Andhra Pradesh, one of 28 states in India, is located along the southeastern coast. It is the country’s 4th-largest state by area and 5th-largest by population, with more than 75 million people. In the late 1990s, Andhra Pradesh was relatively poor and in the midst of a fiscal crisis. Its per-person income was about US$385, nearly 22 percent of its population was below the poverty line, and 40 percent of its primary school-age children were out of school. The state’s fiscal deficit to gross state domestic product (GSDP) ratio exceeded 5 percent. Previous efforts at economic reforms had fallen short, growth was stymied, and development indicators lagged.

Andhra Pradesh has transformed to a middle-income state on a strong reform path, which is reflected in improved development outcomes. Per capita income has risen to nearly US$700 in 2005-06, the poverty ratio has fallen considerably, and nearly 94 percent of the state’s primary school-age children are in school. The fiscal deficit is at a manageable level of 3.5 percent of GSDP and is falling. Among India’s major states, Andhra Pradesh now has the best-managed power sector, the third-highest credit rating, one of the best investment climates, and the fourth-lowest corruption levels.

Highlights:
- The economy grew at a faster rate. Andhra Pradesh’s economy grew at an annual rate of 5.3 percent during the 1990s. In the presence of reforms, that rate increased to 5.8 percent from 2000-03. As the reform process deepened, growth accelerated to 7.5 percent from 2004-06 and 10.6 percent by 2009.

- Poverty decreased. The poverty ratio was 15.8 percent in 1999-2000. Preliminary estimates show that by 2005-06, this ratio has fallen to 8.5 percent. If it sustains this pace, Andhra Pradesh will more than halve the proportion of its people suffering from extreme poverty and hunger by 2015.

- Access to education improved. Recent surveys reveal only 7.4 percent of children are out of school; nearly 97 percent of towns and villages have either a regular school or an alternative center within a kilometer. The focus now is on enhancing the quality of education, and

- Health outcomes continue to be mixed. While some key indicators --infant mortality rate, child malnutrition levels, and the prevalence of anemia in women—show stagnation or rates of growth that fall below what is necessary to achieve the Millennium Development Goals, good progress has been realized elsewhere. The number of polio and leprosy cases has declined. Since 2000, malaria cases have decreased by two-thirds. HIV prevalence rates also exhibit a recent decline. The use of maternal health and family planning services has improved, full antenatal care coverage has increased by about 13 percent, and deliveries conducted by medically trained personnel have increased by about 7 percent during the last five years.

Additional support has come from the UK’s Department for International Development (DFID) in support of Andhra Pradesh’s policy and institutional reform program—US$200 million during APERL 1 plus an additional US$100 million during APERL II. Moreover, DFID provided resources for technical assistance in many areas, including departmental reviews, public enterprise reform, and health sector reform. DFID also helped establish the Center of Good Governance in Andhra Pradesh’s capital, Hyderabad, which has emerged as a national resource for good governance practices.