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Recognizing that faster growth and poverty
reduction in India cannot happen without addressing inherent imbalances in
the economy, the World Bank
is working in concert with the central government to catalyze state-level
reform efforts through its lending and policy dialogue. While continuing to
support nationwide programs in health and education, the Bank has
re-oriented its strategy to focus on reforming states, which includes some
of the poorer states with the worst social indicators.
State-level operations are not new to the Bank
in India. In the past, however, selection of state projects was done largely
on project and sector grounds rather than the overall policy stance of the
state. Under the new approach, the Bank is providing multi-sectoral programs
of assistance, which serve as a vehicle for developing and deepening a
state's reform agenda and for accelerating poverty reduction. Bank loans to
the states continue to be channeled through the central government, and then
on-lent to the states. In support of this strategy, the Bank is undertaking
fiscal studies of all the major reforming states in collaboration with local
research institutions.
In 1998, Andhra Pradesh
(AP) was the first to
benefit from this new type of state-level lending operation, with the
approval of a US$543 million loan. The Bank-supported Andhra
Pradesh: Economic Restructuring Project
(APERP) underpins the state's ongoing innovative program of public
expenditure restructuring by seeking growth-enhancing fiscal reforms,
including specific targets for increased spending on social services and key
physical infrastructure, divestiture of public enterprises, and capping
deficit spending. The project is providing resources to meet priority needs
in human development (nutrition, primary health, and primary education),
rural development that will directly benefit the poor (irrigation, rural
roads, and core access roads), and public enterprise restructuring. One
example of the result of these efforts to date is an increase in public
spending on primary education and health care between 1998 and 1999 from 0.9
percent to 1.4 percent of state GDP.
AP's Economic Restructuring Program is
complemented by a US$210 million loan to support the state's Power
Sector Restructuring Program. The
loan is the first in a series of loans totaling up to US$1 billion that the
Bank plans to provide over the next eight years to help transform AP's power
sector from being a major drain on the state's budget into a contributor of
resources for priority social sectors. The Bank is also supporting
complementary projects in AP, including irrigation, health, roads, forestry,
and poverty initiatives for community development. Taken together, these
programs are making a major contribution to reshaping the state's finances
and speeding up economic growth, human development, and poverty alleviation.
In April 2000, the reform agenda of the
Government of Uttar Pradesh, India's most populous state, was strongly
endorsed by both the Indian central government and the Bank. Included under
a broad package of assistance is a US$251 million loan for a Fiscal
Reform and Public Sector Restructuring Program,
which was the first sub-national single tranche adjustment loan the Bank has
provided in India. The project will assist UP as it implements a
comprehensive set of reforms in the areas of public expenditure management,
tax policy and administration, civil service, anti-corruption, deregulation,
decentralization to local bodies, public enterprise and privatization; and
financial management and accountability. The Bank is also supporting the
state's efforts to reform its power sector with the help of a US$150 million
loan. A third
UP District Primary Education Project
and a Health
Systems Development Project,
along with ongoing irrigation and forestry projects, round out this
considerable package of Bank support. Together, these operations provide
urgently needed funds and create fiscal space to improve social services for
the poor, while helping the state put its finances on a sustainable path.
The Bank also has an intensive lending and
advisory relationship with other key reform states, and additional
state-level assistance programs are under preparation.
(Source: World Bank
Group)
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