The costs of inadequate water supply and sanitation are high: 1.6 million children die every year from diarrhea, mainly as a result of inadequate sanitation, water supply, and hygiene.

Key challenges can be divided in four main areas:

- Reliability: in urban areas, water is never distributed for more than a few hours a day, while in rural areas many hand pumps are defunct due to insufficient maintenance;
- Financial unsustainability: many systems do not recover operation and maintenance costs from user charges;
- Environmental unsustainability: (especially in India), over-exploitation of ground water for irrigation purpose, as a result of highly subsidized electricity. The contamination of ground water by agriculture runoff and improper use of sanitation facilities are affecting the quantity and quality of water available for human consumption;
- Affordability: Despite subsidies, costs are high because of lack of other option. The poor suffer the most.

The Bank managed “Water and Sanitation Program” has played a key role for almost thirty years, supporting improved practices in the WSS sector, with a special focus on service to the urban and rural poor and in building capacity to implement them. In addition, the also Bank managed “Public Private Infrastructure Advisory Fund” supports several activities in the WSS sector in India (Mumbai and Ahmadabad); It has published a revised toolkit for Public Private Partnership in WSS.