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India Country Overview- September 2011

Overview | World Bank Program | Inclusive Growth | Improving Infrastructure | Sustainable Development | Service Delivery | Lending

Overview

 

 

Key Development Indicators

GROWTH:
Population Growth ( 2001- 2007) : 1.4%
GDP Growth (2007- 2008): 9.0%
GDP Growth (Govt. Estimates for 2008-2009): 7.1%
……………………………………………………………………………………

Poverty (Below National Poverty Line 2004-05*)

Rural: 42 %
Urban: 26 %

Fertility rate: 2.5 births per woman

Life expectancy at birth:
 64 years

Infant mortality (per 1000 live births): 57

Maternal Mortality
 (per 100,000 live births):450

Children Underweight
 (below 5 years): 46%

Primary school enrollment, net: 90%

Male Adult literacy (age 15 and older): 73%

Female Adult literacy (age 15 and older):
 48%

Access to improved water source (% of pop): 89%

Access to improved sanitation: 33%……………………………………………………………………………………

Source: World Development Indicators 2008, NFHS 3 2005-06, and World Bank's 'India at a Glance'

*Press Note on Poverty Estimates, Planning Commission, Govt. of India, Jan 2011

 With a population of just over 1.2 billion, India is the world’s largest democracy. In the past decade, the country has witnessed accelerated economic growth, emerged as a global player with the world’s fourth largest economy in purchasing power parity terms, and made progress towards achieving most of the Millennium Development Goals.

However, poverty remains a major challenge though it is declining steadily but slowly. Based on the new official poverty lines, 42% of people in rural areas and  26% of people in urban areas lived below the poverty line in 2004-05.  Official poverty estimates for 2009-10 are not yet available but preliminary estimates suggest that in 2009-10 the combined all India poverty rate was 32% compared to 37% in 2004-05.

Resources generated from recent growth are now being invested into a set of very ambitious programs to deliver services to the poor. These include programs to provide elementary education, basic health care, health insurance, rural roads and rural connectivity, and other services to the poor.

These programs are achieving partial results on the ground. Between 2003 and 2009, the number of out-of-school children declined from 25 million to 8 million (less than 5% of the 6-14 age group). Leprosy, polio, and TB are almost under control and the spread of AIDS has been kept in check. Large numbers of women have been mobilized into self-help groups to generate new livelihood opportunities. Massive new initiatives are being pioneered that are revolutionizing the way services are being delivered to low-income groups.

India continues to grow at a rapid pace, although the government recently reduced its annual GDP growth projection from 9% to 8% for the current fiscal year ending March 2012.  The slowdown is marked by a sharp drop in investment growth resulting from political uncertainties, a tightening of macroeconomic policies aimed at addressing a high fiscal deficit and high inflation (going well beyond food and fuel prices), and from renewed concerns about the European and US economies.  Although the Government was quite successful in cushioning the impact of the global financial crisis on India, it is now clear that a number of MDG targets will only be met under the Twelfth Five Year Plan (2012-17).

The World Bank Program in India

To support India in achieving its long-term vision of a country free of poverty and exclusion, the World Bank Group’s Country Strategy for India for FY 2009-2012 (CAS) is closely aligned with the objectives outlined in the country's Eleventh Plan.

World Bank lending to India has diverged from initial plans spelt out in the Country Strategy due to the impact of the global financial crisis, the World Bank’s efforts to refocus, realign and consolidate the India program, and the increased demand from the Government for more financing.

In FY10, the World Bank lent a record $9.2 billion to India, compared to $2.3 billion in FY09. Fourteen new projects were added in FY10, and the project pipeline has grown in light of increased demand from the Government of India. The average size of requested projects has increased and the volume of Bank lending has shifted further towards infrastructure, the delivery of essential social services, and increasing engagement on urban issues and agriculture. In FY11, new commitments were $5.5 billion (IBRD $3.4 billion; IDA  $2.1 billion). Twelve new projects entered the portfolio thus increasing both the number of projects (81) and amount ($25.6 billion- IBRD $15 billion and IDA 10.6 billion) at the end of FY11.

World Bank lending to India is organized around the following key challenges:

1. Achieving Rapid and Inclusive Growth

India’s integration into the global economy has been accompanied by impressive economic growth that has brought significant economic and social benefits to the country. Nevertheless, disparities in income and human development are on the rise. A large section of the population - especially the poor, Scheduled Castes, Scheduled Tribes, Other Backward Classes, minorities and women - lack access to the resources and opportunities needed to reap the benefits of economic growth. To assist the government in achieving rapid inclusive growth, the World Bank is supporting activities which address both cyclical and structural impediments to growth, as well as the constraints to making growth inclusive:

Building Strong Partnerships with Low-Income States

While India’s higher-income states have successfully reduced poverty to levels comparable with the richer Latin American countries, its seven poorest states - Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, and Uttar Pradesh -lag behind their more prosperous counterparts and are home to more than half of India’s poor. The World Bank is increasing support to kick-start development in these low-income states by helping them to develop into attractive investment destinations, and raise the standards of living of their people by improving the delivery of public services.

In Bihar, the World Bank is supporting critical structural reforms (the Bihar Development Policy Loan I closed in December 2009 and a follow-on operation is under preparation), infrastructure development, and the building of rural livelihoods (Bihar Rural Livelihoods Project). The World Bank is helping the state recover from the devastating 2008 Kosi  floods (Bihar Kosi Flood Recovery Project, $220 million), and supporting the development of a comprehensive disaster management program. A grant for Flood Management Information System is helping to reduce the state’s vulnerability to floods. Several Bank-supported national programs – such as the Sarva Shiksha Abhiyan and the National Highways program - also assist Bihar.

Orissa, until the turn of the millennium, was among the poorest and the most highly indebted states in the country. Today, it is recognized as a state in transition. The World Bank has supported the state for over a decade. Two World Bank Development Policy Loans/credits have supported the state’s own efforts at structural reform in public financial management, investment climate, governance and accountability. The Bank is also supporting investments in the state in core areas of infrastructure development (Orissa State Roads Project) and poverty reduction (Orissa Rural Livelihoods Project; Community Tanks Management Project).

Agricultural and Rural Development

Over the five years to 2010/11, the agriculture sector has grown at 3.4% per year on average, below the 11th plan target of 4 percent. Going forward, it will be essential for India to build a productive, competitive, and diversified agricultural sector and facilitate rural, non-farm entrepreneurship and employment. Encouraging policies that promote competition in agricultural marketing will ensure that farmers receive better prices.

At around $5.5 billion in commitments and 24 projects currently under implementation by the Indian authorities, the World Bank’s agriculture and rural development program in India is by far the largest such program supported by the World Bank worldwide in absolute $-terms. The World Bank is involved in helping the authorities address many of the constraints which impede agricultural productivity growth and structural transformation across most of India's states.

The Bank’s A&RD portfolio is broadly clustered across three themes: agriculture and livestock, watershed management; water resources & irrigated agriculture; and rural livelihood development. Each project, generally, shows a significant integration of these three themes.

Over the past five to ten years, the Bank has engaged and continues to be involved in the following areas in support of a broad range of partners in India:

• Agriculture technology R&D through two national level projects with pan-India implementation (the National Agriculture Technology Project and the National Agriculture Innovation Project);

• New approaches towards agriculture technology dissemination associated with the Agriculture Technology Management Agency (ATMA) model which has contributed to diversification of agricultural production in Assam and Uttar Pradesh; this extension approach is now being scaled-up across India;

• Better irrigation water delivery (ranging from large irrigation infrastructure to local tanks and ponds) as well as strengthening of water institutions in several states (for instance, AP, Karnataka, Maharashtra, Rajasthan, Tamil Nadu, UP) and improved groundwater management practices (for instance, in the upcoming Rajasthan Agriculture Competitiveness Project or the West Bangal Minor Irrigation Project);

• Sustainable agricultural and livestock practices through watershed and rainfed agriculture development (Karnataka, Himachal Pradesh, Uttarakhand), and soil reclamation efforts (in UP);

• Further development of the dairy sector through support towards a renewed Operations Flood led by the National Dairy Development Board under an upcoming National Dairy Support Project. 

• Improved access to rural financial services and increased gender involvement in rural economic activities through rural livelihood initiatives undertaken by a number of states (for instance, AP, Bihar, MP, Orissa, Rajasthan, Tamil Nadu) and which is being scaled-up by GOI with Bank support through a National Rural Livelihood Mission;

• Agricultural insurance by advising GOI on how to improve and modify the actuarial design and implementation of the national agricultural insurance scheme;

• Improved farmer access to agricultural markets through policy reforms and investments under the Maharashtra Agriculture Competitiveness Project which aims to reform regulated wholesale markets and provide farmers with alternative market opportunities; and

• Better rural connectivity through rural infrastructure, such as our support ($1.5 billion) to the Prime Minister’s National Rural Roads Program (PMGSY).

Infrastructure

India’s rapidly growing economy has been placing huge demands on power supply, roads, railways, ports, transportation systems, and water supply and sanitation. But, bottlenecks in both urban and rural infrastructure have been eroding the country’s competitiveness.

The Government of India has increased infrastructure investments under the Eleventh Five Year Plan. However, with India's low taxation base – only some 15-16% of GDP is collected as taxes in India compared to 25-40% in developed countries - the country is unable to invest the required amounts through its budgetary resources. As such, World Bank support to improving India’s infrastructure is critical, and the Bank's country strategy advocates greater investments in infrastructure as a priority to attract investment and generate employment. World Bank support to the sector includes:

Improving Infrastructure: The Government is encouraging private participation in the expansion of critical infrastructure. To support this, the World Bank, in September 2009, agreed to extend $1.195 billion to the India Infrastructure Finance Company Limited (IIFCL) to help finance public-private partnerships in infrastructure, especially in the roads, power and ports sectors.

Transport: The World Bank has supported the states of Gujarat and Andhra Pradesh to upgrade their state highways. It is now helping to upgrade rail and road connectivity in Mumbai; improve state highways in Andhra Pradesh, Himachal Pradesh, Kerala,  Mizoram, Orissa, Punjab, Tamil Nadu and Uttar Pradesh; construct a section of the Golden Quadrilateral in Uttar Pradesh and Bihar; and upgrade rural roads in select districts of Himachal Pradesh, Rajasthan, Jharkhand and Uttar Pradesh. The Bank is also supporting the improvement of urban transport in the cities of Pune and Pimpri-Chinchwad in Maharastra, Indore in Madhya Pradesh, Mysore in Karnataka and Naya Raipur in Chattisgarh. Finally, the Bank is planning to support the improvement of narrow national highways through the National Highway Interconnectivity Improvement Program. It also supports the Eastern Dedicated Railway Freight Corridor Project which aims to increase the railway’s share of the freight market, thus reducing transport costs, as well as fuel consumption which could directly contribute to a reduction in carbon emissions.

Energy: The Government of India is increasingly tapping its vast hydropower resources. It has set the target for an optimum power mix at 40% from hydropower and 60% from other sources. In the past, the World Bank has supported India in building its largest hydropower plant at Nathpa Jhakri in Himachal Pradesh and is now helping the country augment the supply of hydropower. Support for the 412 MW run-of-the-river Rampur Hydropower plant on the Satluj river in Himachal Pradesh is ongoing. Two other hydropower projects are in the pipeline; a 444 MW project on the Alakananda river in Chamoli district in Uttarakhand, and the other at Luhri, further downstream from Rampur in Himachal Pradesh. The Bank is also supporting the efficient transmission and distribution of power to consumers. It has helped Powergrid, the national power transmission agency, to emerge as a world class agency. In September 2009, the World Bank extended a loan of $1 billion to Powergrid to strengthen and expand five transmission systems in the northern, western and southern regions of the country. At the state level, improvements in transmission and distribution are being supported in Haryana and Maharashtra.

Urban Development: In the next 20-25 years, India’s urbanization level is expected to rise from the present 30% to 40- 50%, with over 60 cities of 1 million plus population contributing about 70% of India’s GDP. Yet, India’s growing cities and towns face major challenges in creating adequate infrastructure including in the transportation, water, solid waste, and power sectors. The World Bank is helping streamline urban transport in Mumbai and improve the delivery of urban civic services in Andhra Pradesh, Tamil Nadu, and Karnataka. The Bank has also sought to bring in global best practices in the urban water sector. A successful pilot has helped to provide continuous, reliable water supply in three urban areas in Karnataka. Going forward, it will be essential for India to introduce policy and institutional reforms in land use planning, municipal finance, institutional models, and invest in infrastructure and service delivery to manage its cities efficiently. While state governments have the more critical role in transforming India’s cities, the Government of India’s support through national programs is significant and can be used to incentivize urban reforms. 

Financial Sector Development and Support to Small and Medium Enterprises: Longer-term local currency financing, which could fund large scale infrastructure projects, is in short supply in India. Moreover, poorer households and small and medium enterprises (SMEs) have limited access to banking services, while insurance and equity market penetration in rural areas remains very low.

In September 2009, the World Bank agreed to extend budgetary support of $2 billion to the Government of India in support of its economic stimulus measures to counter the effects of the global financial crisis. This included the injection of capital into some public sector banks to help ensure the expansion of good credit to the SME sector, as well as for the development of infrastructure and the rural economy. The Bank also continues to fund the implementation of the Government of India’s financial sector reform program, support rural credit cooperatives - which are crucial for channeling agricultural credit to farmers, and provide technical assistance for improving the Government's agricultural insurance program, including weather-indexed insurance for farmers. It is also supporting SIDBI in scaling up sustainable and responsible microfinance to the under-served areas of the country.

 2. Ensuring Development is Sustainable

India’s remarkable economic growth has been clouded by a degrading environment. The country is also very vulnerable to climate change on account of its high levels of population density, poverty, stressed ecological systems, and a substantial dependence on natural resources of much of India’s population. The following areas will thus require long-term vision and urgent action: 

  • Protecting India’s fragile environment - air, water, forests and bio-diversity - in the face of the rising pressures created by economic success
  • Adapting to climate change and the growing scarcity of water
  • Coping with accelerating urbanization through strengthened urban governance and environmental management
  • Improving energy efficiency and ensuring adequate energy supplies

The World Bank is in the process of articulating a vision for an environmentally sustainable future for India (India 2030). Its $1 billion National Ganga River Basin Project supports the the Government of India in cleaning up and conserving the iconic Ganga River.  Other projects assist state agencies in Andhra Pradesh and West Bengal to build human and technical capacity to clean up polluted industrial sites, as well as support the country in promoting new models for conserving biodiversity while improving rural livelihoods.Support to the sector includes:

Water: Climate change could impact India more than most other countries, and its impact will most likely be felt first and foremost in the water sector. The World Bank has therefore piloted a new Drought Adaptation Initiative in Andhra Pradesh that will help farmers adapt to warmer and more drought-like conditions. An Integrated Coastal Zone Management Project that seeks to protect India's coastal areas while also ensuring the livelihoods of the people living along the coastline is in the pipeline. The Bank has also completed studies on groundwater resources and low carbon growth.

Energy: The World Bank is supporting India in its efforts to produce clean, efficient, and renewable energy. It is helping the country to tap the hydropower resources in the Himalayan region, as well as supporting the rehabilitation of old and inefficient coal-fired power plants in West Bengal, Maharashtra, and Haryana. The Bank is also helping to strengthen Powergrid's power transmission networks to ensure that the power produced reaches consumers efficiently and losses in transmission are reduced. It is also seeking to expand support for promoting energy efficiency in various sectors ranging from small and medium enterprise, to chillers.

3. Increasing the Effectiveness of Service Delivery

Most public programs suffer from varying degrees of ineffectiveness, poor targeting, and wastage of resources. In the current economic climate, India will have to dramatically improve the impact of every rupee spent. The World Bank is working with the Government of India to improve the delivery of key public services through systemic governance and institutional reforms of public sector service providers, decentralization of responsibilities, promoting effective systems of transparency and accountability, effective monitoring of service delivery, and expanding the role of non-state service providers.

Elementary Education: Since 2001, India has brought some 20 million children into school under the world’s largest elementary education program – the Sarva Shiksha Abhiyan (SSA). Many of India’s states are now approaching universal primary enrollment or have already achieved it. Since 2003, World Bank support has helped scale up the program, improve the quality of learning, and assess learning outcomes. World Bank evaluations and research have provided recommendations for improvements. The program is now focused on bringing the hardest-to-reach children into primary school, raising access to upper primary education, and improving retention and learning outcomes.

Secondary Education: With improved enrolment and retention in elementary school, the need for universalizing secondary education as a means to break the cycle of poverty has gained importance. The World Bank is preparing to support the Government of India’s new centrally sponsored scheme for secondary education, the Rashtriya Madhyamik Shiksha Abhiyan (RMSA), with an estimated $500 million. This support is largely based on its analysis of secondary education published in 2009 (Vol 1; & Vol 2 )

Skills: Equally important is the building of skills among India’s rapidly rising work force, whose ranks are joined by some 8-9 million new entrants each year. Presently, nearly 44 % of India’s labor force is illiterate and only 17 % has secondary schooling. Moreover, the quality of most graduates is poor and employers offer very little upgrading of skills; only 16% of Indian manufacturers offer in-service training compared to over 90% in China. To help produce engineers of international standards, the World Bank has supported improvements in the quality of education in engineering institutes in 13 states. It is also supporting 400 Industrial Training Institutes (ITIs) to become centers of excellence in technical skills that are in demand. Much of this support is based on research conducted by the World Bank on improving the vocational education and training system for skill development in India.

Health: The health sector in India presents a mixed picture. Despite continuous improvements in health indicators, progress is slow and has not matched the impressive gains in economic growth during the past decade. Inadequate access to effective and good quality health services for a large proportion of the population largely accounts for the slow improvement in health outcomes. To help India achieve the MDGs for health, the World Bank increasingly focuses on improving local systems and technical capacity (quality enhancement, supply chain management, supervision, etc.) and strengthening accountabilities (human resource management, monitoring, evaluation, etc.) with the aim of creating an enabling institutional and system environment that would facilitate and leverage government’s capacity to translate resources into effective service delivery. Ongoing World Bank projects support national programs for disease control - such as kala azar, polio and malaria, HIV/AIDS, and TB. They also support child nutrition and reproductive and child health programs. The latter has contributed to important reductions in child and maternal mortality.Other projects are working to strengthen state-level systems for rural healthcare (Rajasthan, Tamil Nadu, Karnataka), as well as national programs for food and drug regulation, and disease surveillance. The Bank has previously successfully supported India in eliminating leprosy as a national health problem, and in bringing the WHO- recommended DOTS TB treatment to all districts in the country. The Bank is currently working with India to curb the HIV epidemic and reduce HIV prevalence, having halved new infections over the past decade, and averted an estimated 3 million HIV infections. The Bank is providing technical support to nine federal- and state-sponsored health insurance schemes to assist them in extending population coverage, improving quality and containing cost escalation. Finally, the Bank is supporting cutting-edge analytic work involving human resource management, public sector management in state health secretariats and impact evaluation of government health programs.

Safety Nets: The global economic crisis has lent new urgency to strengthening social protection and safety nets for the poor and vulnerable. The World Bank is in the process of extending support to the Government of India for the Rastriya Swasthya Bima Yojana (RSBY) - or National Health Insurance Scheme - to expand and improve the effectiveness of health insurance for households below the poverty line. Once the scheme reaches maturity it is expected that nearly 300 million individuals would receive coverage.  The Bank has been providing technical assistance and analytic work at the national and state levels to help improve the coverage, management and delivery of social protection benefits, to include pensions and old age security, disability (including a national assessment of disability initiatives) public workfare and improving social safety nets for the urban poor.  Much of the recent support draws from the first ever national review and analysis of social protection schemes in India, published in 2011 (Vol 1; & Vol 2 ).

Water Supply and Sanitation: The Bank’s Water Supply and Sanitation projects focus on improving access to water and sanitation services in a cost effective and sustainable manner.

Rural Water Supply and Sanitation: Since 1991, World Bank support has helped India first pilot and then scale up the RWSS Reform Program, supporting the evolution of models for the provision of efficient and sustainable services. Bank projects (in Maharashtra, Karnataka, Kerala, Uttarakhand, Punjab, Andhra Pradesh) have continued to increase the role of the Panchayati Raj Institutions and improve the recovery of operations and management costs. In all, the Bank will soon have provided over $1.4 billion in support to the sector, benefiting about 25 million rural people so far.

Urban Water Supply and Sanitation: The Karnataka Urban Water Supply Improvement Project has demonstrated that 24x7 water supply is indeed possible in urban India. This has led to increased demand for such services around the country. In addition, comprehensive studies are being undertaken to inform the service improvement agenda.  

Lending

Total IBRD/IDA Commitments as of end June 2011 (FY11): $25.6 billion
(by fiscal year, in nearest $ billion)

 

 

  Commitments

 FY06

FY07

FY08

FY09

FY10

FY11

  New Lending

1.4

3.7

2.1

2.3

9.3

5.5

Total Commitments (Active Projects)

11.3

14.3

 13.8

14.9

21.4

25.6

Total Number of Active Projects

56

67

60

61

75

81

Note: The World Bank’s Fiscal Year (FY) runs from July to June i.e. FY '11 runs from July 1, 2010 to June 30, 2011. 

India's Debt Service Payments


Last updated: 2011-09-23




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