Overview

With 1.2 billion people and the world’s fourth-largest economy, India’s recent growth and development has been one of the most significant achievements of our times. Over the six and half decades since independence, the country has brought about a landmark agricultural revolution that has transformed the nation from chronic dependence on grain imports into a global agricultural powerhouse that is now a net exporter of food. Life expectancy has more than doubled, literacy rates have quadrupled, health conditions have improved, and a sizeable middle class has emerged. India is now home to globally recognized companies in pharmaceuticals and steel and information and space technologies, and a growing voice on the international stage that is more in keeping with its enormous size and potential.

Historic changes are unfolding, unleashing a host of new opportunities to forge a 21st-century nation. India will soon have the largest and youngest workforce the world has ever seen. At the same time, the country is in the midst of a massive wave of urbanization as some 10 million people move to towns and cities each year in search of jobs and opportunity. It is the largest rural-urban migration of this century.

The historic changes unfolding have placed the country at a unique juncture. How India develops its significant human potential and lays down new models for the growth of its burgeoning towns and cities will largely determine the shape of the future for the country and its people in the years to come.

Massive investments will be needed to create the jobs, housing, and infrastructure to meet soaring aspirations and make towns and cities more livable and green. Generating growth that lifts all boats will be key, for more than 400 million of India’s people–or one-third of the world’s poor–still live in poverty. And, many of those who have recently escaped poverty (53 million people between 2005-10 alone) are still highly vulnerable to falling back into it. In fact, due to population growth, the absolute number of poor people in some of India’s poorest states actually increased during the last decade.

Inequity in all dimensions, including region, caste and gender, will need to be addressed. Poverty rates in India’s poorest states are three to four times higher than those in the more advanced states. While India’s average annual per capita income was $1,410 in 2011–placing it among the poorest of the world’s middle-income countries– it was just $436 in Uttar Pradesh (which has more people than Brazil) and only $294 in Bihar, one of India’s poorest states. Disadvantaged groups will need to be brought into the mainstream to reap the benefits of economic growth, and women—who “hold up half the sky”—empowered to take their rightful place in the socioeconomic fabric of the country.

Fostering greater levels of education and skills will be critical to promote prosperity in a rapidly globalizing world. However, while primary education has largely been universalized, learning outcomes remain low. Less than 10 percent of the working-age population has completed a secondary education, and too many secondary graduates do not have the knowledge and skills to compete in today’s changing job market.

Improving health care will be equally important. Although India’s health indicators have improved, maternal and child mortality rates remain very low and, in some states, are comparable to those in the world’s poorest countries. Of particular concern is the nutrition of India’s children whose well-being will determine the extent of India’s much-awaited demographic dividend; at present, an overwhelming 40 percent (217 million) of the world’s malnourished children are in India.

The country’s infrastructure needs are massive. One in three rural people lack access to an all-weather road, and only one in five national highways is four-lane. Ports and airports have inadequate capacity, and trains move very slowly. An estimated 300 million people are not connected to the national electrical grid, and those who are face frequent disruptions. And, the manufacturing sector–vital for job creation–remains small and underdeveloped.

Nonetheless, a number of India’s states are pioneering bold new initiatives to tackle many of India’s long-standing challenges and are making great strides towards inclusive growth. Their  successes are leading the way forward for the rest of the country, indicating what can be achieved if the poorer states were to learn from their more prosperous counterparts.

India now has that rare window of opportunity to improve the quality of life for its 1.2 billion citizens and lay the foundations for a truly prosperous future–a future that will impact the country and its people for generations to come.

The new Country Partnership Strategy for India will guide the World Bank Group’s support to India over the next four years (2013-2017). Developed in close consultation with the government and with input from civil society organizations and the private sector, the strategy will help India lay the foundations for achieving “faster, sustainable, and more inclusive growth” as outlined in the government’s 12th Five-Year Plan.

The World Bank Group will support India with an integrated package of financing, advisory services, and knowledge—one that is tailored to the needs of individual states. A key feature of the new strategy is the significant shift in support toward low-income and special category states, where many of India’s poor and disadvantaged live.

This is also the World Bank Group’s first country strategy to integrate the institution’s new global goals for reducing poverty and increasing shared prosperity. It presents two scenarios that show India’s potential for growth, poverty reduction and prosperity over the next 17 years. In the “2030 ambitious scenario” India grows on average at 8.2%, and makes economic growth as inclusive as its better-performing states during the latter part of the last decade. The potential is huge; poverty would be reduced from 29.8% (2010) to 5.5% by 2030 and the share of people no longer vulnerable to falling back into poverty would increase from 19.1 to 41.3%. If India were to grow as it did from 2005 to 2010 without making that growth more inclusive, poverty would fall to only 12.3% by 2030.

World Bank Group financing under the new strategy is expected to be $3 billion to $5 billion each year over the next five years. Sixty percent of the financing will go to state government-backed projects. Half of this, or 30% of total lending, will go to low-income or special category states.

Key focus areas

In the next five years, the World Bank Group will focus on three key areas of engagement: integration, rural-urban transformation, and inclusion. Common themes running across these areas will be improved governance, environmental sustainability, private sector, and gender equality.

  • Integration: India’s massive infrastructure needs cannot be addressed through public investments alone. The strategy will accordingly focus on improving both public and private investments in infrastructure. For instance, the power sector, vital for economic growth, will need to build greater capacity and improve the reliability of generation, transmission and distribution. A vibrant manufacturing sector—especially small and medium size enterprises that are critical for the creation of jobs—will require the reform of labor laws, and improved access to land and finance. Better integration would result in more-balanced growth among Indian states, helping low-income states converge more quickly with their faster-growing neighbors.
  • Rural-urban transformation: “Transformation” represents the biggest shift in the new strategy’s approach. Well-managed urbanization can bring innumerable benefits to the 600 million people projected to live in India’s cities by 2031. Accordingly, the new strategy aims to help India make the rural to urban shift as productive as possible in terms of growth and inclusion and to improve the livability of urban areas, especially secondary cities where a sizeable population increase is taking place. At the same time, given agriculture’s continued importance in the economic and social fabric of the country, the strategy will help India work toward raising agricultural productivity.

Inclusion: Economic integration and rural-urban transformation can benefit a large share of India’s population only if there is a stronger focus on human development and on policies that help make growth inclusive. The World Bank Group will support the central and state governments in strengthening the nutrition policy as well as systems and capacities to improve nutrition. It will support government efforts to improve education mainly at the secondary and tertiary levels, with a more pronounced focus on quality across all levels of education. Special focus will be placed on ensuring access to education for underprivileged children, retaining girls in secondary education, and opening opportunities in higher education. It will also work to improve access to finance and to enhance social protection coverage for the more than 90% of the labor force that works in the informal sector.

The World Bank Group’s past support to India’s development agenda has contributed to improving outcomes in a range of sectors. Some results are highlighted below:

  • Between 2001 and 2009, India’s Education for All Program enrolled some 20 million out-of-school children, especially girls and children from socially disadvantaged families. By 2009, the number of out-of-school children had fallen to about 8.1 million. Over 98% of India’s children now have access to a primary school within 1 kilometer of their home. The focus is now on improving the quality of learning, retaining children in school, and ensuring that more children are able to access and complete secondary education.
  • World Bank support for vocational training programs in select institutions has helped more graduates to find jobs, with their numbers rising from just 32% in 2006 to over 60% in 2011. Nevertheless, empowering the large numbers of India’s youth, especially in rural areas, with skills that are better matched with the demands of the labor market—whether informal or formal—will help them find jobs in the urban areas where better-paid work is more readily available.
  • Rural livelihood programs have mobilized more than 30 million poor households in 90,000 villages to form 1.2 million self-help groups (SHGs)–up from 8 million in 2009.  Ninety-five percent of SHG participants are women. In Andhra Pradesh alone, 10 million SHG women have seen their incomes rise by 115%. Members’ savings exceeded $ 1.1 billion (2011) and access to credit rose by 200% to touch $5.8 billion (2000-09). Support has also results in 30-40% higher prices for SHG products, tilting the terms of the trade in favor of poor people in India.
  • Over past two decades, World Bank projects have contributed over $1.4 billion in financing for rural water supply and sanitation. About 24 million people in over 15,000 villages–with populations ranging from 150 to 15,000–have benefited from these programs. In addition, some 17 million rural people have benefitted from improved sanitation.
  • India has the largest burden of tuberculosis (TB) in the world. There are an estimated 2.2 million new TB cases in India every year, accounting for a quarter of the global burden. Between 1998 and 2012, two IDA credits totaling $279 million provided significant support to scale-up effective diagnosis and treatment under the national TB control program. During that period, over 15 million people with TB were diagnosed and treated by the program, saving an estimated 2.6 million lives. And, to date, the World Bank supported National AIDS program has reached about 81% of female sex workers, 66% of men having sex with men and 71% of injecting drug users, with targeted interventions. However, continued attention is needed to secure these gains.
  • World Bank support for health projects has helped pregnant women to reach medical facilities in time for delivery; in Tamil Nadu, 99.5% of deliveries now take place in medical institutions.  However, despite increasing rates of decline, maternal and child mortality rates remain on par with rates in much poorer countries. And while India has recorded impressive economic growth in the past decade, malnutrition rates has declined very little; in fact, stunting rates in India are two to seven times higher than those in other BRICS countries.
  • From September 2004, World Bank support of some $2 billion is helping India’s National Rural Roads Program to improve connectivity, especially in the economically weaker regions and hill states. Some 24,200 km of all-weather roads have benefitted rural people in the states of Himachal Pradesh, Jharkhand, Meghalaya, Punjab, Rajasthan, Uttarakhand and Uttar Pradesh. However, much more remains to be done; one-third of the rural population still lacks access to an all-weather road.
  • Over the past decade or so, World Bank support for improving farmer incomes from rainfed lands in Karnataka, Himachal Pradesh and Uttarakhand have helped implement soil and water conservation measures and raise agricultural productivity. Lessons learnt have helped shape the Government of India’s Common Watershed Guidelines and the design of national watershed programs.
  • Since 1993, two Sodic Lands Reclamation Projects in Uttar Pradesh have brought more than 260,000 hectares of barren or unproductive lands under cultivation. Over 425,000 poor families have benefitted from a three to six fold increase in crop yields. Around 15,000 SHGs have helped the women pool savings and connect to the formal banking network. In several villages, these SHGs now manage the mid-day meal provided in local state schools under a government program. A $197 million World Bank credit is now supporting the third phase of the project that aims to reclaim another 130,000 hectares of predominantly barren and low productivity sodic lands in about 25 districts of the state.

LENDING

India: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments