment) to enhance the

effectiveness of external assistanceand enable greater selectivity in theBank’s own programs.

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Robert PicciottoDirector-General, Operations Evaluation

RÉSUMÉ ANALYTIQUE

L’Inde est l’un des membresfondateurs de la Banque. Le pays, quiest resté l’un des plus grands em-prunteurs de l’institution, a beaucoupinfluencé les conceptions de laBanque en matière de développement.La Banque est la principale source decapitaux étrangers de l’Inde; ses fi-nancements, qui dans les années 1980représentaient près du tiers des ap-ports bruts de capitaux, dépassaientencore le cinquième de ces apportsvers la fin des années 1990.

La performance d’un pays quicompte plus du quart des pauvresdu monde (plus de 300 millions)est d’une importance critique pourl’accomplissement des Objectifs duDéveloppement International, quivisent notamment à réduire demoitié la pauvreté dans le monde de1990 à 2015. La présente évaluationétudie l’efficacité de l’assistance dela Banque au développement del’Inde pendant les années 1990.

Un Vaste Programme deRéformes, Encore InachevéAu début des années 1990, l’Indeavait déjà derrière elle d’importantsesréalisations. La famine avait étééradiquée et le pays était parvenu austade de l’auto-suffisance alimen-taire. Les indicateurs sociaux s’étaientaméliorés, grâce à l’allongement del’espérance de vie, à la réductionde la mortalité infantile, à unemodération de la croissance démo-graphique et à l’augmentation destaux de scolarisation primaire. Néan-moins ces indicateurs étaient encore

EXECUTIVESUMMARY

India was one of the Bank’sfounding members. It is still one of theBank’s main borrowers and has had amajor influence on the Bank’s under-standing of development. The Bankhas been India’s largest source of ex-ternal capital, providing almost a thirdof all long-term gross inflows in the1980s and more than a fifth by the endof the 1990s.

With more than a quarter (morethan 300 million) of the world’s poor,India’s performance is critical to theachievement of the International De-velopment Goals, which includehalving poverty worldwide between1990 and 2015. This evaluation as-sesses the development effective-ness of Bank assistance to Indiaduring the 1990s.

A Large, Unfinished ReformAgendaIndia entered the 1990s with a sub-stantial record of achievement.Famine had been eradicated andself-sufficiency in food productionachieved. Social indicators had im-proved, with a rise in life expectancy,a reduction in infant mortality, amoderated population growth rate,and increased primary school en-rollment. But these indicators trailedthose of China and many other low-income countries, and India ranks132 out of 174 countries on theHuman Development Index. At thesame time, only modest steps hadbeen taken toward economic reform,and India trailed in global economiccompetition as well, burdened with

RESUMEN

La India fue uno de los miem-bros fundadores del Banco. Es todavíauno de sus principales prestatarios yha tenido una gran influencia en lamanera en que el Banco entiende eldesarrollo. El Banco ha sido la mayorfuente de capital externo de la India,ya que ha suministrado casi un terciode todas las entradas brutas a largoplazo en el decenio de 1980, y más deuna quinta parte al final de los añosnoventa.

Lo que ocurra en la India, paísdonde se concentra una cuartaparte (más de 300 millones) delos pobres de todo el mundo, esde gran trascendencia para el logrode las metas internacionales dedesarrollo, entre las que se in-cluye reducir la pobreza mundiala la mitad entre 1990 y 2015. Enla presente evaluación se inten-tará calibrar la eficacia en términosde desarrollo de la asistencia delBanco a la India durante el dece-nio de 1990.

Un programa de reforma ambicioso e inacabadoLa India comenzó el decenio de1990 con un historial bastante pos-itivo. Se había erradicado el hambrey se había alcanzado la autosufi-ciencia en la producción de ali-mentos. Los indicadores socialeshabían mejorado: alta esperanza devida, reducción de la mortalidad in-fantil, moderada tasa de crecimientodemográfico y aumento de la ma-trícula escolar primaria. Pero estosindicadores iban a la zaga de los de

E X E C UT I V E S U M M A RY

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closed trade and investmentregimes, fiscal imbalances,and a large and unwieldypublic sector.

A balance of payments cri-sis in 1991 prompted policy-makers to move towardreform. The approach was

designed to give the private sectora greater role in India’s develop-ment by improving the investmentand tax regimes, reorienting foreigninvestment policy, opening infra-structure to private investment, re-forming public enterprises and thefinancial sector, and reducing pricecontrols. The reforms paid off: eco-nomic growth rebounded andproved resilient, even during theEast Asian crisis of 1997. But Indiafailed to sustain the fiscal reformprocess and to broaden it to otherstructural areas. There has also beenlittle progress in addressing ruralpoverty, largely because of the lackof an effective agricultural and ruraldevelopment strategy and lowgrowth in the poorer northern andeastern states. In the second half ofthe 1990s, a few states initiated sub-stantial policy and institutionalchanges, but there is a large out-standing reform agenda at both thestate and the federal levels.

The Banks’ Approach in the1990s: Enhanced RelevanceThe relevance of Bank assistanceincreased markedly during and im-mediately after the 1990–91 macro-economic crisis. During the first halfof the 1990s, the Bank focused oncrucial areas of reform for sustainablegrowth for improved macroeconomicmanagement and liberalization of thetrade and investment regimes andon human development for broad-based improvement in primary social

China y muchos otros paísesde ingreso bajo, y la Indiaocupa el número 132 entreun total de 174 en lo que serefiere al índice de desarrollohumano. Al mismo tiempo,se habían conseguido sólomodestos progresos hacia la

reforma económica, y la India eramenos competitiva a escala mundial,sobrecargada como estaba con unosregímenes cerrados de comercio einversión, desequilibrios fiscales y unsector público muy grande y pocomanejable.

La crisis de la balanza de pagosde 1991 impulsó a las autoridades apromover la reforma. El objetivo eradar al sector privado un papel másimportante en el desarrollo de laIndia, mejorando los regímenes deinversión e impuestos, reorientandola política de inversión externa,abriendo la infraestructura a la in-versión privada, reformando las em-presas públicas del sector financieroy reduciendo los controles de pre-cios. Las reformas dieron resultado:el crecimiento económico se rean-imó y demostró su capacidad de re-sistencia, incluso durante la crisisde Asia oriental de 1997. No ob-stante, la India no logró sostener elproceso de reforma fiscal ni ampli-arlo a otras áreas estructurales.Además, se había progresado pocoen la lucha contra la pobreza rural,en buena parte por falta de una es-trategia agrícola y de desarrollo ruraleficaz y por el bajo crecimiento delos estados más pobres del norte ydel este. En la segunda mitad eldecenio de 1990, algunos estadosiniciaron considerables cambios nor-mativos e institucionales, pero to-davía hay un amplio programa dereforma pendiente tanto en el planofederal como estatal.

inférieurs à ceux de la Chineet de beaucoup d’autres paysà faible revenu. L’Indice duDéveloppement Humainplace l’Inde au 132ème rangsur un total de 174 pays. Enoutre, seuls des progrès mod-estes avaient été accomplis

vers les réformes économiques etl’Inde – pénalisée par des régle-mentations restrictives en matièrede commerce et d’investissement,par ses déficits budgétaires et par lataille et la lourdeur de son secteurpublic – était loin derrière beau-coup d’autres sur le plan de la com-pétitivité économique.

Une crise de la balance despaiements en 1991 a poussé lesdirigeants du pays à s’engager dansla voie des réformes. Il s’agissaitd’accorder une place plus impor-tante au secteur privé dans ledéveloppement de l’Inde, en réfor-mant le régime fiscal et la régle-mentation des investissements, enrévisant les politiques concernantles investissements étrangers, en ou-vrant le secteur des infrastructures àl’investissement privé, en restruc-turant les entreprises publiques et lesecteur financier et en assouplissantle contrôle des prix. Les réformes ontdonné de bons résultats: la relancede la croissance économique a per-sisté et même résisté à la crise quia frappé l’Asie Orientale en 1997.Cependant, l’Inde n’a pas mis enoeuvre un programme de réformebudgétaire et n’a pas étendu le traindes réformes à d’autres problèmesstructurels. Peu de progrès ont étéréalisés dans le domaine de la pau-vreté rurale, pour deux raisons prin-cipales: l’absence d’une stratégieagricole et de développement ruralefficace et le faible croissance desétats les plus pauvres du nord et de


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services. It also expandedsupport for environmentalprotection and devoted moreattention to improving par-ticipation. Where develop-ment results were unsatis-factory, the Bank reducedlending (to virtually zero in

power) and launched comprehen-sive sector work.

In the second half of the 1990s,and most notably after 1997, the rel-evance of Bank assistance to povertyreduction improved. In the mid-1990s, the Bank began to focus as-sistance on reforming states, withnotable success. But greater em-phasis on fiscal management, pub-lic sector and judicial reform,agricultural policy and rural devel-opment, and gender equity wouldhave been beneficial.

Overall, the strategic goals of theBank during the decade were rele-vant and the design of the assistancestrategy improved. Efficacy is ratedas modest, mainly because of theBank’s limited impact on fiscal andother structural reforms, the failureto develop an effective assistancestrategy for rural poverty reduction,and the mediocre quality of projectsat exit. Institutional development im-pact has also been modest, and sus-tainability uncertain, given the seriousremaining fiscal imbalances, highenvironmental costs, and governanceweaknesses. Taken together, theseratings gauge the overall outcome ofassistance for the decade as moder-ately satisfactory.

But these ratings must be viewedin light of the recent, substantialimprovement in the relevance ofthe assistance strategy, largelyprompted by the innovations em-bodied in the 1997 Country Assis-tance Strategy (CAS). The focus on

El enfoque del Banco enlos años noventa: unamayor relevanciaLa relevancia de la asisten-cia del Banco aumentó no-tablemente durante la crisismacroeconómica de 1990-91 y en el período inmedi-

atamente posterior. Durante laprimera mitad el decenio de 1990,el Banco se centró en algunas áreascruciales de la reforma para el crec-imiento sostenible (mejor gestiónmacroeconómica y liberalizaciónde los regímenes de comercio e in-versión) y en el desarrollo humano(mejora de amplia base en los ser-vicios sociales primarios). Ampliótambién su apoyo a la protecciónambiental y dedicó más atención amejorar la participación. Cuandolos resultados en términos de de-sarrollo fueron poco satisfactorios,el Banco redujo los préstamos (aprácticamente cero en el sector dela energía) y emprendió ampliosestudios sectoriales.

En la segunda mitad el deceniode 1990 y muy particularmente de-spués de 1997, la relevancia de laasistencia del Banco para la reduc-ción de la pobreza mejoró. A medi-ados de los años noventa, el Bancocomenzó a centrar la asistencia enla reforma de los estados, con con-siderables logros. Pero habría sidoconveniente una mayor insistenciaen la gestión fiscal, la reforma delsector público y del poder judicial,la política agrícola y el desarrollorural y la igualdad entre el hombrey la mujer.

En términos generales, las metasestratégicas del Banco durante esedecenio fueron relevantes, y mejoróel diseño de la estrategia de asis-tencia. La eficacia se califica comomodesta, sobre todo por la limitada

l’est. Au cours de la deux-ième moitié des années 1990,quelques états ont lancé d’im-portantes réformes concer-nant leurs politiques et leursinstitutions; néanmoins, en-core aujourd’hui, c’est unvaste programme de ré-

formes que l’Inde doit entrepren-dre au niveau des états et dugouvernement fédéral.

La Stratégie de la Banquedans les Années 1990 : UnProgramme Plus PertinentL’aide de la Banque est devenuebeaucoup plus pertinente pendant etjuste après la crise macroéconomiquede 1990-91. Pendant la premièremoitié des années 1990, la Banquea concentré son attention sur desréformes vitales pour une croissancedurable (une meilleure gestionmacroéconomique et la libéralisa-tion de la réglementation du com-merce et des investissements) et pourle développement humain (un vasteprogramme d’amélioration des serv-ices sociaux de base). Elle a égale-ment accru son aide à la protectionde l’environnement et s’est intéresséedavantage à l’amélioration desprocessus participatifs. Là où les ré-sultats obtenus n’étaient pas satis-faisants, la Banque réduisait ses prêts(à pratiquement zéro dans le secteurde l’énergie) et lançait de grandsprogrammes d’études sectorielles.

Pendant la deuxième moitié desannées 1990 et surtout depuis 1997,la Banque a amélioré la nature deses interventions pour la réductionde la pauvreté. Vers le milieu des an-nées 1990, la Banque a commencéà s’intéresser, avec succès, aux étatsréformateurs. Mais il aurait étésouhaitable d’accorder une plushaute priorité à la gestion budgétaire,


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poverty reduction has beensharpened, a more selectiveapproach to state assistancehas been put in place, andgreater attention is beinggiven to governance and in-stitutions, although it is stilltoo early to judge the efficacy

of these initiatives.

Next StepsIndia has built strong foundationsfor development. The Bank’s mainchallenge is to support far-reach-ing reforms, at both the state andcentral government levels, withhigh-quality and widely dissemi-nated policy studies and policy-based sector and program loans.The five pillars of the 1997 CASremain valid:• Support policy reform in key

areas, including rural develop-ment, power, urban manage-ment, and urban water supplyand sanitation.

• Focus on poverty alleviation, in-cluding a large and expandingsocial lending program and newinitiatives for community partici-pation and demand-driven smallinvestments in the poorestdistricts.

• Increase the priority of social andenvironmental impacts of Bankoperations.

• Promote private sector develop-ment, including the financialsector.

• Concentrate assistance on statesand programs strongly committedto reform.The fiscal and structural reform

triggers for lending embodied inthe CAS remain appropriate as well.Only adjustments to accelerate andassure the full application of thepillars and triggers appear necessary.

contribución del Banco a lasreformas fiscales y estruc-turales, la inexistencia de unaestrategia eficaz de asistenciapara la reducción de la po-breza rural y por la mediocrecalidad de los proyectos enel momento de su con-

clusión. Los efectos del desarrollo in-stitucional han sido tambiénmodestos, y la sostenibilidad incierta,dados los graves desequilibrios fis-cales subsistentes, los altos costosambientales y los problemas de go-bierno. En conjunto, estas califica-ciones permiten considerar que elresultado global de la asistencia du-rante el decenio ha sido moderada-mente satisfactorio.

Al considerar estas calificaciones,hay que tener también en cuentaque desde hace poco la estrategia deasistencia resulta mucho más rele-vante, sobre todo por las innova-ciones plasmadas en la estrategiade asistencia al país de 1997. Se haconseguido una mayor atención a lareducción de la pobreza, unplanteamiento más selectivo de laasistencia a los estados y un mayorinterés en el sistema de gobierno ylas instituciones, aunque es todavíademasiado pronto para juzgar la efi-cacia de estas iniciativas.

Próximas medidasLa India ha construido sólidoscimientos para el desarrollo. El prin-cipal desafío del Banco es apoyar re-formas de largo alcance, tanto en losestados como en el gobierno central,con estudios sobre políticas de altacalidad y ampliamente difundidosacompañados de préstamos paraprogramas y sectores orientados a lareforma de las políticas. Los cinco pi-lares de la estrategia de asistencia de1997 continúan siendo válidos:

à la réforme du secteur pub-lic et du pouvoir judiciaire, àla politique agricole, audéveloppement rural et à l’é-galité des sexes.

Dans l’ensemble, les ob-jectifs de la Banque au coursde cette période étaient sains

et la structure de sa stratégie d’as-sistance est meilleur. Les notes don-nées sur le plan de l’efficacité restentmodestes, surtout à cause du faibleimpact de la Banque sur la réformebudgétaire et d’autres réformesstructurelles, de son incapacité demettre au point une stratégie effi-cace de réduction de la pauvreté ru-rale et de la qualité médiocre decertains projets achevés. La Banquen’a eu qu’une influence modestesur le développement institutionnelet la durabilité de ses interventionsest incertaine en raison de la per-sistance de graves déficits budgé-taires, de sérieux problèmesd’environnement et de la faiblessede la gouvernance. La synthèse detoutes ces notes permet de con-clure que, dans l’ensemble, les ré-sultats obtenus pendantt dix ansd’assistance ont été modérémentsatisfaisants.

Néanmoins, cette appréciationdoit être corrigée pour tenir compted’une nette amélioration de lastratégie d’assistance au cours desdernières années, grâce surtout auxinnovations introduites dans le doc-ument de stratégie de 1997. Uneplus haute priorité est maintenant ac-cordée à la réduction de la pau-vreté, l’aide aux états est devenueplus sélective et une attention plusgrande est apportée à la gouver-nance et au développement des in-stitutions; cependant, il est encoretrop tôt pour juger de l’efficacité deces initiatives.


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RecommendationsLending Link. The Bankshould link the overall lend-ing volumes to fiscal disci-pline at the federal level andto progress in structural re-forms in agriculture and theimplementation of an effec-

tive rural development strategy.Progress in these areas is essential topoverty reduction. The current linkbetween overall lending volume andfiscal discipline and between sec-toral lending volumes and sector-specific policy and institutionalframeworks would be maintained.

New Lending. New lendingshould be concentrated in reformingstates, where an assistance strategyhas been agreed with the state gov-ernment. In nonreforming states, as-sistance should be limited to policydialogue, clarification of perform-ance criteria, economic and sectorwork to contribute to the internal de-bate, and pilot projects that demon-strate the benefits of policy andinstitutional reform. In the samemanner, sectoral lending volumesshould be linked to agreements onsector-specific policies and institu-tional frameworks.

Monitoring. Although Bank assis-tance has become increasingly pro-poor in recent years, the Bank shouldsystematically monitor the povertyand gender impacts of Bank-assistedprojects and programs. Given thelarge gender gap, the Bank shouldalso make greater efforts to main-stream gender beyond the social sec-tors. It should enlist governmentagencies to do the same for public ex-penditure programs.

Aid Coordination. The Bankshould continue to endorse gov-ernment preparation and direction offormal aid coordination meetings

• Apoyo a la reforma depolíticas en las áreasclave, en particular el de-sarrollo rural, la electri-cidad, la gestión urbanay el abastecimiento deagua y saneamiento enlas ciudades.

• Atención a la reducción de la po-breza, con inclusión de un pro-grama amplio y creciente depréstamos sociales y nuevas ini-ciativas para la participación de lacomunidad y pequeñas inver-siones impulsadas por la de-manda en los distritos máspobres.

• Mayor prioridad de los efectossociales y ambientales de las op-eraciones del Banco.

• Promoción del desarrollo del sec-tor privado, incluido el sector fi-nanciero.

• Concentración de la asistencia enlos estados y programas fuerte-mente comprometidos con la re-forma.Los requisitos de reforma fiscal y

estructural, establecidos como des-encadenantes para el financiamientoen la estrategia de asistencia al país,continúan siendo también válidos.Sólo parecen necesarios algunosajustes para acelerar y garantizar laplena aplicación de los pilares ydesencadenantes.

RecomendacionesVinculación con los préstamos. ElBanco debería vincular el volumenglobal de los préstamos a la disci-plina fiscal en el plano federal y alprogreso de las reformas estruc-turales en la agricultura y la apli-cación de una estrategia dedesarrollo rural eficaz. El progresoen esas áreas es fundamental para lareducción de la pobreza. Se man-

Prochaines ÉtapesL’Inde a établi de solides fon-dations pour son développe-ment futur. Le principal défide la Banque est de soutenirde profondes réformes auniveau des états et du gou-vernement fédéral, grâce à

des études de haute qualité qui de-vront être largement disséminées etau moyen de prêts programmes etde prêts sectoriels pour la réformedes politiques. Les cinq principalescomposantes de la stratégie de 1997restent valables:• Appui aux réformes de politiques

dans les secteur prioritaires, no-tamment le développement rural,l’énergie, l’urbanisme, les adduc-tions d’eau et l’assainissementdans les villes.

• Concentration sur la lutte contrela pauvreté, grâce notamment àune forte expansion des prêtsaux secteurs sociaux, à de nou-velles initiatives de participationdes communautés et à de petitsinvestissement dans les districtsles plus pauvres, répondant à lademande des populations.

• Une plus grande priorité à l’im-pact social et environnementaldes opérations de la Banque.

• Le développement du secteur privé,y compris du secteur financier.

• Concentration de l’aide aux étatset des financements de pro-grammes en fonction de lavigueur de l’engagement enfaveur des réformes.Les conditions définies par le doc-

ument de stratégie en ce qui con-cerne la réforme budgétaire et lesréformes structurelles restent égale-ment valables. Quelques ajustementsparaissent nécessaires pour accéléreret renforcer l’exécution des princi-paux objectifs et conditions.


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tendría la habitual conexiónentre el volumen global delos préstamos y la disciplinafiscal y entre el volumen delos préstamos sectoriales ylas políticas relativas a sec-tores específicos y los marcosinstitucionales.

Nuevo financiamiento. El nuevo fi-nanciamiento debería concentrarseen los estados interesados en la re-forma, cuando se haya acordado unaestrategia de asistencia con el gob-ierno estatal. En los estados no par-tidarios de la reforma la asistenciadebería limitarse al diálogo sobrepolíticas, la aclaración de los criteriosde desempeño, los estudios económi-cos y sectoriales para contribuir aldebate interno y proyectos piloto quedemuestren los beneficios de la re-forma normativa e institucional. De lamisma manera, el volumen de lospréstamos sectoriales debería vincu-larse a acuerdos sobre marcos insti-tucionales y políticas relacionadoscon sectores específicos.

Seguimiento. Aunque en los últi-mos años la asistencia del Banco seha centrado cada vez más en lospobres, el Banco debería supervisarsistemáticamente los efectos de losproyectos y programas respaldadospor él en la lucha contra la pobrezay el logro de una mayor igualdadentre el hombre y la mujer. Dadaslas enormes diferencias en este ter-reno, el Banco debería tambiénhacer mayor esfuerzo por incorpo-rar este tema en las actividades ha-bituales, más allá de los sectoressociales. Debería conseguir tambiénque los organismos gubernamen-tales hicieran otro tanto con los pro-gramas de gasto público.

Coordinación de la ayuda. ElBanco debería continuar respal-dando la preparación y dirección

and to provide logistical sup-port. To enhance the effec-tiveness of external assistanceand partnerships, and to en-able greater selectivity, theBank should strengtheninformal, in-country donorcoordination of country assis-

tance strategies and critical sectorstrategies, such as agriculture andrural development.

RecommandationsConditions des Prêts. LaBanque doit lier le volumeglobal de ses prêts à la dis-cipline budgétaire au niveaufédéral, aux progrès des ré-formes structurelles dans l’a-griculture et à la mise en

œuvre d’une stratégie efficace dedéveloppement rural. Des progrèsdans ces domaines sont essentielspour réduire la pauvreté. Les con-ditions présentes qui lient le vol-ume global des prêts à la disciplinebudgétaire et le volume des prêtssectoriels aux réformes des poli-tiques et des institutions sectoriellesdoivent être maintenues.

Prêts Nouveaux. Les nouveauxprêts doivent être concentrés dansles états réformateurs sur la based’un accord sur la stratégie d’assis-tance avec le gouvernement dechaque état. Dans les états qui re-fusent les réformes, l’aide doit êtrelimitée au dialogue de politiques, àla clarification des critères de per-formance, aux études économiqueset sectorielles permettant de faciliterles débats internes et à des projetspilotes visant à démontrer les avan-tages de la réforme des politiques etdes institutions. De la même façon,le volume des prêts sectoriels doitêtre lié à des accords précis sur lespolitiques et le cadre institutionnel.

Suivi. Au cours des dernières an-nées, la Banque s’est de plus enplus intéressée à la lutte contre lapauvreté; la Banque doit aussi or-ganiser un suivi systématique del’impact de ses projets et pro-grammes sur la pauvreté et la con-dition féminine. Compte tenu de lagravité de l’inégalité entre les sexes,la Banque doit intensifier ses effortspour intégrer ce facteur dansl’ensemble de ses opérations au delà


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des seuls secteurs sociaux.Elle doit également mobiliserl’appui des agences gou-vernementales pour que lesmêmespratiques soient éten-dues aux programmes dedépenses publiques.

Coordination de l’Aide. LaBanque doit continuer de soutenirles efforts du gouvernement pour lapréparation et la coordination desréunions officielles de coordinationde l’aide; cet appui doit être ac-compagné d’un soutien logistique.Pour accroître l’efficacité de l’aide ex-térieure et des partenariats et pourfavoriser la sélectivité, la Banquedoit renforcer les réunions in-formelles des bailleurs de fonds dansle pays pour la coordination desstratégies d’assistance, globalementet pour les secteurs les plus impor-tants, tels que l’agriculture et ledéveloppement rural.


x i x

FR

AN

ÇA

IS

gubernamental de las re-uniones formales de coordi-nación de ayuda yofreciendo apoyo logístico.Para aumentar la eficacia dela asistencia externa y de lasasociaciones y hacer posibleuna mayor selectividad, el

Banco debería reforzar la coordi-nación informal de los donantesdentro del país en lo que se refierea las estrategias de asistencia de al-cance nacional y las relativas a sec-tores críticos, como la agricultura yel desarrollo rural.

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x x

AIDS Acquired Immunodeficiency SyndromeCAE Country Assistance EvaluationCARE Cooperative for Assistance and Relief EverywhereCAS Country Assistance StrategyCEM Country Economic MemorandaCODE Committee on Development EffectivenessDEC Development Economics & Chief EconomistDFID Department for International DevelopmentDPEPs District Primary Education projectsEAP East Asia and Pacific RegionESW Economic and sector workGDP Gross domestic productGoI Government of IndiaHIV Human Immunodeficiency VirusIBRD International Bank for Reconstruction and DevelopmentICICI Industrial Credit and Investment Corporation of IndiaIDA International Development AssociationIFC International Finance CorporationM&E Monitoring and evaluationNGO Nongovernmental organizationNTPC National Thermal Power CorporationOED Operations Evaluation DepartmentOEDST Operations Evaluation Department Sector and Thematic EvaluationPER Public Expenditure ReviewPIU Project Implementation UnitPREM Poverty Reduction and Economic Management NetworkQAG Quality Assurance GroupSAC Structural Adjustment CreditSAL Structural Adjustment LoanSC Informal Subcommittee of the Committee on Development EffectivenessSDC Swiss Agency for Development CooperationUNDP United Nations Development ProgrammeUPBEP Uttar Pradesh Basic Education ProjectVEC Village Education CommitteeWTO World Trade Organization

ABBREVIATIONS AND ACRONYMS

1

INDIA’S DEVELOPMENTRECORD

From Independence through the 1980s

Indian civilization is deeply rooted and far reaching. Long before the endof 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 characterizethe country’s rich culture.1 When the British began establishing colonial rulein 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-arching objective of India’s development strat-egy. A broad national consensus soon emergedon the means to achieve this objective—rapidgrowth through industrialization and redistribu-tive transfers to the poor. India’s developmentpolicies welded two disparate visions: MahatmaGandhi’s dream of a simple, village-based econ-omy and Nehru’s socialist ideal of a self-reliantwelfare state. In deference to both, the govern-ment subsidized small-scale industries and hand-icrafts and intervened extensively in the economythrough publicly owned heavy industries and di-rect controls. Economic openness was viewedwith suspicion. A series of five-year plans gave

concrete shape to this strategy in line with thedevelopment paradigm of the time.2

Government control over the economy and thelarge role of public investment in productive ac-tivities generated some social benefits but also hada significant negative side. The industrial licens-ing system, the restrictions on capital flows, andthe complex system of high trade barriers reducedcompetition, thwarted enterprise restructuring,generated monopoly rents, and stifled growth.Paradoxically, the public sector—with its humanand financial resources overstretched—lackedthe capacity to intervene effectively on behalf ofthe poor; that is, by providing universal school-ing and basic medical facilities.

11

The proportion of poor people fluctuatedaround 50 percent through the 1970s (see figure1.1), when the average per capita income growthrate was below 1 percent.3 The higher per capitagrowth of the 1980s, estimated at 3.5 percent, re-duced poverty to around 34 percent. But the highgrowth was unsustainable as it relied on excessivepublic spending and financing of the fiscal deficitat commercial rates. Moreover, the unintended biasagainst labor intensity was such that output growthin the industrial sector during 1951–91 did not con-tribute to poverty reduction at all, either in urbanor rural areas. Instead, poverty reduction was pos-itively affected by growth in the agricultural andservice sectors, and by human capital development(Ravallion and Datt 1996).

By the 1980s India had eradicated famineand attained self-sufficiency in food production.The Bank played a modest role in helping cre-ate the physical and institutional infrastructureof the Green Revolution, but the Bank’s role insustaining the revolution was critical (Lele andBumb 1995). India also made significant gainsin social indicators, with some southern states(led by Kerala) succeeding in bringing fertility

to replacement levels. Between 1970 and the late1980s life expectancy rose from 49 to 60 years,infant mortality fell from 137 to 80 per thousand,and the annual population growth rate fell from2.3 percent to 2 percent. Primary enrollmentrose from 73 percent to 97 percent.

But social indicators trailed behind those ofChina and many other low-income countries.By the end of the 1980s, with only modest stepstoward economic reform, India also trailed in theglobal economic competition, the result of “clo-sure to trade and investment; a license-obsessed,restrictive state; inability to sustain social ex-penditures; loss of confidence in the efficacy ofgrowth in reducing poverty; macro instability, in-deed crisis; pessimism; and marginalization ofIndia in world affairs” (Bhagwati 1998).

The 1990s: Far-Reaching Reform4

The Gulf War’s temporary effect of raising oilprices and disrupting remittance inflows high-lighted India’s macroeconomic weakness. ByJune 1991, with reserves exhausted, India facedserious external debt service problems. Per capitaeconomic growth turned negative. The macro-


2

F i g u r e 1 . 1P o v e r t y , I n e q u a l i t y , a n d C o n s u m p t i o n

p e r C a p i t a , 1 9 7 1 – 9 7

Headcount and Gini index (percent) Mean per capita consumption, 1973–74 (rupees)

40

35

30

25

20

45

50

55

60

40

30

20

10

0

50

60

70

80

Headcount index

Gini index

Mean per capita consumption

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

Note: Data points for headcount and Gini indexes for 1995–97 are estimates. Missing data points are connected with a dotted line.Source: Datt 1997.

economic crisis, the break up of the Soviet Unionand its economic development model, and theexample of reforming China’s economic suc-cess created the opportunity for the reformers totake over policymaking. Understanding the needto go beyond stabilization measures, a new gov-ernment introduced two major structural policychanges. It dismantled industrial licensing, ex-cept for 18 industries, and initiated the liberal-ization of foreign trade and exchange.

The new approach aimed at giving the privatesector a greater role in India’s development byimproving the investment and tax regimes, re-orienting foreign investment policy, opening in-frastructure to private investment, reformingpublic enterprises and the financial sector, andreducing price controls. The government also ex-panded its poverty alleviation programs.

These reforms yielded positive results. Percapita income rebounded to $390 by 1998 afterdropping from its 1990 peak of $360. Exportgrowth was brisk until 1996, after which it slowedbut did not stop. Annual per capita output growthincreased to 3 percent in 1992–94, reached 5 per-cent in 1994–96, and has remained around 3–4percent since. Through the financial turmoil inEast Asia, inflation rates stayed moderate, the bal-ance of payments stayed healthy, and externalreserves increased. Thus the first stage of mar-ket liberalization has been a macroeconomicsuccess. Moreover, the economy became moreintegrated with the global economy and expe-rienced a large increase of private investment.

In the mid-1990s frequent governmentchanges and associated electoral cycles slowedthe pace of reform. And the past three years haveseen backsliding in trade liberalization (a 4.5 per-cent import surcharge in 1998) and fiscal man-agement. Subsidies remain large. Expenditurecomposition in both the center and the states isdeteriorating toward salaries, pensions, and in-terest payments. Revenues are falling. After bot-toming out around a still high 8 percent of GDPin 1994–97, the consolidated public deficit roseto above 11 percent in 1999–2000, exactly thesame as at the start of the decade. This againraised the risk of macroeconomic instability,crowding out credit to the private sector and pub-lic development spending because of the high

interest cost of the large and rising stock of gov-ernment debt (see table 1.1). In public enterprisereform, India has so far preferred slow “disin-vestment” of minority stakes to privatizing viableunits or closing unviable ones. Much “learningby doing” regarding the regulatory framework forprivate sector participation was combined withinadequate public investment in infrastructure,a major bottleneck (Ahluwalia 1999). Finally,labor market rigidities remained untouched.

India is still a low-income country with highpoverty, ill health, malnutrition, illiteracy, a largegender gap, and deep social divisions (see table1.2). Caste still matters: while two-thirds of all In-dian women and two-fifths of all Indian men areilliterate, 81 percent of all scheduled caste womenand 54 percent of all scheduled caste men are il-literate. India ranks 132 out of 174 countries in theHuman Development Index (UNDP 1999). More-over, environmental damage (unsafe water suppliesand sanitation, soil degradation, and air pollution)estimated in the range of 4.5 to 8 percent of GDPa year offsets much of the gain from economicgrowth (Brandon and Hommann 1995, Khanna andBabu 1997, Tata Energy Research Institute 1998).5

The states differ substantially in poverty levelsand trends. Poverty has increased in Bihar, Mad-hya Pradesh, Orissa, Rajasthan, and Uttar Pradesh,where the bulk of the poor live. It has declinedin Andhra Pradesh, Gujarat, Kerala, Maharashtra,and Punjab. The highest rate of decline occurredin Kerala (both rural and urban poverty incidencehave been halved since the 1970s), which amongthe states has the highest proportion of villages withelectricity, a high road density, a high proportionof land under irrigation, and by far the highest fe-male literacy rate. The earlier investment in edu-cation and rural development enabled Keralites totake advantage of the opportunities that openedup in the Gulf from the mid-1970s and to use theresulting inflow of remittances effectively.

According to World Bank estimates of povertybased on official expenditure surveys and priceindexes, aggregate progress in poverty reductionhas been disappointing. Poverty incidence wors-ened to 41 percent in 1992 because of negativeper capita income growth and higher food prices(due to poor harvests and limited imports). In thefollowing years growth picked up and poverty

I N D I A’ S D E V E L O P M E N T R E C O R D

3


4

Sub-SaharanIndia China Africa Low-income

Indicator 1980 1990 95–98 1980 1990 95–98 1980 1990 95–98 1990 1990 95–98

Illiteracy rate, adult total

(percent of people 15+) 56.4 47.8 43.5 34.0 22.2 16.5 61.1 49.8 39.4 46.8 36.9 38.5

Female (percent of females 15+) 70.2 60.7 n.a. 47.3 31.9 25.5 71.4 59.1 49.6 60.0 47.9 42.0

Male (percent of males 15+) 43.6 35.9 32.2 21.4 13.0 8.8 50.4 40.3 31.1 34.2 26.2 29.1

Gross primary school enrollment

(percent) 80.0 100.1 89.7 113.0 125.0 118.0 78.0 75.7 .. 94.0 102.5 104.3

Female (percent) 64.1 85.5 81.2 104.0 120.0 117.0 66.5 67.8 .. 82.7 94.0 98.4

Male (percent) 95.5 113.9 97.5 121.0 130.0 118.0 87.0 82.7 .. 104.6 110.8 108.7

Gross secondary school enrollment

(percent) 30.0 44.0 49.0 46.0 49.0 67.0 15.0 23.4 .. 33.6 40.1 53.7

Female (percent) 20.0 33.0 38.0 37.0 42.0 63.0 10.0 21.0 .. 25.5 32.9 47.2

Male (percent) 39.0 55.5 62.4 54.0 56.0 70.0 19.7 26.2 .. 41.2 47.4 59.3

Life expectancy at birth, total (years) 50.4 52.8 63.1 66.9 68.9 69.9 47.6 50.1 50.4 58.2 61.4 59.7

Infant mortality rate (per 1,000 live births) 110.0 80.0 69.8 42.0 33.1 31.1 114.8 100.2 91.8 97.5 74.7 77.4 n.a. Not available.a. Latest enrollment data are for 1995.Source: Department of Economic Affairs, Ministry of Finance, India (except for secondary school enrollment) and SIMA database, World Bank.

K e y S o c i a l I n d i c a t o r s , 1 9 8 0 – 9 8T a b l e 1 . 2

Indicator 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Annual GDP growth (percent) 6.6 5.7 0.4 5.4 5.0 7.9 8.0 7.3 5.0 6.1 6.1

Annual GNP per capita growth (percent) 4.4 3.5 –1.8 3.5 3.1 6.1 6.4 5.7 3.3 4.2 4.4

Gross domestic fixed investment (percent of GDP) 21.8 22.5 21.5 21.8 20.9 21.4 23.8 23.2 22.9 22.7 23.1

Public sector (percent of GDP) 9.0 8.8 9.0 8.0 7.8 8.6 7.5 6.6 6.8 6.6 6.3

Private sector (percent of GDP) 11.9 12.7 11.7 12.9 13.1 12.9 16.3 16.6 16.1 16.2 16.8

Inflation (CPI, annual percent) 6.2 11.6 13.5 9.6 7.5 8.1 12.2 9.3 7.0 13.1 6.4

Real effective exchange rate (1990 = 100) 111.1 100.0 85.4 72.0 71.5 74.2 72.0 70.4 76.3 73.6 72.5

Overall public sector deficit –11.6 –11.3 –9.5 –9.2 –10.1 –9.1 –8.2 –8.7 –8.5 –9.7 –11.2

Public sector debt .. 85.5 88.7 89.9 88.7 83.7 79.1 75.7 77.4 76.6 80.9

Current account balance (percent of GDP) –1.8 –2.5 –0.2 –1.2 –0.3 –1.1 –1.8 –1.4 –1.3 –1.0 –1.4

Exports, annual growth (percent) 13.7 9.1 10.8 6.9 14.4 8.0 32.9 7.1 6.2 4.4 8.1

Imports, annual growth (percent) –0.6 3.2 –12.0 18.6 11.1 17.5 20.5 10.1 11.7 5.6 5.5

External debt (percent of GNP) 25.7 26.3 31.9 34.8 34.2 31.4 26.2 23.7 22.6 23.0 22.1

Debt service (percent of exports) 28.6 32.7 29.2 28.1 25.4 25.8 27.4 22.2 18.6 17.0 16.8

Foreign exchange reserves(months of imports) 1.9 1.0 4.0 4.0 6.6 6.6 4.6 5.4 5.7 6.1 6.0

Source: World Bank Unified Survey 2000, IMF staff estimates (for fiscal estimates).

S e l e c t e d E c o n o m i c I n d i c a t o r sT a b l e 1 . 1

declined in both rural (to 36 percent) and urban(to 30 percent) areas by 1997, but at a slower pacethan India had experienced in the 1980s. Yet, ruralpoverty was higher in 1997 than at the beginningof the decade (see figure 1.1). But a contrastinghypothesis of faster urban and rural poverty re-duction during the 1990s has recently been pro-posed on the basis of the rising privateconsumption growth estimates recorded in the na-tional accounts (Bhalla 2000) and of alternativeprice estimates for the deflator of rural householdconsumption (Deaton and Tarozzi 1999).

Controversies about poverty numbers are notnew to India and are quickly seized upon by op-ponents and proponents of reform. Regardlessof which numbers are right, India has neverbeen a good performer in poverty reduction bythe standards of East Asia (Ravallion 2000).Growth has actually slowed in the poorer states.Moreover, comparing a near 50 percent reduc-tion in the growth rate of real agricultural wagesin the 1990s to the the rate in the previousdecade suggests that the poverty-reducing impactof agricultural growth has declined. Among thepossible explanations are slower labor demandassociated with new crops, a slowdown in agri-cultural productivity growth, and a slowdown ofagricultural growth in the eastern states, wherepoverty is concentrated. Finally, there was slug-gish employment creation in the nonfarm ruraleconomy (World Bank 2000).

For India as a whole, inequality measured bythe Gini coefficient has declined slowly but steadilyby about 0.3 percent a year since the early 1950s,with some leveling in the 1990s to around 34 per-cent. Inequality remains higher in urban (36.5percent) than in rural areas (30.4 percent; Datt1999). But the weaker effects of growth on povertyobserved in the 1990s may stem in part from ris-ing inequality that the surveys may not fully cap-ture. An illiterate Indian woman, a member of thescheduled tribe or caste, and a landless wageearner face significantly higher-than-average risksof poverty.

Strong Foundations for Development Based on policies prevailing in the mid-1990s,predictions of some researchers using cross-countrygrowth regressions revealed a per capita growth

rate of 3.6 percent a year beyond 1996, only slightlyless than actual. Their simulations showed thatIndia could have doubled its per capita growth rateif it had adopted East Asian policies on public sav-ings, openness, labor market flexibility, and gov-ernment spending (Bajpai and Sachs 1997). Whilethese estimates are only indicative, they suggest thatIndia could grow at a rate higher than the 4 per-cent recorded in the past four years if it resumedthe faster pace of reform of the early 1990s.

Beyond growth and macroeconomic stability,researchers and policy analysts have reached abroad consensus on the factors affecting thepace of poverty reduction in India: more effec-tive public development spending to enhance in-frastructure (especially in rural areas), humancapital, and agricultural productivity (Datt andRavallion 1998; Ravallion and Datt 1999). In turn,policy, institutional, and governance frameworksinfluence the accumulation of physical and humancapital, their efficient allocation, and technolog-ical innovation and adoption (Srinivasan 2001).

Widespread agreement has also emerged acrossthe political spectrum on the need to rejuvenatethe reform process. This view—articulated in thepast five years in economic journals, policy stud-ies, government committee deliberations, andBank reports—has been endorsed by all pastcoalition governments and reaffirmed stronglyby the current one. But the belief that a secondround of reform would entail high political risksis still widespread. Though the bureaucracy’smindset has already begun to change, resistanceto reform comes also from vested interests thatgain from the complex incentive structure. Pre-occupation with issues of ethnicity and religion,regional pulls and pressures, and the ideologicalbaggage of economic nationalism remain obsta-cles to sustained reform.

A Large, Unfinished Reform AgendaBusiness surveys and qualitative assessments ofIndia’s economic management and institutionalperformance in the 1990s confirm that there havebeen substantial improvements in many areas,but they also point to remaining deficiencies inpublic sector management, regulatory frameworks,labor market policies, corporate governance andexit policy, banking sector efficiency, and trade pro-


5

tection.6 High corporate tax rates (35 percent fordomestic companies and 48 percent for foreigncompanies), in particular, are a disincentive toprivate investment.

Fiscal Reform Reducing the fiscal deficit should be a priority,but little progress on this front is expected thisyear (2000–01). The public bureaucracy needsstreamlining. Public programs for marketingfood and other commodities (including the stillineffective Public Distribution System) need fur-ther reform, as do programs for employment andtraining. Subsidies (about 14.4 percent of GDP)and public enterprise losses need to be reduced.Expenditures need to be redirected toward op-erations and maintenance and investment in in-frastructure.7 To improve revenue buoyancy andequity, the tax base needs broadening and taxadministration needs improvement.

GovernanceVariable enforcement of laws, regulations, andcontracts and delayed administration of justiceare serious problems, especially with respect tothe poor. The chain of accountability from thecivil service to the legislature is weak.8 Oversightand audit reports have limited impact becauseof a lack of transparency, delays, and poor fol-low-up by parliamentary oversight committees.State administrative and financial control ca-pacities have large gaps and variations. The per-formance of the civil service is undermined byoverstaffing, low salaries, inadequate perform-ance appraisals, and political interference. Cor-ruption, which extends to the police and judicialsystems, is perceived to be serious.

Much work lies ahead to improve weak gov-ernance. In addition to strengthening financial ac-countability, public sector reforms require focuson quality, efficiency, incentives for service de-livery, and orientation toward a market economy.The legal system also needs strengthening tofight corruption and uphold equality under thelaw. Devolution of power has been gradual sincethe landmark 1992 constitutional amendent man-dated decentralization of state responsibilities toelected local bodies, or panchayats, and en-hanced representation of women in such bodies.

Training is needed to improve local capacity foradministration and service delivery.

Private and Financial Sector Development A major constraint to private sector developmentis slow privatization of public enterprises, in-cluding banks, due in part to a blurred delin-eation of responsibilities among the multiplegovernment agencies and commissions that ad-vise on and implement privatization.9 Overlyprotective labor laws need to be relaxed; archaicbankruptcy and liquidation laws and proce-dures (including the Sick Industrial CompanyAct) urgently need reform. Completing the en-abling legislation and regulatory institutionswill allow an expansion of private sector par-ticipation in infrastructure. The regulatory frame-work for corporate governance also needs moretransparency.

Openness Protection remains very high compared with alllarge countries in Asia and Latin America (the ef-fective rate of protection on the secondary sec-tor was 47.6 percent in 1998) and, thus, theliberalization timetable to correct the still sub-stantial anti-export bias of the current regimeshould be accelerated. Even internally, India isnot a single common market, especially inagriculture—interstate sales taxes and movementrestrictions across and within states still apply.

Agricultural Reform Agriculture remains overregulated, with dis-torted production and marketing incentives.Public resources are used inefficiently, mostlyfor public employees’ salaries and subsidiesfor water, electricity, fertilizer, and food that donot reach the poorest. Basic reforms are neededto free internal trade, eliminate other market dis-tortions, and integrate India fully with worldmarkets while increasing investment in agri-cultural technology and rural infrastructure,protecting the poor, and ensuring that qualityinputs are supplied.10

Environmental Protection Environmental legislation is adequate, but cur-rent efforts to strengthen the weak enforcement


6

capacity must be accompanied by policychanges. To stem over-watering and excessiveprivate pumping from aquifers, subsidies forelectricity and water should be drastically re-duced. Community-based programs hold prom-ise for improved natural resource management,but scaling them up requires increased publicfunding. A more effective public role for urbansanitation services is also needed.

Social Sectors Public education can be effective, as in Mad-hya Pradesh, where local communities suc-cessfully took responsibility for hiring teachersand monitoring their performance. At the sametime, national enrollment levels in primaryschools remain lower than in comparator coun-tries. Improving service delivery of health andeducation services for better efficiency and ac-cess by the poor requires increasing public ex-penditures, reallocating expenditures away from

tertiary levels and toward primary ones, mak-ing institutional changes, and sharpening tar-geting and incentives.

Social Inclusion India’s public sector has an affirmative actionprogram, which applies to elected bodies, tohelp break caste inequality. Reservation of athird of local council seats for women, decreedby the 1992 Panchayats Act, is already raisingthe voice of poor women in local politics.India’s gender strategy aims to empower womensocially and economically by changing atti-tudes toward girls; providing education, train-ing, employment, and support services; andemphasizing women’s rights and laws. Thisstrategy should be pursued with renewed vigor,sensitively mainstreaming exclusion concerns inall development programs and monitoring theirgender-disaggregated and caste-disaggregatedimpact.


7

9

THE INDIA–WORLD BANKHISTORICALRELATIONSHIP

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 rangedfrom 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 compositionof these capital inflows has changed from an equal contribution of officialand private sources in the 1980s to 52 percent private financing in 1998–2000.

India was one of the Bank’s founding mem-bers, is still one of the Bank’s main borrowers,and has had a major influence on the Bank’s un-derstanding of development. The Bank has beenIndia’s largest source of external capital, pro-viding almost a third of all long-term gross in-flows in the 1980s and, by the end of the 1990s,still supplying more than a fifth. Bank dis-bursements, which were about 5.5 percent ofgross domestic public investment during the1980s, rose to about 8 percent in the early 1990sand have been 6.2 percent since 1998. Cumula-tive lending from 1950 until June 2000 has been$53.8 billion for 412 projects, split equally be-tween the International Development Associa-tion (IDA) and the International Bank forReconstruction and Development (IBRD). Bankcommitments to India have averaged about $1.6billion annually during fiscal 1997–2000, with 54percent from IDA and 46 percent from the IBRD.Without sanctions and with satisfactory country

policy performance, however, IBRD lending inrecent years would have been substantiallyhigher (see last section of this chapter) and theblend would have been harder.

Through the 1970s: A CyclicalRelationshipThe Bank’s relationship with India began witha slow acquaintanceship; praise from the Bankfor India’s first five-year plan; cautious lendingfor railways, iron and steel, irrigation, and de-velopment finance; and mild criticism of theoverly ambitious second five-year plan in the late1950s.1 Initially, the Bank and other donors sup-ported the third five-year plan, consisting of am-bitious investment programs supported bygenerous capital transfers. But a high-level Bankeconomic mission led by B. Bell criticized thegovernment’s development strategy and rec-ommended greater liberalization, increased for-eign assistance, and a currency devaluation.

22

The sense of vulnerability prevailing in Indiaat the time, partly due to the country’s increas-ing dependence on aid, exacerbated sensitivitiesabout outside interference. The policy dialoguetriggered by the Bell report and directed by theBank’s president became confrontational. TheBank and India became estranged, with the no-table exception of agriculture (that part of the Bellreport was prepared under the direction of JohnCrawford). For the Bank, the policy dialogue rep-resents an early attempt to use the leverage ofits lending in a major member country. While thegovernment accepted the need for reform, Bankpressure caused resentment. The modest amountof the devaluation, combined with tariff sur-charges on traditional exports, a severe drought,and inadequate relaxation of the underlyingcontrol regime proved insufficient to generate astrong supply response. Given the high politi-cal cost of the devaluation and its apparent in-effectiveness, vastly compounded by delays andshortfalls in promised quick-disbursing aid, con-trols were tightened again and the governmentemerged from this episode wary of liberalizationand determined to lessen the country’s de-pendence on foreign assistance. In parallel, theBank’s activist attitude gave way to an exagger-ated reticence to advocate policy change. Instead,the Bank focused on narrow issues directly re-lated to its operations’ success, even in its quick-disbursing program lending—for example, theannual industrial imports credits.

In the late 1960s and 1970s, trust was re-stored. India’s agricultural sector became thefocus of Bank assistance, which helped expeditethe adoption and dissemination of the new tech-nologies that produced the Green Revolution. At

the same time, Indian authorities—who fearedBank interference in politically sensitive nationalprograms—resisted the Bank’s ambitions to sup-port the government’s antipoverty programs.Policy advice and economic analyses, mostlyproduced by resident mission staff in close con-sultation with government officials, had a mod-est impact. Conditionality was used sparingly andcommon ground between the Bank’s objectivesand the government’s was continually stressed.

External political factors helped cement therelationship. While assistance from the U.S. gov-ernment declined, reflecting a deteriorating po-litical relationship, Bank lending increased andsoon exceeded aid flows from other donors,eliciting much goodwill from Indian officials.By the end of the 1970s India and the Bank wereconverging: the Bank had adopted the essenceof India’s outlook on developmental priorities,while India had started to cut its tangle of redtape.

The 1980s: Lending Push in a Poor PolicyEnvironmentThroughout the 1980s most academics, govern-ment officials, and top political leaders becameaware of the need to adopt a new model of eco-nomic management, but the necessary politicalsupport for far-reaching reform was not forth-coming. Bank staff produced a large number ofsector reports, especially in industry and finance,that pointed to policy deficiencies that requiredattention.

But while the Bank was actively promotingstructural adjustment in many of its membercountries, high-level discussion of necessarypolicy adjustments in India—to say nothing of


1 0

During the 1970s and 1980s the Bank contributed $425 million tosupport the continued development of a cooperative system, Op-eration Flood, that had already assured small-scale producers amarket for their milk. This led to large increases in milk pro-duction, training for villagers in dairy technology, manufactureof dairy equipment, stimulation of private sector investment, andmajor benefits for women. The difficulties of protecting the sys-

tem from import competition, high state subsidies, and politicalinterference in management of the cooperatives led the Bank towithdraw its support. An OED study concluded that the projectprovided solid and sustainable net benefits to the poor. The mainlesson identified in the study was that development effectivenessof external assistance can be increased substantially by relyingon sound local institutions with the right incentives.

S t r o n g L o c a l I n s t i t u t i o n s a n d t h e R i g h t I n c e n t i v e s : O p e r a t i o n F l o o d

B o x 2 . 1

an explicit link between the Bank’s lending andpolicy reform—was largely avoided. Throughoutthe 1980s, Bank management did not addressIndia’s disappointing policy record for fear ofjeopardizing a strong lending relationship witha sensitive client. The Bank also muffled its ad-visory and institutional reporting roles.2

Although IDA lending slowed considerablythroughout the 1980s, both as a proportion of thetotal and in absolute terms (in line with under-takings to the IDA deputies), IBRD lending andInternational Financial Corporation investmentsexpanded very rapidly. Total Bank annual com-mitments reached a peak of $3 billion in fiscal 1989and $18.5 billion for the decade (figure 2.1).

In many cases Bank-supported projects wereinconsistent with Bank economic and sectoranalyses and advice. Many projects had limitedpolicy content and supported the expansion ofthe state in the economy, regardless of effi-ciency. The Bank continued to lend to public sec-tor enterprises that made fertilizer, steel, andcement; to unsound rural credit institutions; andto inefficient state electricity boards that did not

charge for the power they produced and werebehind serious state financial problems that haveyet to be resolved.

The Bank also lent for the expansion of irri-gation systems known for their inability to re-cover costs and clouded with the suspicion ofcorruption. The focus on irrigation came at thecost of neglect of rainfed areas in which a largeproportion of the rural poor live. Bank lendingfor urban development met with considerablefailure because it ignored the public financeand institutional development aspects of urbanlending. The failure was so profound that it be-came the reason for the decision in the first halfof the 1990s to withdraw entirely from the sec-tor. Furthermore, despite the great needs in thesocial sectors, the Bank was not able to estab-lish a dialogue or a lending program in healthand education because of the government’s re-sistance to foreign advice.

There were some bright spots, such as a loanto the Housing Development Corporation thathelped establish housing finance in the country,and a successful project that provided resources

T H E I N D I A – WO R L D B A N K H I S TO R I C A L R E L AT I O N S H I P

1 1

F i g u r e 2 . 1C o m m i t m e n t s , D i s b u r s e m e n t s ,

a n d N e t T r a n s f e r s , 1 9 8 5 – 2 0 0 0

Source: For commitments, gross disbursements, and net transfers see Controller‘s database. For total net transfers see Global Development Finance database, 10 July 2000.

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

World Bank commitment

World Bank gross disbursementWorld Bank net transfers

Net transfers from all sources

–6

–4

–2

0

2

4

6

Billions of U.S. dollars

for venture capital and research and develop-ment. On the whole, however, in the 1980stransfer of resources was the overriding objec-tive of the Bank, with little concern for the ef-fectiveness with which these resources wereused. As lending expanded in the wrong direc-tion, however, the quality at entry of the Bankportfolio faltered. OED rated Bank performanceat the project appraisal stage satisfactory in only26 of 57 operations (52 percent by commitment)approved in fiscal 1985–89.

The 1990s: Enhanced Relevance of theBank Assistance StrategyAgainst the backdrop of strong commitment tostructural adjustment by a new government, therelevance of Bank assistance increased markedlyduring and immediately after the 1990–91 macro-economic crisis. Changing the mindset of theprincipal counterparts in the core ministries wasnot the issue any more. Instead, the central chal-lenge was to help the newly elected, reform-minded government implement its programs, achallenge that the Bank substantially met.

Bank assistance focused on supportingmacroeconomic stabilization measures (togetherwith the International Monetary Fund); reformsin the investment and trade regimes, finance,taxation, and public enterprises; and cushion-ing short-term social costs, including with threequick-disbursing, policy-based operations. Atthe same time the Bank sought to discontinueold-style lending for public enterprises and stateelectricity boards, and to build a lending pro-gram in health and education. The Bank con-tinued lending, however, in a number of sectorswithout a sector strategy and without seekingthe necessary reforms (for example, in agricul-ture, irrigation, urban water supply—even bank-ing). Nonetheless, the partial attempt to makeBank advice consistent with its lending led toa record drop in new commitments in fiscal1994 to less than $1 billion and to the disman-tling of the Industrial and Finance Division ofthe India Department.

For the first half of the 1990s the Bank focusedon crucial areas of reforms for sustainable growth(for improved macroeconomic management andliberalization of the trade and investment regime)

and on human development (for broad-based im-provement of primary social services). It alsoexpanded its support for environmental protec-tion. But the Bank did not pay enough attentionto the inadequacy of agricultural incentives, thelandless rural poor, rainfed agriculture, and thestructural constraints to rural development. Italso missed opportunities to reform safety netsand to improve the targeting of the poor andwomen in its projects and in public expenditures.

In the second half of the 1990s the relevanceof Bank assistance to poverty reduction im-proved, and even more so after 1997. In the mid-1990s the Bank began studying state finances,increased its attention to sector reforms, offeredassistance in establishing a framework conduciveto efficient private investment in infrastructure,and offered its support in restructuring social pro-grams and providing the poor with skills to par-ticipate in the new, more competitive marketeconomy. The telecommunication companies,ports, and gas and oil sectors, which had the po-tential to attract private investment, were ex-cluded from lending assistance. All new loanswere expected to have a strong policy content.

The 1995 Country Assistance Strategy docu-ment (CAS) explicitly listed continued reductionof the central government’s deficit to 5.5 percentin 1995–96 and beyond and progress in imple-menting its reform agenda as triggers for pro-viding annual lending volumes of around $2.9billion. The strategy also proposed discontinuinglending to states whose fiscal stance was unsus-tainable. Significant shortfalls against those trig-gers were expected to lead to progressivereductions in lending, beginning with IBRD op-erations, to a minimum of $1.2 billion annually.But the government made clear to the Bank, aswell as to the International Monetary Fund, thatit preferred to follow its own pace in reformingthe economy and that it did not see a role for theBank in framing the agenda. In spite of the in-adequate fiscal stance (see table 1.1), the down-ward adjustment in Bank lending volume did nothappen, and annual new commitments returnedto more than $2 billion in fiscal 1995 and 1996.

The most recent full CAS, in December 1997,contained triggers similar to those in the 1995CAS for overall annual lending of about $3 bil-


1 2

lion. It was built around the same objective ofpoverty reduction through accelerated growthand social development as past assistance strate-gies. But it added specific antipoverty inter-ventions. It also set out a new and highlyrelevant operational approach to deal with thechallenge of finding a role for the Bank in sup-porting reforms; that is, to scale up lending toreforming states. And for the first time the CASarticulated monitorable targets against whichthe success of assistance can be judged. TheBank aimed to contribute by 2010 to:• Reducing poverty to 15 percent• Halving the proportion of malnourished

children• Putting in place a reliable disease surveil-

lance system• Increasing contraceptive prevalence to more

than 60 percent of eligible couples• Reducing the population growth rate to 1.2

percent (from 1.9 percent).The five operational pillars of the 1997 strat-

egy, still highly relevant, were: • Support for policy reform (through early en-

gagement and building consensus and own-ership with partners and clients) in key areas,including rural development, power, urbanmanagement, and urban water supply andsanitation.

• Focus on poverty alleviation, including a largeand expanding social lending program andnew initiatives for community participation anddemand-driven small investments in the poor-est districts (see box 2.2).

• Increased priority to the social and environ-mental impacts of Bank operations.

• Promotion of private sector development, in-cluding the financial sector.

• Concentration of assistance toward states andprograms strongly committed to reform.Some components of the 1997 CAS have pro-

gressed well. Bank assistance has focused in-creasingly on rural development; social andhuman development; participatory, decentral-ized, and targeted poverty reduction programs;and economic management and statistical sys-tems. The new focus on states willing to reformhas led to Bank support for two comprehensivereform programs in Andhra Pradesh, Karnataka,and Uttar Pradesh, and close engagement withOrissa and Rajasthan.

But lending commitments of $2.1 billion in fis-cal 1998 were much lower than planned becauseof the sanctions imposed by major Bank share-holders after India’s nuclear testing in May 1998.Under the sanctions, only projects meeting a“basic human needs” criterion were allowed togo forward. At the end of 1999 the sanctions had

T H E I N D I A – WO R L D B A N K H I S TO R I C A L R E L AT I O N S H I P

1 3

A clear Bank assistance strategy for poverty reduction in Indiadid not emerge until the late 1990s. The 1997 Country Assis-tance Strategy (CAS) contained the first explicit proposals forBank assistance (Annex 2 of the CAS) to address poverty on allthree fronts suggested by World Development Report 1990. The1999 CAS progress report reaffirmed this approach.

There is now considerable energy devoted to ensuring thepoverty focus of Bank operations. In addition to continuing to ad-dress policy and infrastructural constraints to growth and to sup-port improved social services, the Bank approved more targetedpoverty interventions in Andhra Pradesh and Rajasthan throughDistrict Poverty Initiative projects and is planning such a proj-ect in Madhya Pradesh. These projects have the characteristicsof social funds with the addition of significant institutional de-velopment components. They rely on existing institutional struc-

tures to support communities to identify, design, and implementprojects that communities demand and then maintain. In short,they aim at developing community and village social capital asa way of making faster progress in poverty reduction among thepoorest groups. A formal but simple ex-ante evaluation proce-dure, designed to forestall corruption, uses village councils, orGram Panchayats, for review, and then processing by a districtoffice for approval and close monitoring.

The World Bank Quality Assurance Group review of theseprojects in 1999 noted some risk that the institutional frameworkmay not be sustained, but regarded them as carefully prepared,with sound quality at entry and strong government support, andtherefore well worth trying. As these projects can become mod-els for nationwide poverty reduction programs, implementa-tion should be closely watched.

P o v e r t y R e d u c t i o n F o c u s o f B a n k A s s i s t a n c e

B o x 2 . 2

held up more than $2 billion of IBRD lendingfor energy, state roads, and other infrastructureprojects.

In the January 1999 CAS progress report, theBank recognized that India had not met the1997 CAS fiscal triggers and had made only lim-ited progress in structural reform. Thus India wasat the border “between the base case and the lowcase, still in the former but heading in the di-rection of the latter.” Consistently, India ex-

pected a lending envelope for fiscal 1999 of$1.9 billion. Because sanctions remained inplace, blocking all the infrastructure projects inthe pipeline, only $1.1 billion was committed infiscal 1999. In fiscal 2000 the sanctions were defacto relaxed in the fourth quarter, but the Bankstill committed only $1.8 billion, remaining onthe border between the base case ($2.7–3 billion)and the low case ($1.2 billion) lending scenar-ios presented to the Board a year earlier.


1 4

1 5

THE BANK’S PRODUCTSAND SERVICES

Analytical Services: High Quality but Limited Outreach

Through the mid-1990s, poverty-focused Bank research assessedpoverty 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 onpoverty reduction and thus became more relevant to policymakers.

Country Economic Memoranda (CEMs), sector re-ports (for example, in transport, education, health,and so on), and Poverty Assessments synthe-sized research findings of the Bank and othersand analyzed most of the relevant issues. (Al-though the policy framework in agriculture wasonly addressed in the later part of the 1990s.) TheCEMs became a vehicle to discuss macroeco-nomic policies and sector policies. The 1992CEM took an in-depth view of the structural re-forms under way and the shortcomings of povertyalleviation programs. The 1993 CEM raised for thefirst time issues related to state finances. The1994 CEM dealt with issues of capital controls andrecommended the Chilean example of taxationon potentially volatile inflows, generating con-siderable controversy with the International Mon-etary Fund (IMF) at a time when this idea wasnot popular. The 1995 CEM went into more de-tail on state finances and legal reform.

Typically, the Bank also took a less alarmingview of India’s fiscal deficits and worked on the

basis of a much higher sustainable fiscal deficitthan the IMF did. Interestingly, because India’sgrowth performance exceeded Bank and IMFforecasts, actual sustainable deficits were evenhigher than the estimates. Many of the themesand issues raised in the Bank’s CEMs found theirway into the Ministry of Finance’s annual eco-nomic surveys and the Reserve Bank of India’sannual reports—suggesting the Bank had at leastan indirect impact on the intellectual debate onpolicies.

But Bank reports have been cautious in pre-senting conclusions and policy options (see box4.1) because of the government’s sensitivity tocriticism, its resistance to policy advice from ex-ternal sources, and its view that Indian expertsand officials should be left to draw their own con-clusions on policy issues. As a result the dis-semination of controversial analyses andrecommendations has often been restricted, andmany Bank reports have not been processed forfinal distribution to the Board.1 Recently, dis-

33

semination has improved, but further progressis possible (see box 3.1).

Eight of nine reports that the Bank’s QualityAssurance Group (QAG) panels reviewed wererated satisfactory (the Bankwide average is 72 per-cent), and one was proposed for best practice (seebox 3.2). All received positive comments onstrategic relevance, technical aspects, and time-liness. But links among strategic goals, policy di-alogue, and economic and sector work designand findings were lacking. Some reports didn’tmeet other criteria, such as realistic, measurableobjectives (environmental issues, rural develop-ment); presentation, with emphasis on key rec-ommendations and policy options (urbaninfrastructure, rural development, water resources,poverty); likely impact (water resources); and costeffectiveness (urban infrastructure, environmen-tal issues, water resource management).

Most Bank reports appear to have little di-rect impact, reflecting their limited scope anddissemination, the variety and richness of in-tellectual contributions within India, and thedrawn-out internal consensus-building and de-cisionmaking processes. Yet some exceptionsstand out: the Bank’s policy work in the late1980s on trade and investment liberalization in-fluenced the pace and extent of reform in theearly 1990s, according to its Indian architects.The new crop of state economic reports alsoappears to have had a significant impactthrough highly relevant analyses of fiscal, struc-

tural, policy, and institutional deficiencies un-dertaken in close partnership with local policyinstitutes. Similarly, the most recent economicreport is highly relevant, high in quality, anddeserving of wide dissemination (World Bank2000).2

The Bank also made excellent use in India ofsome of its global sector work. The foundationsof the assistance program in education were the1990 Jomtien Conference on Education for Alland the economic and sector work preparedfor it. The health program was built on thestrength of the Bank’s global work on disease pri-orities and the 1993 World Development Report.The Bank involved Indian experts in the prepa-rations for the Jomtien conference and the report.The Bank also organized high-level workshopsin the country, in cooperation with local insti-tutes and with the participation of some of thebest primary education and disease and healthsystems experts in the world.

Lending Priorities: Toward Social SectorsThe Bank’s lending shifted in the 1990s towardhealth, education, and social protection. A newBank management team, saddled with a portfolioweak in both relevance and implementation,proceeded to a deep restructuring that entailedmassive cancellations and staff redeployment. Infiscal 1990–94 the team cancelled projectsamounting to $3.2 billion, a large portion in en-ergy, compared with $0.4 billion during the pre-


1 6

Strengthening of the Bank’s outreach efforts in the 1990s took placein a favorable environment created by the new Indian consensuson economic reforms, the collapse of the socialist experiment inEastern Europe, and China’s opening and liberalization. The Bank’spolicy of greater openness and disclosure has been highly ben-eficial for both India and the Bank, and has helped the Bankevolve into a provider of knowledge beyond the confines of theIndian bureaucracy. The Bank grasped the rich disseminationopportunities of the Internet by putting a large amount of mate-rial online and by expanding its contacts with the popular, elec-tronic, and foreign media. Greater contact and collaboration withlocal academics and nongovernmental organizations has im-

proved information flow and built bridges and local capacity. Asa consequence, the Bank’s image improved greatly in the 1990s.

But the Bank’s in-country external relations efforts have notbeen sufficiently proactive and effective, partly because of lim-ited human, budget, and management support. Bank dissemi-nation has overemphasized new loans and lending volumesand has been mainly targeted to English-language print media.In a still mostly rural country with high illiteracy rates, the Bankneeds to make a greater effort to reach the vernacular press andto harness the potential of television, especially in local lan-guages. Recent staff additions and a larger budget promise im-provement in outreach.

T h e B a n k ’ s O u t r e a c h H a s I m p r o v e d b u t S t i l l F a l l s S h o r t

B o x 3 . 1

vious five years. Cancellations were still high infiscal 1995–2000, at $1.1 billion.

Agriculture remained the largest sector atabout 16 percent of new commitments in fiscal1996–2000, even after experiencing a decline dueto a review of lending for irrigation in the firsthalf of the 1990s. Within the sector, irrigation re-mained dominant, but lending for broad-basedrural development increased. From virtually nilin the 1980s, lending for health and nutrition, ed-ucation, and social development expanded dra-matically (to 35 percent) because of thegovernment’s changed attitude toward Bank in-volvement in these areas. Transport increased itsshare, but power and urban development werevirtually phased out. In the power sector this re-sulted from the Bank’s insistence since 1993 thatlending be conditional on far-reaching policy andinstitutional changes. In the urban sector, theBank took a decade-long pause to reflect on thefailures of the past. Lending for industry and oiland gas disappeared altogether as the private sec-tor took over (see figure 3.1).

As of June 1998, 73 percent of the Bank’soutstanding portfolio ($12.9 billion) was ear-marked for state governments and other ben-eficiaries identifiable by state. Of the lendingcommitments going to states, more than halfwere for high-poverty states, roughly mirror-

ing the geographical distribution of the poor(see figure 3.2).

Completed Project Performance:MediocreThe 121 completed and evaluated operations infiscal 1991–2000 (for a total of $18 billion in netcommitments), three quarters of which wereapproved during the 1980s, had mixed results.OED rated only 72 percent of commitments sat-isfactory for outcome, 58 percent likely to be sus-tainable, and 38 percent substantial in institutionaldevelopment impact—all below Bankwideaverages.

Among the 28 projects completed and evalu-ated in the most recent three years (fiscal1998–2000, with $4.2 billion in commitments),virtually all of which were initiated in the 1990s,performance was significantly improved acrossthe board. For outcome, 74 percent of commit-ments were satisfactory; 65 percent carried likelysustainability ratings, and 44 percent had a sub-stantial institutional development impact—all stillbelow Bankwide averages but in line with Inter-national Development Association (IDA) and blendcountries’ performance (see table 3.1 and figure3.3). Of nine projects evaluated during 2000, oneis a top-rated project (Technician Education II, seebox 4.4); seven show a satisfactory outcome, al-

T H E B A N K ’ S P R O D U C T S A N D S E R V I C E S

1 7

A Quality Assurance Group review panel has praised the report UttarPradesh: From Fiscal Crisis to Renewed Growth (World Bank 1998) andproposed it for best practice on all criteria (relevance, internal qual-ity, presentation, and likely impact) for reasons such as the following:• The state government initiated the study request without any

prodding by Bank staff.• The Bank assembled a high-caliber team with an appropri-

ate skill mix.• The study was undertaken jointly by Bank staff and state of-

ficials who felt like equal partners.• Co-task management proved very useful in interactions with

the client in Delhi and the sectoral specialists in Washington.• The country director provided strong leadership and support

in the dialogue with the client, adequately resourced thetask, and steered the report internally.

• The study’s context, objectives, and scope were clear in theminds of Bank management and task team leaders and sharedby the state officials.

• The report integrated sector knowledge and perspectiveinto the macroeconomic and fiscal framework consistentlyand coherently and tailored them to the state’scircumstances.

• The recommendations were tested for their political feasibilityby involving the politicians.

• The strategy for report dissemination respected politicalsensitivities, but also made sure to reach out beyond bu-reaucratic circles. The state published and circulated therecommendations in a suitable fashion, which muted op-position to the recommendations as being pushed by theBank.

A S t r o n g L i n k B e t w e e n A n a l y s i s a n d P o l i c y D i a l o g u e

B o x 3 . 2


1 8

F i g u r e 3 . 1N e t L e n d i n g C o m m i t m e n t s b y S e c t o r ,

1 9 8 6 – 9 0 a n d 1 9 9 6 – 2 0 0 0

Agriculture21%

Education4%

Power28%

Environment 1%Health, nutrition, and population 3%

Mining 3%Telecommunications 3%

Transport 6%

Urban development 6%

Water 3%

Finance7%

Industry9%

Oil and gas6% Agriculture

16%

Education11%

Social 3%Public sector

management 5%Private sector development 2%

Power10%

Environment 2%

Health, nutrition, and population21%

Mining7%

Telecommunications 1%

Transport 11%

Urban development 1%

Water 3%Economic policy 1%

Multisector 6%

1986–90 Commitment, $13.1 billion 1996–2000 Commitment, $8.6 billion

Source: World Bank data.

F i g u r e 3 . 2 I n d i a ‘ s P o v e r t y D i s t r i b u t i o n a n d B a n k L e n d i n g

Poverty by state group, 1994 Bank commitments by state group, June 1998

L–31% ofstate total

($2.9 billion) H–53% ofstate total

($4.9 billion)M–16% ofstate total

($1.5 billion)

Source: World Bank data.

H–65% oftotal poor

(225 million)

M–19% oftotal poor

(65 million)

L–16% oftotal poor

(56 million)

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).

though one (the Dam Safety project) received amodest institutional development impact rating;and one (the Industrial Pollution Control project)received a moderately unsatisfactory rating.

Completed project performance indicatorsbased on number of projects (see table 3.1) andon the economic rates of return (a quarter ofthose projects for which such rate was calculatedhad economic rates of return less than 10 per-cent) point to a similar picture. Water supply andsanitation, agriculture, finance, power, and theenvironment were the worst-performing sec-tors, while social sectors, industry, and oil andgas were the best (see table 3.2).

Monitoring and evaluation (M&E) arrange-ments to track the poverty reduction and gen-der impact of Bank projects and governmentprograms, with few exceptions, have beenweak (see the Country Assistance Evaluationpoverty, rural, gender, and environment back-ground papers). But the Bank has begun to cor-rect this inadequacy in recently approvedprojects. For instance, the District Poverty Ini-

tiative projects include provision for baselinesurveys, regular collection of monitoring in-formation during implementation, and quickanalysis and evaluation of this information, toprovide the basis for any changes in the pro-grams as they proceed. Similarly, the UttarPradesh Health Systems Development projecthas identified explicit achievement targets forthe general population, the poor, and womenand has provisions for M&E of performance. Fi-nally, thorough and comprehensive M&Earrangements have been put in place in the con-text of the comprehensive adjustment programsupported by the Bank in Uttar Pradesh, in-cluding a baseline, state-specific poverty as-sessment. Moreover, the June 2000 workshopon “Poverty Monitoring and Evaluation” or-ganized by the Bank’s Poverty Reduction andEconomic Management Network and the re-gional office has been an important step forwardin strengthening M&E arrangements in India.

Quality at entry—relevance, design, and pre-paredness—for the Bank’s completed projects in


1 9

Substantial Satisfactoryinstitutional Bank

Number Net Satisfactory Likely development performanceof commitment outcome sustainability impact at appraisal

Area/period projects (US$ millions) (percent) (percent) (percent) (percent)

India, 1981–90 107 9,785 72 / 72 47 / 53 18 / 26 55 / 65

1991–2000 121 18,033 68 / 72 47 / 58 36 / 38 56 / 62

1996–2000 50 7,703 68 / 71 58 / 65 40 / 37 56 / 54

1998–2000 28 4,222 71 / 74 57 / 65 46 / 44 68 / 63

Sri Lanka, 1996–2000 18 623 67 / 72 50 / 66 22 / 21 56 / 69

Pakistan, 1996–2000 34 3,506 71 / 72 44 / 43 32 / 24 58 / 60

China, 1996–2000 46 6,239 85 / 88 78 / 81 65 / 69 74 / 76

East Asia and Pacific Region,

1996–2000 172 24,899 80 / 87 60 / 72 45 / 43 72 / 82

IDA and blend, 1996–2000 570 26,560 69 / 77 46 / 56 35 / 38 59 / 65

1998–2000 342 14,774 69 / 74 47 / 56 35 / 40 57 / 62

Bankwide, 1991–2000 2,254 167,589 69 / 77 49 / 61 34 / 41 64 / 72

1996–2000 1,095 88,646 72 / 80 53 / 63 39 / 45 63 / 73

1998–2000 637 52,757 73 / 82 55 / 68 41 / 49 62 / 75Note: Includes all projects completed in fiscal 2000 and evaluated as of December 31, 2000. Numbers separated by slashes are percentage by number of projects and net commitmentby exit years.

O E D P r o j e c t E v a l u a t i o n R a t i n g s , C o m p a r a t i v eP e r f o r m a n c e , V a r i o u s F i s c a l Ye a r s

T a b l e 3 . 1


2 0

Substantial SatisfactoryNet institutional Bank

Number commitment Satisfactory Likely development performanceof (US$ outcome sustainability impact at appraisal

Sector projects millions) (percent) (percent) (percent) (percent)

Agriculture 10 1,234 60 / 56 30 / 36 40 / 41 50 / 44

Education 3 576 100 / 100 100 / 100 67 / 80 67 / 80

Electric and power 8 1,849 50 / 58 38 / 47 25 / 32 50 / 49

Environment 4 339 75 / 59 50 / 34 50 / 34 50 / 34

Finance 3 433 67 / 57 67 / 57 67 / 57 67 / 57

Industry 2 431 100 / 100 100 / 100 100 / 100 100 / 100

Mining 2 308 50 / 96 50 / 96 50 / 3 0 / 0

Oil and gas 1 450 100 / 100 100 / 100 0 / 0 0 / 0

Health, nutrition, and population 7 625 86 / 88 86 / 89 29 / 22 100 / 100

Transport 3 513 67 / 64 67 / 64 0 / 0 33 / 48

Urban development 3 582 67 / 81 67 / 81 33 / 37 67 /81

Water and sanitation 4 362 50 / 38 50 / 52 50 / 38 25 / 20

Total India 50 7,703 68 / 71 58 / 65 40 / 37 56 / 54Note: Includes all projects completed in fiscal 2000 and evaluated as of December 31, 2000. Numbers separated by slashes are percentages by number of projects and net commitmentby exit years.Source: OED data.

O E D P r o j e c t E v a l u a t i o n R a t i n g s , S e c t o r a l P e r f o r m a n c e , F i s c a l 1 9 9 6 – 2 0 0 0

1976–80 1981–85 1986–90 1991–95 1996–2000

F i g u r e 3 . 3O E D P r o j e c t E v a l u a t i o n R a t i n g s

b y C o m m i t m e n t , F i s c a l 1 9 7 6 – 2 0 0 0

Note: Of the 40 projects evaluated by OED for fiscal 1976–80 exit, only 2 were rated for institutional development impact. Of the 44 projects evaluated for fiscal 1981–85, only 12 were rated for institutional development impact.Source: OED database, December 2000.

93 Satisfactory outcome

55

0

71

18

0

72

60

32

73

54

39

71

31

Likely sustainability Substantial institutionaldevelopment impact

0

10

20

30

40

50

60

70

80

90

100Percent

65

T a b l e 3 . 2

India during the 1990s (proxied by OED ratingsof Bank performance at appraisal) was poor inboth absolute and relative terms. Only 56 per-cent of the 50 evaluated projects in fiscal1996–2000 obtained satisfactory appraisal rat-ings, compared with 61 percent in fiscal 1990–94.Performance in the last three years has im-proved, but is still low. Quality at entry wasparticularly poor in the sectors mentioned above,but satisfactory in most projects in the health andeducation sectors. Several implementation prob-lems, chiefly procurement delays, also under-mined performance. The 1997 portfolio reviewnoted the most common causes: weaknesses inpreparing bid documents and in contractingprocedures, and delays in contract awards fol-lowing bid evaluation. Other problems includedscarcity of counterpart funding and rapid turnoverin the Bank’s and borrower’s project staff.

Ongoing Portfolio: Sound Approval of 10 new projects in the fourth quar-ter of fiscal 2000 boosted the Bank’s portfolio forIndia to 76 projects amounting to commitmentsof about $12.9 billion, with a high undisbursedbalance of $8.0 billion. Based on the supervisionratings and QAG’s classification, 29 percent ofthe commitments were at risk, a level higher thanthe previous peak in fiscal 1993 (28 percent) andconsiderably worse than the Bankwide level (16percent). Commitment at risk doubled from theprevious year, but this indicator is very volatileon a quarterly basis, precluding a strong con-clusion. In fact, by end-December 2000, portfo-lio performance appears much improved, withonly 9 percent of commitments at risk. However,the high historical disconnect ratio (19 percentin fiscal 1997–99, compared with 9 percentBankwide and 19 percent for India in fiscal1994–96) between Bank and OED completionratings suggests a strong upward bias in self-eval-uations.

QAG reviewed the quality at entry of two on-going projects in 1999 (among 80 randomly se-lected Bankwide), one of which (the AndhraPradesh Power project) was rated highly satis-factory; the other (the Rajasthan District PrimaryEducation project), satisfactory. Similarly, of thetwo projects (among the 100 selected Bankwide)

reviewed in 1998, one (the Haryana Power Sec-tor Restructuring project) was on the top 10highly satisfactory list and the other (the Womanand Child Development project) was rated mar-ginally satisfactory. A similar review of sevenother India projects in 1997 found one highly sat-isfactory (the Coal Sector Rehabilitation project,scoring high on all QAG criteria) and one mar-ginally satisfactory (the Rural Women’s Devel-opment project).3

Efficiency: Adequate

Decentralization In fiscal 1991 the resident mission was alreadyresponsible for a significant part of supervisionwork. In the following years its role expandedto encompass all of supervision, support forprocurement, disbursement, and auditing, and todeal with strategic and policy issues related toinfrastructure development, social development,public affairs, and state focus. The Bank’s July1997 reorganization created a matrix managementstructure with a small country management unitheaded by a director posted in the field officeand virtually all operational staff working onIndia placed administratively under regional sec-tor unit managers (based at headquarters). Thesize of the field office increased from 50 to 57professionals between fiscal 1991 and 1997 andjumped to 83 professionals by fiscal 1999 to im-plement the decentralization objective of thestrategic compact.

Preliminary estimates from a study of total fieldoffice costs currently under way as part of aBankwide review show that in fiscal 1999 theIndia field office spent about $8 million, or 24percent, of the South Asia Region’s expendi-tures on the whole India program. This is aboutthe same percentage as for Africa and slightlylower than for the East Asia and Pacific Region(26 percent). South Asia’s expenditures for theentire India program for fiscal 1999 ($33 million)represented about 5 percent of the total for allRegions, a much lower percentage than thecountry’s share of the developing world’s pop-ulation or the poor.

Expanded field presence was critical to thesuccessful expansion of Bank assistance in ed-


2 1

ucation and social development and for en-hancing the state focus of assistance. The shrink-ing field presence in agriculture and genderparalleled less successful performances in theseareas. Bank staff and OED evaluators with ex-posure to the Bank’s activities in India havepraised the Bank’s enhanced appreciation ofcountry culture and conditions and the clientfocus that decentralization has brought about. Aclient survey conducted in 1998 reflected satis-faction with the impact of decentralization, es-pecially more nimble decisionmaking and greaterresilience of the Bank-India partnership. Clientsseek even more delegation of authority to fieldoffice staff.

Cost and Efficiency Indicators The trend in the Bank’s total staff direct costs forIndia has been flat since fiscal 1995 at about $16million, up by about 9 percent compared with theearly 1990s. India’s economic and sector work andlending unit costs, which were generally lowerthan for China in fiscal 1990–94, rose substantiallyin the second half of the decade, and were wellabove recent unit costs for China and East Asiaand Pacific programs, which instead decreasedover the same period. Project preparation costsin India were also higher than those for otherlarge countries, including Argentina, Brazil, andMexico. Supervision costs, in contrast, comparedfavorably even with large countries, and lendingcosts per commitment dollar were substantiallylower than for neighboring Pakistan and other Re-gions, reflecting the economies of scale of India’slarger average project size.4

Available operational efficiency measures arehighly imperfect but point to average perform-ance. During fiscal 1995–99 India’s total pro-gram costs per satisfactory commitment dollarwere 41 percent higher than China’s and 18–90percent higher than those for other larger coun-tries in Latin America and the Caribbean. ButIndia’s costs were slightly lower than those forEast Asia and Pacific and Latin America and theCaribbean and substantially lower than those inall other Regions. Moreover, the performance ofthe outstanding portfolio has seen notable im-provement. Finally, indicators of service effi-ciency up to fiscal 1999 compared well with

China and the two Asian Regions and were alsoclose to Bank service standards.

Aid Coordination and Effectiveness:Uneven Aid coordination and mobilization have beenpursued through regular annual donor meet-ings outside India, at which the governmentand Bank have solicited pledges to fill the ex-ternal financing gap estimated by governmentand Bank economists. In addition, the UnitedNations Development Programme chairs vari-ous sectoral in-country working groups.

Aid coordination among donors has beenminimal at the country-strategy level and unevenat the subsectoral and state levels (for example,it has been strong in health but neglected in agri-culture). Moreover, partnerships with otherdonors appear to be declining.5 Even coordi-nation internal to the Bank Group has been sub-optimal. Indeed, the Bank–International FinanceCorporation (IFC) 1997 Country Assistance Strat-egy was a one-sided Bank document. The Bank’sefforts at encouraging private sector participa-tion in infrastructure (in power, for example)were not sufficiently coordinated with the IFCuntil recently.6

According to a 1998 client survey, govern-ment officials appreciate the Bank’s deferenceto the government’s preeminent role in aid co-ordination. A survey of the main donors, con-ducted in May/June 1999 for this evaluation,suggests that they would appreciate a moreactive Bank role. For donors the goal of mobi-lizing resources appears to be less importantthan interacting with partners about the coun-try’s development priorities; addressing envi-ronmental, poverty, and governance issues;and encouraging civil society, nongovernmen-tal organizations, and the private sector to par-ticipate in the country’s development.7 Therespondents thought that the relevance andimpact of aid coordination activities with respectto the balance of payments, governance issues,and financial and private sector developmentwere low or negligible. Their responses toquestions on outputs and impact of aid coor-dination indicate only modest achievements,ambivalence about the government’s ability to


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coordinate aid, and a desire for a more activeBank role, especially in-country. This mismatchsuggests the need for an intensive dialogue(led by the government) among all India’s ex-ternal partners about aid coordination arrange-ments and the role of the Bank.

The major lessons from country program eval-uations by three donors (Swiss Agency for De-velopment Cooperation, the government of theNetherlands, and the Department for Interna-tional Development) confirm the importance ofseveral factors for the success of externalassistance:

• Adequacy of the policy and institutionalenvironment

• Client ownership, commitment, and appropriatedesign, which are facilitated (and tested) by theuse of pilot projects, beneficiary participation, andlocal partnerships (see boxes 2.1 and 4.4)

• Quality at entry, through simplicity of designand early identification of institutional capacityconstraints

• Attention to gender concerns• Investment in knowledge products combin-

ing foreign and local expertise as the most ef-fective way to influence decisionmakers.


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SELECTED SECTORSAND TOPICS

Overview of Sectoral Assistance

The effectiveness of Bank assistance during the 1990s varied amongsectors. Results have been strongest in power (in the second half ofthe decade). They have been good in private sector development,

population, health, nutrition, and education and modest elsewhere.1

Public Sector Management Fiscal adjustment and public enterprise reformwere supported by the 1991 structural adjustmentloan, but with little long-term impact. Together withthe other two projects of the early 1990s (the Ex-ternal Sector and the Social Safety Net adjustmentoperations), the Bank supported institutionalchanges in taxation; the financial sector; and thetrade, foreign exchange, and investment regimes.Since explicitly acknowledging the seriousness ofgovernance problems in the December 1997 Coun-try Assistance Strategy (CAS), the Bank has paidmuch more attention to this issue in both its lend-ing and nonlending activities. Civil service issuesare beginning to be addressed in the focus states.The Bank’s economic and sector work on publicsector management, while inconsequential at thecenter, is having a stronger impact at the state level.Fiscal and public enterprise reform issues are alsobeing addressed in the context of state-level, pol-icy-based lending.

Institutional development components of proj-ects were more focused at the agency level (andeven here, narrowly so, mostly in skill upgrad-

ing and management) than broadly at the sec-tor, state, or national levels. Results were mod-est. Only 16 out of 100 projects completed inIndia and reviewed by OED in a 1997 survey hada primary focus on institutional development. Inthe face of weak line institutions, the Bank re-lied on project implementation units to ensurebetter project performance, but this has been atthe expense of strengthening or reforming theexisting institutional machinery.

Financial and Private Sector Development The Bank’s high-quality economic and sectorwork, intensive policy dialogue, and lendingoperations (including the three adjustment loans)in the early 1990s were relevant and contributedeffectively and in a timely way to good progressin the incentives framework facing the privatesector and to strengthening the financial system.India’s commitment to structural adjustment in1991 represented a clear breakthrough from thepiecemeal approach to policy change.

In the second half of the decade, however,a Bank loan supporting the restructuring of a

44

small number of public banks achieved very lit-tle and had virtually no demonstration effecton the rest of the banking system. But theBank’s strong advisory role helped maintain themomentum of the financial sector reforms.Moreover, many impediments to private sectorgrowth remain unaddressed, such as labormarket rigidities, delayed justice, poor corpo-rate governance, slow and ineffective privati-zation of public enterprises and banks, and lackof private sector participation in the develop-ment of ports and roads. These are areas wherethe policy dialogue could have been moreforceful.

Urban Development The Bank has not finalized an urban develop-ment strategy, even after a major but protractedsector study and evaluation of its unsatisfactoryexperience in the 1980s. There has been virtu-ally no new lending during the 1990s, except forwater supply and sanitation projects. But thereach of the eight projects completed and eval-uated has been limited, and in most cases theborrowers’ weak commitment to the agreedpricing and institutional reforms meant thateven their limited outcomes were not sustain-able. In spite of 25 years of Bank assistance forurban water supply projects, no Indian citytoday can provide safe water for more than afew hours a day, and most water and sanitationagencies have financial difficulties and offer in-adequate service.

Relevance of sectoral assistance has beenimproving in the late 1990s, but remains mod-est. Three ongoing projects are being imple-mented satisfactorily, according to the latestprogress reports. But they are narrowly focusedon specific cities rather than on sectorwide is-sues and municipal development. Further-more, there has been little follow-up by theBank on its 1996 sector work (which the Qual-ity Assurance Group, QAG, judged “an out-standing piece of analytical work”) for buildingthe capacity of municipalities, helping the cen-tral government and other tiers of govern-ment implement the urban agenda, andfostering a better balance between private andpublic participation.

Agriculture and Rural Development The Bank’s 1991 country economic report con-cluded that Indian agriculture was in crisis, largelybrought about by serious policy and institutionalshortcomings at the central and state governmentlevels. Given the importance of agricultural andrural development to economic growth andpoverty reduction, adjustments in agricultural sec-tor policy deserved to be pursued within the gov-ernment’s broader program of stabilization andreform. Despite the report’s conclusions, agricul-tural policy issues were never near the top of theBank’s strategic agenda during the first half of the1990s. Since there was a similar lack of interest onthe government side, the Bank made only weakattempts at meaningful dialogue on agricultural pol-icy. This neglect also held up further analyticalwork by the Bank on Indian agriculture and weak-ened the relevance of its sectoral assistance.

Compared with the late 1980s, there was a re-duction in Bank lending for agriculture in the firsthalf of the 1990s, largely due to a review of thedominant irrigation lending component ratherthan a response to the unsatisfactory policy en-vironment in the sector. Nonetheless, the Bankcontinued to lend substantial amounts in thesector in an overregulated and inefficient policyenvironment, with many stand-alone projectsaddressing relatively narrow issues. In a fewstates the Bank sought adjustments in agriculturalpolicy, with some success (for example, in waterpricing). But such efforts were often underminedby weak enforcement of the hard-won projectcovenants, while large-scale lending continued.

The Bank’s assistance program was also slowto adjust to changing circumstances. For exam-ple, the extension system assisted by a Bank-funded project was geared mainly to supportingirrigated grain production rather than diversifiedand rainfed agriculture, which would have beenmore relevant for rural poverty reduction. Ear-lier extension projects also used the discreditedtraining and visit system, but revised extensionmodels are being explored in two recently ap-proved projects (the National Agricultural Tech-nology and the Uttar Pradesh DiversifiedAgricultural Support projects).

In the second half of the 1990s lending for agri-culture and rural development increased, but the


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Bank concentrated on a few main subsectors andplaced even more emphasis on state-level re-forms. The new, sharper focus of assistance arosefrom the realization that earlier neglect of agri-cultural policy issues and dispersion of projectshad limited sustainable impact on poverty re-duction and were creating serious problems inproject implementation and performance. Theincreased lending was for irrigation and drainage(still the dominant part of the portfolio), water-shed and area development, and forestry. Therewere also project components directed at agri-cultural research and extension. Overall, Banklending was largely directed to states willing toadopt significant policy reforms, such as for watermanagement and pricing. This more selectiveand relevant sector orientation had a larger im-pact on rural development institutions than the dis-parate and enclave projects of earlier years.

Providing the rural poor (mostly landlesspeasants or farmers on marginal lands) with ac-cess to land on a formal basis—rather thanthrough often illegal tenancy arrangements—and more off-farm employment opportunities,which in recent years have increased slowly, isimportant for sustained poverty reduction (WorldBank 2000). Over the past few years the Bankhas indeed focused more on the assetless rural

poor, although the majority of the ongoing ruraldevelopment projects still favor those with suchassets as land. Bank researchers have recently ar-gued in favor of the need for agrarian reform inIndia, including improved land distribution(Mearns 1999; Mearns and Sinha 1999). Never-theless, for enhanced off-farm (as well as on-farm) employment opportunities for the poor,boosting agricultural production remains criticalbecause “the greatest stimulant for growth of thenonagricultural economy in rural areas is dynamicagricultural growth” (Fisher, Mahajan, and Singha1997). Such a boost in the sector’s growth, in turn,will require substantial policy improvements.

In 1999 the Bank concluded a major reviewof rural development and poverty reduction thathad begun in the mid-1990s with the commis-sioning of subsector reviews. The review cul-minated in a good synthesis report that pointedto substantial shortcomings in incentives, insti-tutions, and public expenditure priorities. The re-port, however, should have taken a bolderapproach by presenting more specific recom-mendations (see box 4.1). India is defining its sec-toral assistance strategy in light of this sectorwork. The Bank has not made clear how it in-tends to strengthen focus on agricultural and ruraldevelopment policy in its future policy dialogue,

S E L E C T E D S E C TO R S A N D TO P I C S

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A Quality Assurance Group (QAG) review panel found that India –Towards Rural Development and Poverty Reduction (World Bank1999b), as a synthesis, contains much good analytical material. Andthe thrust of the report’s conclusions and recommendations issound. But it presents surprisingly timid recommendations forchanges in incentives, institutions, and investments.

The panel acknowledged the report’s strong points, whichincluded its synthesis of existing but unexploited analyticalwork and its discussion of sequencing of proposed policychanges (quite a rarity). In line with the rural development strat-egy advocated in Rural Development: From Vision to Action(World Bank 1997), it addresses rural, not just agricultural, de-velopment; poverty reduction in its widest dimensions (exceptfor land redistribution); and desirable changes in incentiveregimes, institutional arrangements, and public investment.

The QAG panel thought that the Bank should have taken abolder approach by being more specific on recommendations forreductions of subsidies for canal irrigation, power, and urea. Andby leveraging its lending on corresponding actions (although besthandled separately). Nonetheless, the renewed interest of theIndian government to review its agricultural policies and ruraldevelopment strategy led the panel to a positive assessment ofthe report’s likely impact.

The Country Assistance Evaluation sectoral background re-view also concluded that the report could have been bolder inpresenting its conclusions and that its impact on crucial issuesfor rural development and the poor remains uncertain. The re-port was discussed at a workshop in New Delhi and later withthe government, but no further dissemination in the states hadbeen initiated by the end of 2000.

C a u t i o u s C o n c l u s i o n s C l o u d t h e P o l i c y D i a l o g u e f o r R u r a l D e v e l o p m e n t

B o x 4 . 1

in its overall country strategy, and in its opera-tions at the central and state government levels.2

Lending in the irrigation subsector had beena crucial part of the Bank’s support for increasedgrain production based on Green Revolutiontechnology, which depended heavily on irriga-tion. Through the 1990s, this lending still ac-counted for about 50 percent of the agriculturalportfolio. Since early in the decade, Bank assis-tance has been mostly for river basin develop-ment through the state-focused Water ResourceConsolidation projects in the context of in-creasing pressures on domestic, agricultural, andindustrial water demand. Major objectives wereto improve river basin planning and water man-agement to increase the reliability of water sup-plies and support higher agricultural productivity.These projects were also intended to help com-plete a number of older projects whose imple-mentation had stalled.

But these projects focused too much on con-struction and not enough on institutional re-

form and water management. Also, irrigationprojects continued to be implemented in a pol-icy environment providing the wrong incentivesfor water use and agricultural production. Resultshave been disappointing so far. Only half of the18 projects completed in the 1990s have beenrated satisfactory, only a third were judged tohave had substantial institutional developmentimpact, and only three were evaluated as hav-ing likely sustainability (for an example of afailed project, see box 4.2).

In the second half of the 1990s, following therelease of a global water resources policy paperby the Bank (but at the same time as the Bank’sreview of irrigation strategy for India in 1998),the Bank’s irrigation assistance has focused in-creasingly on strengthening the institutional ca-pacity of irrigation management systems,establishing water users associations, and re-covering costs for irrigation water. The new cropof projects appears to be performing much bet-ter than their forerunners.


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Objectives. The Upper Krishna Irrigation II project (a $167 millionInternational Development Association credit approved in 1989and closed in mid-1997) had the commendable objective of in-creasing employment and incomes of 100,000 poor families in thearid north of Karnataka. It was to do this by developing 150,000hectares of irrigation, including dam construction; resettlingand improving the living standards of displaced persons;strengthening capacity in irrigation management; and con-tributing to an effective antimalaria campaign.

Weak Implementation. The physical objectives were onlypartially achieved (80 percent). While the plentiful availabil-ity of irrigation water at virtually zero cost to users has in-creased yields and returns by 200–400 percent, slowdevelopment of the command area and inefficient use of waterresources has led to practically no net benefits to the projectbecause of the substantial project cost. There are now nofunctioning water users associations, despite 50 having beencreated during 1990–92. Association members had stoppedwater rotation soon after the project delivered ample water, asthey saw no reason to ration water and submit individual de-livery preferences to group decisions. Moreover, the oversup-

ply of water, with considerable water logging, has caused se-rious damage to houses and crops.

For the state government, dam construction on the KrishnaRiver was the priority. As a result, despite written assurances,dam construction took place and many villages were submergedwithout completion of the resettlement arrangements. Reset-tlement expenditures by the state government after closing theBank’s credit have been $166 million, compared with $101 mil-lion during the eight years of Bank assistance. This influx offunds, combined with improved administrative procedures andinstitutional capacity, has led to more resettled families usingincome-generating-scheme grants (from 12 percent to 16 per-cent), land purchase grants (from 16 percent to 29 percent), andhouse construction grants (from 33 percent to 51 percent).

Outcome and Lessons. Despite the late corrections to the re-settlement component, this project had an unsatisfactory out-come and is unsustainable. The project provided three lessons:the Bank ignored its own agreement with the state governmenton the need for coordination between irrigation development andresettlement, water management reforms were not pursued,and supply-led irrigation development cannot be sustained.

A n E x t r a o r d i n a r y F a i l u r e —T h e U p p e r K r i s h n a I r r i g a t i o n I I P r o j e c t

B o x 4 . 2

The Uttar Pradesh Sodic Lands Reclamationproject, for example, has not only been techni-cally successful but has also created opportuni-ties for women and the poor to access productiveland and higher incomes (see box 4.3). Anotherexample of the Bank’s new approach is the on-going irrigation component of the AndhraPradesh Economic Restructuring project, whichfocuses on reducing the role of government andenhancing the role of beneficiaries in the man-agement of major parts of irrigation systems. Inthree years there has been a remarkable im-provement in rehabilitation of canals, watermanagement, and cost recovery in AndhraPradesh as a result of the empowerment ofwater users groups to manage the tertiary irri-gation systems.

Improving the quality and quantity of ruralwater supplies is one of the important devel-opment challenges in India—on average onlyabout 75 percent of the rural population has ac-cess to public water supplies, which leavessome 175 million people without safe publicwater. While many rural development projectsalso contain rural water supply components,the performance of two completed stand-aloneprojects in Maharashtra and Kerala was modestlysatisfactory at best, but two other ongoing proj-ects in Karnataka and Uttar Pradesh are pro-gressing satisfactorily. The thrust of the ongoingBank assistance—to improve health and pro-

ductivity by creating conditions at the state levelfor the sustainable supply of safe water throughincreased involvement of the private sector—isappropriate, as neither the Bank nor govern-ments can possibly assist all rural areas directly.

Two watershed management projects (clas-sified as environment projects) were approvedin fiscal 1990 and implemented satisfactorily.They addressed watershed issues in the “plains”and the “hills” in a number of states. At the endof fiscal 1999 a second hills project—designedto intensify a participatory approach to imple-mentation—was approved. A series of watershedprojects is being planned, in contrast to area de-velopment projects, to reflect the idea that wa-tersheds should be the organizing principle forarea development in rural settings. While Bankassistance for rural roads has been relativelylimited, it has been highly relevant and effica-cious throughout the decade.

In the early 1990s the Bank launched a newprogram of assistance for the forestry sectorbased on the Government’s policy statement of1988 and the Bank’s forestry policy paper of 1991.The Bank’s policy (similar to the government’s)was based on four principles: multisectoral ap-proaches and international cooperation; rectify-ing market and policy failures that led todeforestation and unsustainable land use; fi-nancing operations that lead to socially, envi-ronmentally, and economically sustainable


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The main objective of the two Uttar Pradesh Sodic Lands Recla-mation projects (the first approved in 1993 and almost com-pleted, and another approved in 1999) is to reclaim areas that havebecome contaminated with high levels of salt in the soil and wereunproductive under previous water management regimes.Backed by the enthusiastic support of the state government,the approach involves large-scale drainage, use of chemicals,on-farm development, promotion of forest species on communitylands, and strengthening local institutions so they can partici-pate in implementing the land reclamation program. An impor-tant target group for the use of the reclaimed land is the poor andlandless.

Very substantial benefits have come from crop diversifica-tion and increased crop yields, leading to an almost 50 percentincrease in family income. Paddy yields have risen from 1.2 to3.74 tons per hectare; wheat yields from 0.75 to 2.63 tons perhectare. About 11,138 hectares have been allocated to the land-less (average farm size is about 0.5 hectare). Village imple-mentation committees review and decide on land allocation.Women’s self-help groups operate small-scale credit schemes.

Planned recovery of operation and maintenance costs willbe only partial in the short term. But since most of the benefi-ciaries are poor and the farms are very small, this may be a bet-ter way to transfer resources to the poor.

S t r o n g L o c a l I n s t i t u t i o n s a n d t h e R i g h tI n c e n t i v e s : U t t a r P r a d e s h S o d i c L a n d s P r o j e c t s

B o x 4 . 3

resource expansion and intensification; and pre-serving intact forest areas.

In addition to the multistate Forestry Research,Education, and Extension project and the Ecode-velopment project, the Bank financed six stateforestry projects in the 1990s that supported thedevelopment strategies of the state forest de-partments and also aimed at strengthening thecapacity of the relevant state institutions. Muchof the population living around forests is poor,and hence this assistance has an impact onpoverty reduction through employment and thegeneration of productive assets.

There is considerable variation in the per-formance of these projects depending on thecommitment of the state forestry agencies, buttheir main contributions have been to:• Provide crucial additional financing for im-

portant state forestry programs that have gen-erated employment for the poor.

• Strengthen local capacity for forest resourcemanagement.

• Improve forestry officials’ attitudes towardcommunity participation.

• Raise policy and institutional developmentissues for discussion among stakeholders. Issues that need attention in future Bank as-

sistance include expanding the role of the pri-vate sector, the revenue-raising capabilities of theforest sector, marketing nontimber forest prod-ucts, clarifiying of the roles of the center and thestates in forestry, and project sustainability.

PowerThe poor performance of power projects andthe post-1991 adjustment spirit led the Bank in1993 to decide that new lending would be con-ditional on the adoption of far-reaching re-structuring of the state electricity boards. Theconditions included unbundling generation,transmission, and distribution; establishing anindependent state regulatory authority; and pri-vatizing all distribution facilities and all new gen-eration investment. Since 1996 a new series ofhighly relevant power projects has emerged ina few states, with strong client ownership(Orissa, Haryana, Andhra Pradesh, UttarPradesh) and a substantial demonstration effecton others. A QAG review panel found the on-

going Andhra Pradesh Power adaptable pro-gram loan ($210, approved in February 1999)highly satisfactory and noted that the Bank’s se-quential state-by-state approach yields oppor-tunities for learning from experience acrossstates with important cost savings. Both theOED sector evaluation and the QAG reviewpanel concluded that the South Asia Region’sapproach in India is a best practice model thatshould be emulated throughout the Bank’s en-ergy sector portfolio.

TransportThe Bank’s intrasector lending shift from a focuson railways in the 1980s to highways in the fol-lowing decade was appropriate, given the gov-ernment’s unwillingness to address the railway’spricing distortions (with subsidies for passengertraffic financed by very high freight charges)and continuing poor corporate governance,exemplified by resistance to corporatizing (andeventually privatize) Indian Railway’s large man-ufacturing units and social sector activities. At thesame time, the government’s decision in themid-1980s to accept international competitive bid-ding procedures opened the door to highwaylending. The increasing emphasis on subna-tional lending, however, has tilted the balanceof sectoral assistance too much in favor of stateprojects, given that the national highway systemrepresents only 8 percent of all major roads butcarries 35 percent of the traffic and is the mostcongested.3

Environment Since 1990 the Bank has lent $1.94 billion to Indiafor 19 projects to mitigate environmental dam-age. Another $97 million was granted underGlobal Environment Facility and Montreal Pro-tocol trust funds for four other projects to pro-tect the global environment. The Bank has alsosupported various studies addressing environ-mental issues. According to OED interviews withstakeholders, the Bank’s sector work has hadconsiderable impact on policies and environ-mental awareness in the country. The Bank’smost significant achievement is in mainstream-ing environmental concerns in its agriculture,power, irrigation, and water supply and sanita-


3 0

tion portfolio. Substantial progress has beenmade lately on more rational power pricing ina few states that have embarked on Bank-supported reform. Price subsidies for water andenergy producers and consumers, however, re-main in most states and are highly damaging tothe environment. Moreover, the overall impactof Bank and government actions to prevent en-vironmental problems has been modest.

Environmental project performance has beenmixed. Most forestry and water resource projects,

the Uttar Pradesh Sodic Lands Reclamation proj-ect, and the Renewable Resources Developmentproject, to cite a few, have performed well. Oth-ers, however, such as the Environmental Man-agement Capacity Building project, the BombaySewage Disposal project, the Industrial PollutionControl project, and the Ecodevelopment project,have had difficulty in implementation for variousreasons, including poor compliance by the bor-rowers, inadequate management, procurementproblems, and difficulty with social issues.


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Among the five dozen Bank-financed projects completed sincefiscal 1995, six projects in five different sectors received the high-est possible evaluation ratings, including highly satisfactoryoutcome. These projects were all very successful at achievingtheir physical and institutional strengthening objectives, butthey differed greatly in their support for sectorwide policy andinstitutional change. OED has not yet audited these projects; ithas only conducted brief desk reviews of the completion reports.The projects share a high degree of commitment, ownership, andlong-term vision.

The Oil India Ltd. Petroleum project ($140 million, fiscal1988–95) focused narrowly on maximizing oil recovery from de-clining oil fields in Assam. Components were limited to invest-ment and improvements in technical and management capabilityfor a committed and already financially viable public enterprise.

The Industrial Technology project ($200 million, fiscal 1990–98)was relevant in the pre- and post-liberalization environments.It catalyzed change, helped launch a domestic venture capitalindustry, attracted foreign venture capitalists, supported astronger industry orientation, increased self-financing of tech-nology research institutes, and contributed to liberalization ofimport policies. The project took into account market failuresand distortions created by government import policies. Strong,committed intermediaries, flexible project design, strong fi-nancial incentives, consensus building, and training were cru-cial to success, allowing adaptation to the changing economicenvironment, changing technology institutions’ attitudes, and cre-ating new skills.

The two Technician Education projects ($472 million, fiscal1991, fiscal 1998–00) were complex, multistate projects affect-ing the entire polytechnic system in 20 states and surpassing all

physical and institutional targets, including women’s enrollment(up to 30 percent from 11 percent before the projects). This in-cludes making a new policy framework final in partnership withemployers. Success factors are strong state ownership, frequentjoint meetings and reviews fostering knowledge sharing amongall states, a collegiate relationship among the Bank team and na-tional and state counterparts, and full national policy support.Shortcomings are uneven state performance in adopting a flex-ible curriculum, instruction quality, and employer participation.

The Private Power Utilities project ($200 million, fiscal1992–97) aimed to transform the Mumbai utility—majority-ownedby three public financial institutions—from a distribution com-pany into an integrated power utility. It also aimed to provide ad-ditional electricity capacity to meet increasing demand and tosupport efforts to transfer ownership to the private sector. Notdevoid of controversy, preparation was delayed by a court ac-tion initiated by nongovernmental organizations on environ-mental grounds. Political commitment, ownership by the utility’smanagement, and the company’s financial strength and will-ingness to address the environmental implications proved keyto the project’s success.

In the Maharashtra Emergency Earthquake Rehabilitationproject ($217 million, fiscal 1994–99), commitment, ownership,participation, long-term vision, and repair and reconstruction ac-tivities on an unprecedented scale succeeded in providing safereplacement dwellings for nearly 1 million people in the state’ssoutheastern region. Vulnerability to seismic events was re-duced by installing modern seismic equipment and preparingwidely disseminated construction guidelines, a manual fornonengineered masonry construction, and a statewide disastermanagement plan.

B e s t P r a c t i c e P r o j e c t sB o x 4 . 4

Mainstreaming environmental concerns inpolicy reforms and in the public investment pro-gram should be an important focus of Bank ef-forts in India. This would include addressingenvironmental safeguards further upstream, sup-porting alternatives to public sector manage-ment of water supply and sewerage systems,promoting rational pricing of natural resources,backing enforcement efforts of the existing com-prehensive environmental legislation, and ex-panding use of the Global Environment Facilityto address greenhouse gas and ozone produc-tion and to reverse threats to biodiversity.

Health The Bank health program is now on the righttrack, having improved considerably during thelast decade. Its assistance program was built onthe findings of World Development Report 1993,solid sector work conducted in collaborationwith Indian expertise, effective policy dialogue,and recognition that there needed to be a focuson specific diseases. The result was a series ofbroad-based projects that focused on maternaland child care (also as a way to address popu-lation policy issues), on specific diseases, and onstate-level health system reform. Comments fromthe Ministry of Health and Family Welfare expresssatisfaction with the Bank’s contribution to phys-ical capacity, but also note its modest pastachievements in institutional development. Thegovernment’s withdrawal from the Tamil Nadunutrition model has been a big disappointment,but the Bank has continued to encourage the in-corporation of successful aspects of that expe-rience in the Integrated Child DevelopmentServices projects.

Four projects addressing specific diseases—leprosy, blindness, tuberculosis, and malaria—were included in the program, and two HIV/AIDSprojects were added during the 1990s. The firstof these, which closed in fiscal 1999, initiated sig-nificant nationwide HIV/AIDS prevention andawareness activities. The program has dramati-cally improved the blood supply and publicknowledge of HIV and has increased condomuse considerably in high-risk groups. Bank per-formance on the design and supervision of thiscomplex project was rated highly satisfactory by

OED in its review of the project’s implementa-tion completion report.

Education In the early 1990s the Bank overcame the lineministry’s resistance to lending for educationprojects, which was mainly due to fear of in-terference by outsiders in sensitive curriculummatters. Initially, the Bank assisted in the vo-cational/technical education area, with fourprojects that have been recently and success-fully completed. Since October 1993 seven Dis-trict Primary Education projects (DPEPs) havebeen approved and are still ongoing for $1.2 bil-lion in gross commitments from the Bank andwith a large amount of parallel donor financ-ing. These projects focused on increasing ac-cess to primary education for the disadvantaged,particularly children from scheduled tribes andcastes and girls; capacity building; and qualityimprovement.

The large efforts to promote primary educa-tion have been accompanied by high governmentcommitment, innovative thinking, and an em-phasis on carrying out project preparation workwith local staff only, who in the process learneda great deal. Overall about 50 million childrenhave been involved, and large enrollment in-creases, especially of girls, have been reportedin the most deprived areas.4 Some questionshave been raised among donors, scholars andnongovernmental organizations (NGOs), how-ever, regarding the reliability of enrollment data,the extent of quality improvements, the func-tioning of the village education committees, andthe tight control by the government of school vis-its and supervision reports.5 This suggests aneed for an independent verification.

Public Financial Accountability: A Promising BeginningThe risk of fraud, waste, and abuse of publicfunds has been growing in the past decades,partly fueled by the rapid economic growth thathas benefited many in the private sector and bythe increased availability of luxury goods. Pub-lic financial accountability is a recent area of em-phasis for the Bank, whose knowledge of theissues in this area at the country and state lev-


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els is growing. That knowledge is centered onfinancial management and internal control pro-cedures in the central government and, very re-cently, in a few focus states, especially UttarPradesh. But there are still significant gaps inknowledge—the most significant being the ef-fectiveness of the legislative scrutiny processesat the center and at the states.

The Bank has not yet articulated a compre-hensive long-term assistance strategy for strength-ening public financial accountability in India.While elements of a strategy have been slowlyemerging at the state level, the Bank has yet todeal with public financial accountability issuesat the country level. At the project level theBank has made efforts to improve accounting,auditing, and budgeting systems at the imple-menting agency level and in specific operatingdepartments in state governments. Outside UttarPradesh, however, these interventions were notdesigned to address the significant capacity prob-lems in the state or country’s overall public fi-nancial accountability systems.

Regarding Bank-financed projects, lessonswith implementing the Loans AdministrationChange Initiative suggest the importance of: • Bank and borrower commitment to enhance

financial management and control• Training and experience of Bank staff in pub-

lic sector auditing, accounting, and scrutinysystems

• Communication to the borrower of conse-quences for less-than-satisfactory compliancewith fiduciary obligations as specified in theloan agreements.With the recent emphasis on programmatic

lending in India, the adequacy of the overall pub-lic financial accountability systems at the na-tional and subnational level has assumed greaterimportance. The Bank has done pioneeringwork in this area in Uttar Pradesh, but this ini-tiative alone may not be sufficient. Unless theBank engages in a productive dialogue and part-nership with the central government on the sys-tematic modernization of public financialaccountability systems in the country, its currentefforts in a few focus states may be neither ef-fective nor sustainable. The June 2000 Lucknowconference for speakers of state legislatures

proved to be an ideal forum and first step for theBank to articulate its views to a national audi-ence on the need for improvements in this area.

Mainstreaming Participation, butResettlement Safeguards Are StillContentious Social development received inadequate atten-tion in Bank-assisted projects before the 1990s.Serious problems had accumulated, mainlycaused by poor involuntary resettlement prac-tices, which seriously damaged the reputationsof India and the Bank (the Morse Commission’sreview in 1992 highlighted serious deficiencieson the part of the Bank) and forced remedialwork. Much of this work, however, was con-centrated on specific projects, with limited at-tention to systemic issues. Numerous projectswere canceled, suspended, or restructured.6 TheBank became reluctant to take on, and the gov-ernment hesitant to seek Bank support for, proj-ects with resettlement implications, such aslarge-scale irrigation, power generation, androad projects.

Recent Bank initiatives hold more promise, butto assess the longer-term results and sustain-ability of the steps taken so far, better monitor-ing and evaluation systems are needed. Theemphasis has expanded from “do no harm” insocial safeguard policies to a more proactiveapproach in the second half of the 1990s: im-proving Bank and borrower performancethrough social assessment, participatory ap-proaches, decentralization, increased trans-parency and accountability, and communityempowerment. During fiscal 1994–98, India hadthe second-highest percentage (81 percent) ofBank-assisted projects approved with communityparticipation among all Bank borrowers withmore than 10 projects. Each later project roundhas built on the lessons of previous efforts toachieve greater participation.7 Social developmentissues have indeed become more integrated andmainstreamed in Bank operations. Although thegovernment has made uneven progress in adopt-ing participatory approaches, it is moving forwardwith Bank encouragement and assistance.

The application of the Bank’s resettlement pol-icy, however, remains contentious. In complaints


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raised by community organizations and NGOsabout the National Thermal Power Corporation(NTPC) Power Generation project in 1997 andthe Ecodevelopment project in 1998, an inde-pendent inspection panel found merit to theclaims of project area residents and tribal peo-ple that they had been (or might be) harmed byinvoluntary resettlement and that their interestshad been neglected. The Bank admitted policyviolations regarding the involuntary resettlementcomplaint and implementation shortcomings re-garding the peoples’ interests. It adopted cor-rective action plans.

At the same time, the Bank is often seen astoo rigid in applying its resettlement policy andtoo accommodating of NGO agendas. Some sen-ior NTPC and government officials raised withOED missions the issue of the Bank’s insistenceon retroactive application of its resettlement pol-icy to projects the Bank did not originally finance.The officials also raised the issue of differentialtreatment of resettled people in Bank-financedprojects compared with other projects, somecovering adjacent areas, where lower standardswere applied. They expressed dissatisfactionwith field office staff’s lack of authority to makedecisions based on local realities and with suchissues being routinely referred to headquartersstaff, who apply rigid interpretations of Bankguidelines on safeguards.

Despite the concerns of some officials, for themost part the government accepts and supportsthe Bank’s approach. The Bank has indeed pos-itively influenced the resettlement debate inIndia and its guidelines have become the defacto standard against which civil society meas-ures government performance. During the 1990s,in an attempt to harmonize approaches, theBank engaged in policy dialogue about the dif-ferences between Bank and other donor guide-lines and Indian laws and practices. The majordifference is that, while the Indian approach islimited to compensation for loss of land andother assets, Bank standards require that atten-tion also be given to potential loss of livelihoodfor poor and vulnerable people. Thus, Bank-sup-ported projects require a broader set of sup-portive measures for affected people. Suchadditional support, however, is complementary

to, rather than in conflict with, Indian laws andpractices.

Given the impasse at the center, the Bank fo-cused on sector and state policies where it hashad greater success. Sectoral resettlement poli-cies in line with Bank safeguards have beenadopted for the coal sector and for highways bythe central government and a few state govern-ments. Similarly, some states have adopted safe-guards for all their public irrigation projects.The recently approved National Highways IIIproject, with full attention to safeguards, and thecentral government’s application of the Bank’sapproach to resettlement and social assessmentto some other non-Bank financed road projectsare strong evidence of commitment and own-ership by at least some parts of the government.

Nevertheless, the high-level policy dialogue hasbeen insufficient so far at the national and statelevels. Drafts of a new national resettlement pol-icy and proposed amendments to the Land Ac-quisition Act in line with Bank guidelines havebeen awaiting cabinet approval for the past fiveyears. And the perception of unreasonablenessamong some senior officials regarding the Bank’sapplication of its guidelines in central ministriesand in the NTPC remains an area of concern.

Gender: Unsuccessful MainstreamingThe Bank has not succeeded in mainstreaminggender issues across sectors. Attention to gen-der issues has been mainly confined to enclaveactivities in the social sectors. While Bank lend-ing and nonlending operations in education andwomen’s health have taken women’s issues intoaccount, the picture for operations in agriculture,basic health, water supply and sanitation, irri-gation, rural finance, rural transport, and envi-ronment is disappointing. The failure is inimplementation rather than conceptualization.The Bank’s sector work in these areas recognizedwomen’s issues, and many project documents ad-dressed gender concerns at entry. However, atimplementation these concerns often take a backseat. Moreover, monitoring of gender disaggre-gated results of lending operations remains de-ficient. Finally, in such sectors as industry, energy,transport, and finance, there has been little or norecognition of gender issues.


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3 5

THE DEVELOPMENT EFFECTIVENESS OF BANKASSISTANCE

The Elusive Counterfactual

There are no easy ways to construct a counterfactual to the Bank’s as-sistance efforts in a large country such as India, which was alwaysmore 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 growthand urban poverty reduction? The broad thrust of the reforms would likelyhave been carried out without the Bank on the strength of the high degreeof country ownership and commitment, reinforced by the collapse of theSoviet Union (India’s political ally) and its planned economy and by China’sspectacular growth since it opened to the global economy. The Bankbrought technical expertise, but Indian economists (inside and outside thecountry, 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 itspublic pronouncements on fiscal issues (as it wasat the May 2000 Paris donors meeting) and hadmade fiscal balance a condition for the two ad-justment operations that followed the first Struc-tural Adjustment Credit/Structural AdjustmentLoan and also for its overall lending volume,would the country have a smaller deficit today?Louder warnings might have better focused theinternal political and academic debate on sub-sidy reduction and civil service downsizing.They might also have limited India’s quick re-

turn to the international capital markets, strength-ening the fiscal authorities’ efforts to rein inspending pressures and raise tax collectionagainst the background of a deep-rooted polit-ical opposition to such reforms.

If Bank assistance had been more focused onrural development and agricultural policy issuesand rainfed agriculture since the early 1990s,would the country have achieved deeper re-ductions in rural poverty? Former Bank officialsstress the difficulty of addressing these issuesrather than lack of effort arising from diffuse and

55

overlapping institutional responsibilities. For-mer senior government officials, moreover, be-lieve that the government could not have openedanother battlefront with critics of the reformprogram of the early 1990s and could not haveweathered the political implications of sensitivereforms, such as the withdrawal of input subsi-dies from farmers. At a minimum, an earlierfocus by the Bank on institutional reform, par-ticipation, and decentralization in project de-sign, implementation, and monitoring andevaluation would have led to better project per-formance. Equally, widely disseminated sectorwork and an explicit sector assistance strategymight have helped the internal debate and ac-celerated high-level consideration of agriculturalreform issues.

If the Bank had focused earlier and withmore effort on analyzing sectorwide policy andinstitutional constraints, widely disseminated itsconclusions beyond the small group of com-mitted reformers in government with whom itworked closely, and withheld sectoral lendinguntil satisfied with actions or commitments takento overcome such constraints, it might have con-tributed to a faster pace of domestic reform.This is what happened in the power sector afterthe Bank refused to lend unless policies and in-stitutions were reformed. With the benefit ofhindsight, it can be seen that budgetary, agri-cultural, or social safety net reforms, for in-stance, could already have started (in the mid-or late-1990s), with a positive long-term impacton rural poverty.

Development Effectiveness: Improving

Relevance and Efficacy Although the Bank neglected rural poverty in thefirst half of the 1990s, it provided timely supportto structural adjustment for the resumption ofeconomic growth, which was the most pressingpriority. It also showed increased concern for theadequacy of the policy and institutional frame-work in the energy sector and gave much at-tention to human development.

The relevance of Bank assistance continuedto be substantial in the second half of the 1990s,as its concern for the adequacy of the policy and

institutional framework expanded to other sec-tors (especially water resources) and to the states,and thanks to its in-depth study of India’s ruraldevelopment strategy and heightened attentionin its lending program to social developmentand rural poverty. Relevance has improved fur-ther in the past three years, as the Bank has rec-ognized the importance and urgency ofcomprehensive fiscal adjustment, sharpened andoperationalized its state focus, and intensified itsdecentralized and participatory interventions.

The achievements of the Bank’s strategic ob-jectives in the 1990s are undeniable. Creditwor-thiness, stabilization, and faster growth on theheels of the fiscal and structural reforms of theearly 1990s were already in hand by the mid-1990s. Some progress has also been made inmore rational pricing and institutions for powerand, to a limited extent, water. Social indicatorshave continued to improve. Urban poverty hasdeclined. With the support of the Bank andother external partners, India’s mindset is moreopen and relies more on markets and the pri-vate sector. From a closed and controlled econ-omy, India has indeed moved far towardintegration in the global economy.

However, macroeconomic stability has beenat risk since 1997 because of the fiscal deficit. Eco-nomic growth has come down to between 5 to6 percent beginning in 1997, partly as a result ofthe slowdown in the pace of structural reform,and partly due to the ripples in Indian exportcompetitiveness from the East Asian crisis. Povertyreduction has been limited, with severe povertyin rural areas associated with inadequate socialand infrastractural services. A large reform agendastill remains a decade after India broke away fromthe old development model.

All in all, the efficacy of the Bank’s assistanceis rated modest for both the first and secondhalves of the 1990s. For the decade overall, ex-cellent results in power and good results in in-creasing competition, openness and the role of theprivate sector, health, and education must be bal-anced against modest impacts on rural and urbandevelopment, financial sector development, pub-lic sector management, environmental protection,and gender (see Chapter 4); the limited impact ofeconomic and sector work; and the mediocre


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performance of completed projects. Efficiency hasbeen adequate—somewhat behind other largecountries but higher than for most countries.

It is still too early to gauge the efficacy of themost recent Country Assistance Strategy. More-over, the sanctions imposed in the wake of nu-clear testing undermined the implementation ofkey aspects of the 1997 assistance strategy. In par-ticular, they blurred the link between the over-all volume of lending and the country’s macroand sectoral performance, infrastructure reforms,and the quality of its public investment.

Outcome On balance, therefore, in light of substantial rel-evance but modest efficacy, this Country AssistanceEvaluation finds the outcome of Bank country as-sistance moderately satisfactory for both the firstand the second halves of the 1990s. However, thehigher relevance and promising steps taken fol-lowing the 1997 strategic shift in Bank assistancepromise better efficacy and, thus, presage a sat-isfactory outcome for current Bank efforts, pro-vided India intensifies its reform efforts.

Institutional Development ImpactThe institutional development impact of pastBank assistance is modest, although here againthe Bank’s recent attention to governance issues(as in Uttar Pradesh); its heightened link of lend-ing to overall policy and institutional perform-ance; and the mainstreaming of participation inproject design, implementation, and monitor-ing presage a substantial impact ahead.

Sustainability Broader appreciation of the need for continuingreforms and the fruits of increased interstatecompetition for private investment and eco-nomic and social progress suggest furtherprogress ahead. But the economy remains vul-nerable to macroeconomic shocks, which maycause reversal of structural reforms. The econ-omy’s ability to sustain investment and currentgrowth rates and to further reduce poverty isthreatened by the continuing large fiscal imbal-ances and new military spending pressures, en-vironmental damage, populist approaches tosubsidies and trade, and poor governance. Hence

the sustainability of the benefits from past andongoing Bank assistance remains uncertain.

Bank and Borrower Performance: Mixed

Exogenous FactorsAs the global environment remained favorableoverall throughout the 1990s, with only a slight de-terioration between mid-1997 and the end of 1998due to the impact of the East Asian crisis on In-dian export competitiveness and foreign invest-ment, the contribution of exogenous factors to theachievement of Bank objectives was positive.

Bank PerformanceBank performance in the design and delivery ofits assistance has greatly improved since the1980s, while ensuring borrower ownership. In-creasingly during the 1990s the Bank:• Supported important reforms initiated by the

center and some states with timely and well-regarded analyses, advice, and creative lend-ing instruments

• Withheld or reduced lending to some agen-cies and states reluctant to embrace necessaryreforms (for example, in power), even at thecost of painful negative consequences for itslending volume and staff job security

• Greatly expanded its assistance in the socialsectors, critical to its long-term mission ofpoverty reduction

• Recognized the increasing importance of thestates, adjusted its assistance accordingly, andfocused on those interested in reform

• Devoted more resources and managementattention to improving participation

• Improved portfolio performance• Embarked on a deep (and ongoing) review

of its sectoral assistance strategies (in urbanand rural development and in water resourcemanagement) where development results hadbeen unsatisfactory.

But the Bank did not: • Pay enough attention (until recently) to in-

adequate agricultural policies and stagnatingrural poverty (the slow-down in agriculturalwages should have been enough of a warn-ing bell, even before poverty estimates be-came available)

T H E D E V E L O P M E N T E F F E C T I V E N E S S O F B A N K A S S I S TA N C E

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• Sufficiently emphasize the need for publicsector management and judicial reforms in itseconomic and sector work and policydialogue

• Improve the reach and impact of its eco-nomic and sector work

• Broaden the aim of its project assistance toachieve sectoral policy or institutional reformobjectives

• Mainstream gender across all sectors in acountry with a high gender gap

• Track the gender and poverty-reduction im-pacts of its own projects

• Withhold financial assistance to sectors withinadequate commitment to reform (agricultureand banking).

Borrower Performance The central government’s core economic min-istries initiated and sustained several very im-portant reforms that substantially opened theprivate sector to internal and external competi-tion. The ministries pushed for expanding Bank

assistance in the social sectors to increase the ab-sorption of available external funds for devel-opment and supported the Bank’s firm stance onpower reform and its recent direct policydialogue with the states. The committed lead-ership of a handful of states seized the oppor-tunities for strengthening their developmentstrategies offered by the Bank’s eager searchfor new channels to support policy and institu-tional reforms.

At the same time, Indian authorities failed toresolve the fiscal deficit problem; to shift spend-ing toward operations and maintenance, infra-structure investment, and the social sectors; toaccelerate the pace of structural reforms andextend them to agriculture; to design a more pro-poor rural development strategy; and to addressadequately governance and environmental prob-lems. Indian authorities must share responsibil-ity with the Bank for the slow disbursement ofBank loans and credits and the mediocre out-come and institutional development impact of theoverall portfolio.


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3 9

IMPROVING ASSISTANCEFOR HIGHER REACH ANDIMPACT

With 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 alsobecome more receptive to external contributions to its development policies.The Bank’s capacity and credibility remain high and its new emphasis onknowledge transfer is welcome in India. Resource transfer, however, remainscritical to the Bank’s capacity to engage the Indian authorities in a dialogueabout policy and institutional reforms and to influence their design and im-plementation. In such an environment the comparative advantage of the Banklies in the combination of money and knowledge transfer—that is, policy andtechnical analyses and advice—targeted to high-impact development issues.

In the past three years the Bank has moved inthe right direction and has been more selectivethan it was earlier in the 1990s in its lending andnonlending services. The five pillars and the fis-cal and structural reform triggers of the 1997Country Assistance Strategy remain valid. Thus,except for adjustments to accelerate and assurethe full application of those pillars and triggers,no substantive changes in the assistance strategyappear necessary.

Lending InstrumentsThe Bank should scale up and direct new lend-ing assistance only to those sectors where cen-

tral and state governments exhibit strong own-ership of policy and institutional reform pro-grams, as it has successfully done in the energysector. Adaptable program loans are appropri-ate instruments to support sectorwide public in-vestments when there is commitment to anadequate policy and institutional framework,but the future pace of progress is also less thancertain. Program or adjustment quick-disbursinglending is also appropriate for supportingstatewide comprehensive reform efforts. As seenin Uttar Pradesh, a planned series of singletranche operations rewarding the adoption ofconcrete actions taken before presentation to the

66

board of directors is preferable to multiyear,condition-laden operations, in light of the coun-try’s sensitivity to external interference.

Lending LinkageThe Bank should link overall lending volumesto progress in structural reforms in agricultureand implementation of an effective rural de-velopment strategy, as progress in these areasis crucial for rural poverty reduction. This wouldbe in addition to maintaining the current link be-tween the overall lending volume and fiscaldiscipline and between sectoral lending vol-umes and sector-specific policy and institutionalframeworks or reform programs. The Bank al-ready has an internal management system forcountry performance scoring, but its componentweights and the quality, transparency, and com-prehensiveness of the criteria used need adap-tation to India’s circumstances in consultationwith government and civil society. The Bank’smost recent economic report is a good basis forsuch consultations.

State FocusGiven the states’ important responsibilities ininfrastructure and social services, their greater au-tonomy from the central government, and theirdiversity in institutional, policy, human, and so-cial capabilities, an intensified state focus bythe Bank is appropriate. The Bank should con-centrate new lending in reforming states, whereit has agreed on an assistance strategy with gov-ernments (as piloted in Uttar Pradesh).2 In non-reforming states, assistance should be limited topolicy dialogue, clarification of performance cri-teria, economic and sector work to contribute tothe internal debate (including work through rep-utable Indian institutes), and pilot projects thatcan demonstrate the benefits of policy and in-stitutional reforms. In parallel the Bank shouldassist the government (and relevant commit-tees) in introducing performance-based alloca-tions of central government and externalresources to the states.

Program PrioritiesThe priority areas of engagement for India’s ex-ternal development partners mirror the large, un-

finished reform agenda for poverty reduction de-scribed in Chapter 1. Specific sectoral prioritiesfor Bank assistance, however, should emergefrom a renewed dialogue and an explicit divi-sion of responsibilities among the Bank, gov-ernment, civil society, and development partners.

There is an urgent need to reduce macro-economic vulnerability and public deficits(through reductions in subsidies, public em-ployment, public enterprise losses, and tax re-forms) and to increase economic efficiency,international competitiveness, and the labor in-tensity of growth (through trade liberalization,privatization, labor market reform, and judicialreform). The Bank should continue to coverthese areas with policy analyses (such as thoserelevant for India in World Trade Organizationnegotiations) and economic and sector work.And it should offer lending support for easingthe pain of labor dislocations to accelerate thepace of reform, especially of the government’sdivestment plans.

There is also an urgent need for the Bank toscale up assistance for capacity building in pub-lic financial accountability from the project to na-tional and subnational levels. The Bank shouldaugment its skill base in project financial man-agement with specialists in public accountabil-ity systems.

In power, transport, urban development (es-pecially in the area of safe and adequate watersupplies and sanitation facilities), and the envi-ronment, the Bank’s experience in India andaround the world, the large gap between needsand available resources, and the scope for pric-ing, regulatory, and other policy and institu-tional reforms (say, for water and power) justifythe Bank’s continuing involvement. Bank assis-tance should help maximize private sector par-ticipation and competition in these areas throughguarantees, appropriate incentives for good man-agement of public agencies, and strengtheningof capacity for enforcing environmental regula-tions and safeguards.

For rural development, especially in rainfedareas, the Bank should support policy reformsin agriculture, capacity building at the district andvillage levels, and enhanced community partic-ipation in project planning, implementation,


4 0

maintenance, and evaluation (as through proj-ects of the District Poverty Initiative type). Andthe Bank should help expand public investmentfor rural infrastructure, agricultural technology,and sustainable forestry.

In health, the Bank should continue its dualfocus on nationwide diseases (including HIVinfections) and statewide institutional reforms. Infuture assistance to education, the Bank shouldfocus on poor people’s access to basic educa-tion in all districts of the country, rather than onlyin District Primary Education project districts; im-proved availability of teachers; and higher qual-ity of instruction. It should also recommend anindependent impact evaluation and verificationof the flow of funds to the beneficiaries at thelocal level, an integrated study of and assistanceapproach to education subsectors, direct lend-ing to states, and a better use of internationaltechnical expertise.

Analytical WorkTo maximize the impact of economic and sec-tor work on policy analysts and decisionmakers,the Bank should intensify its partnerships withIndian research and policy institutes and focuson relevant international experiences and cost-benefit analyses of policy options. A new pub-lic expenditure review focused on incidenceanalysis would be an important tool for theBank in providing policy advice on reform of so-cial safety net programs and on the restructur-ing of public expenditures. The Bank should alsoensure wide dissemination among stakeholdersand the general public, preferably through gov-ernment agencies or local think tanks. Conclu-sions from economic and sector work should bedrawn more sharply, but detailed proposalsshould continue to be discussed confidentiallywith government officials.

Monitoring Although the Bank’s assistance has become morepro-poor, the Bank should systematically mon-itor the poverty and gender impacts of Bank-as-sisted projects and programs. It should also helpgovernment agencies do the same for their pub-lic expenditure programs. Given the large gen-der gap the Bank should also make greater

efforts to mainstream gender beyond the socialsectors.

Participation The Bank should continue to foster participatoryinstitutions and to assist Indian ownership andcapacity for comprehensive social development.A balanced approach needs to be pursued thatfocuses on implementation as much as prepa-ration. It should also give the same weight to un-derstanding and improving incentive structuresof the institutions responsible for social devel-opment programs as to prescriptive rules.

SafeguardsBank management should, as a matter of prior-ity, clarify with the government and other donorsthe mandatory nature, rationale, and scope of thesafeguard standards to be applied in Bank-sup-ported projects, especially for resettlement. Tohelp engender gradual improvements in India’sstandards, the Bank should engage “focus state”governments in a dialogue on such standards aspart of its discussions about reforms and policy-based lending.

Aid CoordinationTo foster client leadership and ownership in aidcoordination, the Bank should continue to en-dorse government preparation and direction offormal aid coordination meetings and provide lo-gistical support as required. At such meetings,the Bank should also continue to present a trans-parent and candid scorecard of country devel-opment performance, as it did in 2000. Toenhance the effectiveness of external assistanceand partnerships and to enable greater selectiv-ity in its own assistance, the Bank shouldstrengthen informal, in-country donor coordi-nation on Country Assistance Strategies and oncritical sector strategies where consultationsamong donor and development agencies havebeen lacking (for example, agriculture and ruraldevelopment). The Bank should also endeavorto reverse the decline in cofinancing for its op-erations, seek out donors’ expertise more sys-tematically, and encourage other agencies totake the lead in external assistance in their areasof strength.

I M P R OV I N G A S S I S TA N C E F O R H I G H E R R E AC H A N D I M PAC T

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The Bank’s EfficiencyFinally, the Bank should analyze sources and justi-fications for the higher budgetary costs for project

preparation (to Board approval) for India than forother large countries. It may consider shifting moreproject preparation responsibilities to the client.


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4 3

THE CLIENT’S EVALUATIONOF BANK ASSISTANCE

Given India’s importance to the Bank, extensive exit consultations onthe India Country Assistance Evaluation (CAE) took place from March14 to April 7, 2000, including a series of workshops. These were or-

ganized jointly with the South Asia Region, which took the opportunity forbeginning consultations on the next Country Assistance Strategy (CAS).1

Civil Society’s Views from the CAE/CAS Synthesis WorkshopIn general, the series of workshops was much ap-preciated by Indian stakeholders, as they showedthe face of a new Bank willing to confront franklyand openly its past weaknesses and interested inthe suggestions of a broader audience on its fu-ture assistance program. All the voices heard, evenwhen critical of the Bank, wanted more and bet-ter involvement by the Bank rather than less. Sum-mary minutes of the sectoral workshops can befound in annexes to their respective CAE back-ground papers (see Bibliography). The follow-ing is a summary of the views expressed bydiscussants and participants at the CAE/CAS syn-thesis workshop on April 6, 2000.

The panel discussants stressed some of thethemes in the CAE, including:• The need to help restore fiscal health at the

center and in the states• Long-standing poor performance by the Bank

in institutional development (for example,with technical assistance and the railways,

with urban development, and in support ofthe country’s decentralization)

• The Bank’s lack of attention to public sectormanagement

• The centrality of rural development to povertyreduction and the need for the Bank to ad-dress it

• The limited access to and dissemination ofeconomic and sector work

• The desirability of involvement of policy re-searchers around the country in economicand sector work

• The need for the Bank to mainstream genderconcerns and to form real partnerships at thelocal level to go beyond the token partnerships

• The need to improve project implementationperformance

• The wisdom of continuing to support powersector reforms.A discussant challenged the CAE’s endorse-

ment of the shift in Bank assistance strategy to-ward the “reforming states,” cautioning that thestates least likely to succeed are the ones trying

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hardest to lure the Bank. The same discussantalso challenged the Bank’s shift toward soft sec-tors and soft issues, and stressed the need forlong-term capital financing of infrastructure proj-ects (irrigation, urban development, transport,and power). The discussant also challenged theBank’s comparative advantage to support the pol-icy and institutional reform requirements, aswell as the financing, of such investments.

Another discussant thought that OED hadoverplayed the influence of the Bank on policy(see the counterfactual questions in Chapter 5)regarding the reforms of the early 1990s and thefiscal deficit, and challenged the OED view thatthe Bank was at fault for not emphasizing agri-cultural reform issues in its policy dialogue dur-ing the early and mid-1990s. The Bank wascriticized for its “zeal for participation,” whichoften leads it to set up organizations that paral-lel existing ones (that is, the Panchayats).

The discussants also suggested new (but some-times conflicting) priorities for future assistance.These included capacity building for existing in-stitutions at the local level; vocational educationand technical training for industry and the healthsector; focus assistance on the 125 poorest dis-tricts, in addition to the reforming states; close col-laboration with the Planning Commission oncommon development and poverty reductionstrategies; investment in power generation (whichthe Bank had avoided during the late 1990s); andinvestment in social sectors, which a participantsaw as the only justifiable area for Bank financ-ing given India’s easy access to internationalcapital markets for infrastructure projects.

In the open discussion that followed, thehigh quality and positive impact of the Bank’swork was recognized (“The Bank has been aconsistent force for the past decades for inte-grating India in the world economy, which todayis an unqualified success”). Most participantsagreed on the need to work with states, giventheir increased autonomy from the center andtheir primary responsibilities in health, education,water, power, and the like; on the need to reachbeyond the “focus” states of assistance; and onthe necessity and desirability of the Bank’s rec-ommended agenda of structural reforms. Butbeyond this, two strands of comments emerged.

Academic and government officials supportedthe Bank focus on power sector reforms, and alsomentioned the need to expand Bank assistanceto the urban transport sector. Some noted a senseof dispersion of Bank efforts and resources andwished it would concentrate its human and fi-nancial resources on infrastructure. But manyexpressed reservations about the strategies forfocus states of the Bank and other developmentagencies because the strategies implied neglectof the needs (including advice) of states deemed“not sufficiently reforming.” There was also con-cern expressed that the criteria for the Bank’s def-inition of “reforming states” are not transparent,because the analytical and reform work in the re-forming states is not being adequately dissemi-nated to other states, and that states that arereforming may not like to be channeled to onlyone international donor or lender. Academic andgovernment officials also expressed deep con-cerns about the effect of a strict application of theBank’s environmental and resettlement safe-guards, the latter being seen as creating islandsof affluence with respect to government-supported or other donor-supported programs.

Other participants, mainly representatives ofnongovernmental organizations (NGOs), cau-tioned that power should not dominate the Bankassistance agenda and that there is a need to keepa balance with other sectors. They expressed apreference for less selectivity and more holisticapproaches. The participants stressed the needfor the Bank to pay close attention to the poor(endorsing the idea of a focus on the 125 poor-est districts) above growth and, regardless of thechoice of reforming states, to make better use oflocal partnerships and to pay more attention tothe social dimensions of the structural reforms andto the environment. For instance, one of the par-ticipants mentioned that the Bank’s focus onspecific diseases (malaria, HIV/AIDS) overlooksother serious diseases, such as diarrhea.

Feedback from the India-Based CAEAdvisers Reflecting on the main messages from the synthesisworkshop, the India-based CAE advisers stressed:2

• The high payoff of better dissemination of eco-nomic and sector work


4 4

• The importance of the Bank’s long-term lend-ing role

• The centrality of the fiscal/power sector cri-sis and of fiscal discipline for both central andstate governments

• The need for the Bank to remain engaged withthe central government and not put all its eggsin reforming states’ baskets

• The need to be honest about the fiscal healthof reforming states

• The need to help capacity building at thePanchayat level

• The need to focus on a few areas of assistancewhere a critical mass of expertise is built upover time and then maintained (unlike inurban development).One of the advisers remarked that the current

lending mix (a third social, a third rural, a thirdinfrastructure) is about right and that the Bankcannot deal only with fiscal/power issues, as ithas done in recent years. Others stressed thatlending ought to consider the Bank’s compara-tive advantage in infrastructure (especially byhelping public institutions build public-privatepartnerships, as in housing finance or throughsupport to the Industrial Credit and InvestmentCorporation of India) and focus on the lack ofan adequate policy and institutional frameworkin agriculture. Another adviser thought that theCAE draft needed a better distillation of genericlessons from successes and failures and a sharperdiscussion of the Bank’s comparative advantage.Finally, the neglect by the 1997 CAS of trade is-sues was noted, with the implication that the CAEshould give trade more emphasis than the Jan-uary 31 draft did. On the delicate question of theBank’s policy influence, advisers sided with thecamp that thinks the Bank succeeded only inthose areas where India had decided to go onits own and that there are no known instanceswhere the Bank’s influence caused, rather thansupported, a policy shift.

On the CAE draft in particular, the advisersthought the tone was right—balanced and frank—and that the open discussion process had been—and will be—much appreciated. The concludingchapter (Chapter 6 in the current version) neededa better reflection of the controversy heard overalternative directions for Bank assistance.

In conclusion, the key ingredients for effec-tiveness for the Bank in India were identified asfocusing on key areas ahead of time and stay-ing with them over the long term; widespreaddissemination of analysis and recommendations;providing support at the right time; and bring-ing international experience to bear.

Feedback from the Government During the April 2000 exit consultations in NewDelhi, the OED mission held meetings on an ear-lier version of the CAE (a draft dated January 31,2000) with officials of the Ministry of Finance andthe Planning Commission, senior economic ad-visers to the government and the main opposi-tion party, a former minister of finance in theearly 1990s, and the former counterpart in theMinistry of Finance (until end-1999) of the Bankcountry director.

OED’s interpretation of the rural povertytrends (amended in the current CAE draft tobetter reflect the controversy over poverty esti-mates) and its criticism of the Bank for not pay-ing more attention to agricultural and ruraldevelopment policy issues (still standing in thecurrent CAE draft) were challenged by somewithin this group. But otherwise no other majorconcerns or differences were raised with thesubstance and tone of the evaluation.

Government officials were supportive of theBank’s new approach of focusing on reformingstates, which in their view had been quite effectivein nudging states to move forward. But theywould like the Bank to be more proactive in talk-ing to nonreforming states and to support someislands of excellence in those states as well (note,however, that the Ministry of Human ResourceDevelopment had reservations on this point).Well aware of the risk of macroeconomic insta-bility, government officials also believe that fis-cal pressures need to be dealt with both at thecenter and the state levels. In fact, were thefocus exclusively on the states, some of themwould try to pass on their fiscal problems to thefederal government.

To reduce poverty, the priority reforms shouldbe to address agricultural policies and reduce theanti-labor and anti-export bias of the current in-dustrial regulations. Diversified agriculture must

T H E C L I E N T ’ S E VA L U AT I O N O F B A N K A S S I S TA N C E

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be a focal area of assistance, more so than irri-gated agriculture.

In resource transfer, the Bank may not belarge, but it brings standards, learning, and dis-cipline. These byproducts are very valuable.Even from a strict financial standpoint, the Bank’scontribution is not trivial, as long-term sourcesof financing are still limited for India in both thedomestic and international capital markets. As forthe actual lending volume, it was not the gov-ernment’s decision to borrow only $1.1 billionin fiscal 1999, as it was and still is eager to bor-row more in the $2.4–3 billion range. The qual-ity of current financial auditing work is high. TheBank and government do not need any other par-allel auditing system.

Other officials, however, stressed that Bank fi-nancing is paltry compared with total public ex-penditures and that it would be more productivefor the Bank to focus on improving the qualityof public expenditures. Given the shrinking (ab-solute and relative) size of Bank lending to India,the Bank role should be catalytic and innovative.The dual goals of Bank assistance should begrowth and equality of opportunity. Becauseagricultural liberalization may well have an ad-verse effect in the short term on rural welfare, un-less the employment effect is very strong, theBank may be needed to help cushion the blow.Other priorities should be in infrastructure, so-cial sectors, quality of education, ways to supportthe first student in a family to attend school, andcapacity building, especially at the Panchayatlevel.

Officials noted that monitoring and evaluationis one of the weakest areas in the country, andan area where the Bank should help. Theystressed the need for easy dissemination of eco-nomic and sector work, especially on the Inter-

net. Economic and sector work can be subcon-tracted to local institutions, but India still has muchto learn from the Bank’s knowledge of interna-tional experience and best practices. Officialsstressed that the Bank’s economic and sectorwork has been “extremely helpful in policy for-mulation and its implementation.” For instance,the value in the most recent Bank economic re-port is that it stimulates thinking and debateabout important issues, without committing thegovernment to any specific point of view or sug-gestion.

Some officials expressed concern at the lengthof the Bank’s project preparation cycle (two years,with the third Madras Water Supply project underpreparation for seven years). Learning and inno-vation loans from the Bank are not worth the trou-ble for the government, as there is too little moneyinvolved. Shifting goalposts during project prepa-ration is a problem (for example, the Bank is mak-ing the Tamil Nadu desalinization plant shutdown before the Bank will give assistance).

While government officials agree in principleon the thrust of the Bank’s resettlement safe-guards, various officials argued that the Bankwas often blind in its interpretation. (“In onecase, Bank staff even insisted on a specific roomsize. If India were to adopt and publicize theBank’s position on squatters’ right, it wouldmake it impossible to acquire more land for pub-lic projects.”)

In addition to the feedback recorded aboveon the January 31, 2000, draft, the governmentalso had the opportunity to comment on the Oc-tober 24, 2000, draft, which already reflectedfeedback from the government and the SouthAsia Region. With respect to the October 24,2000, CAE draft, only the Ministry of Human Re-source Development provided comments.


4 6

4 7

ANNEX A: REFERENCE TABLES

ANNEXES

5 7

Informal Subcommittee’s Report on theIndia Country Assistance EvaluationThe Informal Subcommittee of the Committee onDevelopment Effectiveness (SC) met on March16, 2001, to discuss the Country Assistance Eval-uation (CAE) for India (CODE2001-18). OED re-marked that the evaluation had been OED’slargest and most complex CAE exercise, with in-tensive involvement from all stakeholders. OEDparticularly thanked the Government of India(GoI) and Management for the collaborative ap-proach in CAE preparation. OED reported thatin the 1990s, Bank assistance was timely and ef-fective in supporting India’s structural adjust-ment program, energy sector reforms, waterresource management at the state level, andhuman development. While there was progressin the Government’s reform program at thistime, it was well below India’s potential and thesustainability of the reforms remain uncertain.Moreover, there was insufficient attention torural poverty reduction, and the gender and so-cial gaps are persistent problems. OED stressedthat an important weakness in Bank assistancehad been neglecting the policy reform needs ofthe agriculture and rural sectors. OED welcomedthe Region’s agreement to link the Bank’s over-all lending volumes with the implementation ofan effective rural and agricultural developmentstrategy, and to improve monitoring of thepoverty and gender impacts of the GoI’s pro-grams. OED emphasized that the next CASneeded to provide quantifiable indicators tomeasure the future success of Bank assistancein this and other areas. Lastly, OED stressed theimportance of increasing the impact of Eco-nomic Sector Work (ESW), improving the coun-try’s resettlement safeguards, and strengtheningaid coordination as outlined in the CAE.

Management welcomed the CAE and the les-sons learned through the preparation process.However, Management questioned the feasibilityof carrying out a single evaluation exercise for acountry as large and complex as India and sug-gested that it was difficult to evaluate the impactof the many aspects of the Bank’s programs giventhe size of the country. Management consideredthat the CAE simplified the richness and com-plexity of the issues faced both by the country andthe Bank’s program as a result. Managementagreed with the importance of addressing ruralpoverty and stressed that this played a central rolein the upcoming CAS. While acknowledging thatthe dissemination of ESW needed improvement,Management noted that the CAE underestimatedthe ultimate impact of the Bank’s ESW.

The SC welcomed the CAE and thanked OEDfor a well-written and comprehensive study not-ing the challenge presented by the large scaleof the country and the Bank’s programs. The SCrecognized the tensions (as outlined in Man-agement’s remarks) in evaluating the Bank’sprogram in a country as large and complex asIndia and there was debate about the most ef-fective approach to undertaking evaluations inlarge countries. The SC particularly welcomed thebroad consultations in the preparation of the CAEand hoped that the chapter outlining feedbackfrom the GoI and civil society would become aregular feature in all CAEs.

The Chair representing India also thankedOED for its efforts and noted that the CAE wasa useful report for the GoI and was the result ofan intensive consultative process. He stressed,however, that the CAE should be understood asan evaluation of the Bank’s program in India andnot of India’s reform program as a whole. He alsonoted that the report was not an exhaustive

ANNEX B: REPORT FROM THE COMMITTEE ON DEVELOPMENTEFFECTIVENESS


5 8

commentary on the range of development issuesaffecting a country as complex as India andoften did not convey the nuances of the coun-try and the Bank’s program. With regard to theCAE recommendations, he noted that the GoIsupported the state-focused approach, includingthe proposal to engage poor and non-reformingstates with nonlending services and demonstra-tion projects, but that it did not wish to see theBank concentrate its social sector lending on thefocus states alone as the GoI had a responsibil-ity in this area to all states, regardless of their re-form inclinations. Finally, he stressed that the GoIobjected to the linkage of lending volumes to re-forms in agricultural and rural development asproposed by the CAE.

Rural DevelopmentThe SC shared OED’s concerns on the lack ofprogress in addressing rural poverty and stressedthat the Bank needed to focus more aggres-sively on implementing a rural and agriculturaldevelopment strategy. Members emphasized thatrural poverty must be tackled if the Interna-tional Development Goals were to be attained.Management responded that this was a pillar ofthe new CAS.

Assistance to StatesMany members welcomed Management’s ap-proach of focusing efforts on reforming states butalso stressed that the remaining states had seri-ous development needs and the Bank should notdisengage entirely with them. Members agreedwith the CAE approach that support to the poorerperformers take the form of ESW and TechnicalAssistance programs, but supported recent shiftsin the Bank’s program in favor of good per-formers and selectivity in Bank interventionsbased on receptivity to reform. One memberasked whether reform was a political issue inmany states and whether lack of political con-sensus on reform had led to “poor performers.”The SC encouraged the Bank to create demon-stration projects through its work with reform-ing states to be replicated in other states.Management commented that the Bank’s currentsupport to the states included some of the poor-est and most populous states in India and that

the state of Bihar was the only left in the cate-gory of “poor performers.” The new CAS was ad-dressing this issue.

In this regard, the SC also noted that thecomplexities in a country as large as India cre-ated a tension between focusing Bank assis-tance on states versus the center. Some speakersstressed that while working with the states waswelcome, this should not be done at the expenseof attention to the central government, which wasstill the Bank’s primary counterpart and client.

Donor CoordinationThe SC expressed concern about weak donor co-ordination in India as a continuing problem.While acknowledging and welcoming the GoI’slead in this matter, the Subcommittee stressed theneed for the Bank to play a role and asked howthe Bank planned to improve coordination withother donors. One member noted, however,that donor coordination would be far more ef-fective if tackled on a sector-by-sector basis andgiven the sophisticated democratic processes inIndia, should be led by the GoI. The Subcom-mittee urged Management to immediately addressthe Bank’s role in improving donor coordination,particularly leveraging the decentralization ofthe Bank’s programs in India.

Economic and Sector WorkMany speakers welcomed the quality of ESWdone by the Bank in India but expressed con-cern at the lack of dissemination, noting that onlya small group of Indian experts seemed to beusing Bank ESW. The SC urged Management towork with the GoI to improve ESW dissemina-tion and ensure broader access to the Bank’swork as recommended in the CAE. Some mem-bers questioned why ESW was still necessarygiven the capacity, human resources, and ex-pertise available locally in India and questionedthe relevance and audience for the over 200 ESWreports done in India in the past decade. Mem-bers further stressed that the CAE needed morein-depth analysis on ESW, focusing on rele-vance, duplication, presence of local knowl-edge and expertise, and selectivity from theBank. In this regard, the Subcommittee ex-pressed concern that only one Public Expendi-

5 9

ture Review had been carried out and therehad been no ESW on corruption and governanceissues in this time period. Speakers stressedthat limited International Development Associ-ation resources, the fungibility of funds, and theshift toward programmatic lending necessitateda PER at the central level. Though many mem-bers agreed with Management that it was diffi-cult to undertake a traditional public expenditurereview (PER) in a country as large and complexas India and that innovative approaches may berequired, they, nonetheless, noted that a PER-type exercise was necessary. Management re-sponded that a PER was in the work programfor the coming year. Management also re-sponded that the Bank’s economic reports hadaddressed public expenditure issues, at both thecentral and state levels, although these reportswere not formally called PERs. Furthermore,the Bank’s engagement at the state level placedparticular emphasis on fiscal performance andextensive advisory and analytical work wasdone to develop programs of fiscal adjustmentand improved public expenditure. Managementalso noted that while governance was not apillar of the 1997 CAS, it was central to the up-coming CAS.

Project Implementation UnitsMany speakers expressed concerns about the en-clave nature of project implementation units(PIUs) and urged Management to mainstreamimplementation through the line ministries inIndia. One member stressed, however, that therole of PIUs should be decided on a country bycountry basis as many line ministries did not havethe required capacity and PIUs served the im-portant function of creating a critical mass of re-formers that moved development programsforward. OED noted that the India CAE had not

evaluated the PIU issue in India in detail as it didnot appear to be a concern for the GoI. How-ever, OED’s overall view has been that PIUs aregenerally found to not be conducive to sustain-able institutional development though there arecases where low capacity or emergency situationswarrant establishing PIUs. The Subcommitteeemphasized that the Bank needed to move awayfrom the PIU concept and build capacity withinministries.

Evaluation MethodologySome members questioned whether the CAEwas meant to be an evaluation of the Bank’s pro-gram or India’s reform program. Membersstressed that the development paradigm wasshifting toward collaborative and comprehensive(that is, Programmatic Adjustment Lending) ap-proaches and thus, it was difficult to clearly de-marcate the Bank’s program from the country’sprogram.

ProcessMany members of the SC questioned the timingof the CAE discussion and the process for Boardinput, noting that the CAS had already been cir-culated for Board discussion. They wonderedhow members’ comments on the CAE would beincorporated into the CAS. Management respondedthat it had been logistically difficult to schedule theCAE discussion prior to the finalization of theCAS but that the CAS had been prepared in closeconsultation with the OED CAE team and incor-porated the lessons from the CAE. Furthermore,the CAS would be revised after the April 5 Boarddiscussion, leaving an opportunity to incorporatethe Subcommittee’s comments as required.

Pieter Stek

Chairman

A N N E X B

6 0

Chapter 11. See paper by Singh (1999), which pro-

vides an interesting discussion of India’s uniquecultural heritage and the contribution of thatculture to its democratic and social institutions.

2. The following three paragraphs are basedlargely on Srinivasan (2001), a background paperfor this evaluation, and Basu and Pattanaik(1997). A detailed and comprehensive economichistory of India through 1991 can be found inJoshi and Little (1994).

3. The official national poverty line is definedas allowing a daily per person caloric intake of2,400 in rural areas and 2,100 in urban areas, inaddition to basic clothing and transport items. Therural poverty line was Rps. 274 a month in 1997,equivalent to less than $0.25 a day at then cur-rent exchange rates. The 1966–79 per capita GNPgrowth rate was 0.7 percent.

4. This section draws from Khatkhate (1994),Joshi and Little (1996), Bajpai and Sachs (1997),Basu and Pattanaik (1997), Ahluwalia and Little(1998), Ahluwalia (1999), and Srinivasan (2001).

5. About 60 percent of this environmentaldamage stems from economic losses from unsafedomestic water supplies and unsanitary excretadisposal; another 20 percent is from soil degra-dation.

6. This section is based largely on Joshi andLittle (1996), Bajpai and Sachs (1997), Basu andPattanaik (1997), Ahluwalia and Little (1998),Ahluwalia (1999), and Srinivasan (2001). For acomprehensive analysis of the unfinished re-form agenda see the World Bank’s recent eco-nomic report (World Bank 1999a).

7. For the 1990s, military expenditures havebeen about 15 percent of central government ex-penditures, ranging between 2.1 percent and2.7 percent of GDP.

8. For example, 23 of 26 states had not reg-ularized extra-budgetary (unauthorized by thelegislature) spending in the past five years.

9. However, 19 new private banks began op-erations during the 1990s. The new govern-ment’s reform agenda includes improving debtrecovery mechanisms, reducing the governmentstake in public banks to 33 percent, and for-mulating the first voluntary retirement scheme forthe banking sector.

10. Some policy changes have recently beenmade and more are under consideration. For in-stance, in 2000, state governments in Haryanaand Rajasthan reduced electricity subsidies torural users. The central government has raisedprices for wheat and rice in the Public Distrib-ution System. The government is also propos-ing to restructure and merge the 36-odd ruraldevelopment schemes and to revamp the creditdelivery system so that the funds granted to itare more likely to reach the end users.

Chapter 21. This section and part of the next section

summarize the first four phases in the India-Bankrelationship as described in a 1997 backgroundpaper by Jochen Kraske (a former Bank managerwith direct India experience).

2. In July 1989, just before the macroeco-nomic crisis, the Bank sent a country brief toits executive directors affirming the goodgrowth prospects of the country and the sound-ness of its development strategy and policyframework, with only minor qualifications.Mild warnings about the increasing stress in thebalance of payments and public sector financeswere overshadowed by the extensive coverageof the positive achievements of the govern-ment’s policies in the late 1980s and the implicitendorsement of the institutional and policyframework underpinning them. However, in the1970s, Bhagwati and Desai (1970) and Bhag-wati and Srinivasan (1975) had already pre-dicted a serious macroeconomic crisis stemmingfrom the faulty policy framework.

Chapter 31. For example, the sole public expenditure

review (PER) for the decade (1993), a costly,three-year effort, was discussed with only asmall group of government officials, was neverpublished, and had little impact. Regional staffstrongly dispute this assessment, which is basedon the findings of a review of the quality andimpact of the India PER commissioned by OEDas an input to its Bankwide PER review, and wassubstantially confirmed in interviews with Indianofficials during the May 1999 Country AssistanceEvaluation mission. Regional staff argue that this

ENDNOTES

study reviewed comprehensively not only thecontent of public spending but also the institu-tional context in which spending decisions weremade; that the PER raised for the first time theissue of central government transfers and lend-ing to the states, and the lack of performance cri-teria in such transfers and lending; that theseissues have gradually become part of the policydebate in India; that several of the sector reportsunderlying the review (ports, agriculture, socialsectors) were widely disseminated in India; andthat the PER was discussed among a small cir-cle of senior officials who felt that it would beeasier to implement the PER recommendationsif they were not associated with the Bank.

2. A recent QAG review reached similar over-all conclusions but also pointed to some weak-nesses—inadequate treatments of the fiscalproblem, of a possible trade-off between growthand equity, and of issues related to labor-inten-sity of growth and employment opportunities forthe poor. The panel also found poor prioritiza-tion and inadequate analysis of the “actionabil-ity” of key policy recommendations. However,the panel underscored the value of Bank eco-nomic and sector work in India, even when itmay not lead to policy changes in the shortterm, as long as it contributes to setting the re-form agenda and shaping the public debate.

3. QAG panels rate projects’ quality at entrygood, satisfactory, marginal, or poor on the fol-lowing criteria: project concept, objectives, andapproach; technical, economic, and financialanalyses; environmental analyses; social andstakeholder analyses; institutional capacity analy-ses; readiness for implementation; and risk as-sessment and sustainability. The other projectsQAG evaluated in 1997 were AP Emergency Cy-clone, AP Irrigation III, Malaria Control, Repro-ductive Health, and State Highways I.

4. These annexes are published under sepa-rate cover in OED’s Working Paper Series andare available upon request.

5. Donor resources directly mobilized byBank projects fell from $2.2 billion in fiscal1990–94 to $0.9 billion in fiscal 1995–99 (spreadamong 11 cofinanciers, down from 19 during theearlier period). While in the first half of thedecade adjustment lending attracted substantial

donor resources ($686, or about 30 percent oftotal cofinancing), more than 85 percent of co-financing in fiscal 1995–99 has been for the en-ergy and mining sectors, with export agenciesproviding more than half of the total (as in ear-lier years).

6. The Bank’s internal South Asia Regiontook exception to such critical remarks aboutpartnerships and about cooperation with IFC. Itnoted that the extent of partnership should notbe judged by the scope of cofinancing only.Other factors are at play, such as a move awayfrom large infrastructure projects and towardprojects (such as in education) where variousdonors all finance one program directly to thegovernment, not as cofinanciers of the Bankprojects. It also noted that IFC has just investedin Orissa’s newly privatized power distributionsector.

7. Of 14 donors solicited by OED, 8 repre-sentatives in Delhi responded with a writtenquestionnaire. Most donors indicated that an as-sessment of the Bank’s effectiveness in aid co-ordination was not possible because thegovernment was in charge.

Chapter 41. Tables containing the evaluators’ ratings of

the Bank assistance in all the sectors covered byOED sector studies or CAE background papersand descriptions of sectoral assistance strate-gies’ objectives and achievements, as well assummaries of all sectoral evaluation inputs (CAEbackground papers and OED sector reviews) arepublished under separate cover in OED’s Work-ing Paper Series and are available upon request.

2. In its comments on an earlier draft, theBank’s internal South Asia Region noted that ithas an ongoing, very detailed, and meaningfuldialogue on a number of issues relating to ruraldevelopment and poverty reduction at the statelevel. According to the Region, there is no dis-agreement in India, at least at the policy levels,about the need to revise fertilizer, water, andpower subsidies to agriculture. And the centralgovernment has been moving, albeit cautiously,in the same directions recommended by theBank’s sector work. The Region also maintainsthat public debate on the need to remove do-

E N D N OT E S

6 1

mestic and external trade restrictions is quitehealthy, with the Bank having taken every op-portunity to bring this issue to the notice of pol-icymakers in the “focus” states. In the Region’swords: “For example, the establishment of therural poverty reduction task force in AndhraPradesh and the proposed rural policy review inKarnataka will give an opportunity to lay theseissues out and discuss them with major partnerstates. In Uttar Pradesh and Rajasthan, the WaterSector Restructuring projects offer an opportu-nity to come to grips not only with the pricingissue with regard to water but also with institu-tional reform of water management agencies.”A number of states are finally “taking water re-sources management seriously. Cost recovery inirrigation is no longer a controversial issue. Theissue is rather one of when and how it must bephased in.”

3. In its comments on an earlier draft, theSouth Asia Region noted that while the Bank hasindeed been working closely with a few statesand its sector lending has expanded in the stateroad subsector, the Bank continued to have astrong program with the National Highway Au-thority. Indeed, looking at recent lending oper-ations (fiscal 2000) and the lending program forfiscal 2001–03, about 40 percent of the Bank’slending volume will be for national highwayprojects.

4. For example, in the Uttar Pradesh Basic Ed-ucation project, enrollments in the 1991–2000 pe-riod reportedly increased by 67 percent at theprimary level and by 74 percent at the lower sec-ondary level. The gross enrollment ratio in-creased from a baseline level of 66 percent to107 percent (including overage children), al-though the target level was only 78 percent.Girls’ enrollment increased significantly, re-portedly by 97 percent. The dropout rate de-creased, textbooks were provided on a largescale and were available in classes, while 100,000teachers received in-service training throughblock and cluster resource centers. Large num-bers of teachers were appointed, particularly lo-cally residing para-teachers. Instructionalmethodology was emphasized and child-cen-tered methodologies were disseminated to teach-ers and parents.

5. In its comments, the Ministry of Human Re-source Development argued that there is nomerit to such questions. The Ministry’s view isthat, under the District Primary Education Pro-gramme, many extensive research studies andmore than 250 evaluations have been made;data reporting systems have been effectivelystrengthened over the years; there are effectivemonitoring and training components for the Vil-lage Education Committee; and the elaboratejoint supervision mechanism, involving donors,national research institutes, and other local ex-perts, is very collaborative, with no question ofgovernment domination.

6. Including withdrawal of support for the Sar-dar Sarovar dam and a power project on the Nar-mada River.

7. For example, the Karnataka Rural WaterSupply and Environmental Sanitation project (ap-proved in fiscal 1993) built on lessons of a pre-vious project in Maharashtra, which in turn ledto improvements and greater investments (7 per-cent of project budget devoted to participationcompared with 2 percent in the Karnataka proj-ect) in the Uttar Pradesh Water Supply project (ap-proved in fiscal 1998). The state of the art DistrictPoverty Initiative projects and Integrated Water-shed Development projects, some of which havealready been approved, are founded on a socialdevelopment approach of empowering the poorthrough community groups.

Chapter 61. For the full list of International Develop-

ment Goals see http://www.oecd.org/dac/Indicators/htm/goals.htm

2. The Ministry of Human Resource Devel-opment took exception to this recommenda-tion. The Ministry’s view is that “education,especially elementary schooling, needs to beviewed differently from other sectors. It is the ob-ligation of the government to provide universaleducation up to the age of 14. The GOI’s [gov-ernment’s] inputs to the states, particularly in theeducation sector, depend on several factors,such as educational backwardness and regionaldisparities, and the like. It would, therefore, notbe appropriate to link the external funding to thereforms in other sectors.”


6 2

Chapter 71. There were 12 half-day, sectoral CAE/CAS

workshops on outreach (March 14, 2000), urbandevelopment (March 24), education (March 29),energy (March 30, South Asia presentation only),transport (March 30), private sector develop-ment/financial sector development (March 31),public sector management (March 31), social de-velopment (April 3), gender (April 3), environ-ment (April 4), health (April 4, South Asiapresentation only), agriculture and rural devel-opment (April 5), where presentations of thepreliminary findings of the CAE background pa-pers and thoughts by Bank staff on future sec-toral assistance strategies were discussed bygroups of 20–30 stakeholders from the central andstate government and parastatals, academics andpolicy analysts, and representatives from non-governmental organizations and other elementsof civil society. An all-day CAE/CAS synthesis

workshop was held on April 6, 2000, where pre-sentations by OED of the preliminary CAE find-ings and by South Asia staff of thoughts aboutfuture Country Assistance Strategy were discussedby two panels and by a larger audience of stake-holders (about 60–80). The draft CAE (dated Jan-uary 31, 2000), however, given the need forconfidentiality and privileged consultations, wasonly shared and discussed (in additional ses-sions) with the CAE advisers, Bank staff, currentgovernment officials, a small number of formerofficials, and the CAE/CAS workshop panel dis-cussants. All other workshop participants only hadthe benefit of a presentation, albeit a substantiveone, of the draft CAE findings.

2. R. Mohan, A. Ray, G. Sen, and A. Sen-gupta. The feedback from all other CAE re-viewers had already been incorporated into theJanuary 31, 2000, draft on which the India-basedadvisers commented.

E N D N OT E S

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Background Papers/Working Papers

Published as part of OED’s Working Paper Seriesand available on request.

Abadzi, Helen. 2001. Evaluating Bank Assis-tance to India for Education Sector Develop-ment in the 1990s. OED Working Paper.Washington, D.C.

Aiyar, Swaminathan. 2001. World Bank’s Imageand Outreach Effectiveness in the 1990s. OEDWorking Paper. Washington, D.C.

Basu, Ananya. 2001. Evaluating Bank Assistanceto India for Gender Equality in the 1990s.OED Working Paper. Washington, D.C.

Khatkhate, Dinanath. 2001a. Evaluating Bank As-sistance to India for Financial Sector Devel-opment in the 1990s. OED Working Paper.Washington, D.C.

———. 2001b. Evaluating Bank Assistance toIndia for Private Sector Development in the1990s. OED Working Paper. Washington, D.C.

Levy, Hernan. 2001. Evaluating Bank Assistanceto India for Transport Sector Development inthe 1990s. OED Working Paper. Washington,D.C.

Mathur, Om Prakash. 2001. Evaluating Bank As-sistance to India for Urban Development in the1990s. OED Working Paper. Washington, D.C.

Pitman, G.K. 2001. World Bank Assistance forWater Resource Management. OED WorkingPaper. Washington, D.C.

Ringskog, Klas, and Nola Chow. 2001. Evaluat-ing Bank Assistance to India for Environ-mental Sustainability in the 1990s. OEDWorking Paper. Washington, D.C.

Sahgal, Vinod, and Deepa Chakrapani. 2001.Evaluating Bank Assistance for Public Fi-nancial Accountability in India in the 1990s.OED Working Paper. Washington, D.C.

Srinivasan, T.N. 2001. India’s Development inthe Near Term: Constraints and Prospects.OED Working Paper. Washington, D.C.

Tuncer, Baran. 2001. Evaluating Bank Assis-tance to India for Public Sector Managementin the 1990s. OED Working Paper. Washing-ton, D.C.

van Holst Pellekaan, Jack. 2001a. EvaluatingBank Assistance to India for Agricultural and

Rural Development in the 1990s. OED Work-ing Paper. Washington, D.C.

———. 2001b. Evaluating Bank Assistance toIndia for Poverty Reduction in the 1990s.OED Working Paper. Washington, D.C.

Van Wicklin, Warren. 2001. Evaluating Bank As-sistance to India for Social Development. OEDWorking Paper. Washington, D.C.

Zanini, Gianni. 2001. India CAE: Overview of Sec-toral Assistance Evaluations. OED WorkingPaper. Washington, D.C.

References

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