India: Laying the Foundation for Transformation

Challenge

Although India’s development has been one of the most remarkable global achievements in recent times, its gross national income ($1,570 per capita (2014, current US$)) remains low and considerably lags behind that of comparator countries such as the BRICs nations (Brazil, Russia, India, China, South Africa).  Its development challenges remain deep and complex.  Despite halving extreme poverty, India is still home to nearly one-quarter (270 million) of the world’s poor people.  Income inequality is on the rise, and structural inequalities have prevented entire groups (lower castes, tribes and women) from taking full advantage of the opportunities generated by recent economic growth.  India’s female labor force participation is low and decreasing; only 27 percent of women age 15 and older are working.  Rates of maternal and child mortality remain stubbornly high, and 38.7 percent of Indian children are malnourished.  Ending open defecation in India’s villages has proved to be one of the country’s greatest challenges. An estimated 567 million people in India still defecate in the open.  Lack of access to sanitation has had a huge negative impact on child health and nutrition, as well as on the safety of women.  With 10 million people migrating to towns and cities each year, the country is rapidly urbanizing, leading to demands for better services, jobs, infrastructure, affordable housing as well as sound environmental management.  India’s overall infrastructure needs continue to be massive.  Some 250 million people lack access to electricity, and those who do have to deal with unreliable supply and frequent outages.  One-fourth of the rural population lacks access to all weather roads.  Addressing these challenges is not only central to India and its people, but also to global progress on the new Sustainable Development Goals, and efforts to reduce poverty and boost shared prosperity.  

Solution

The World Bank Group’s (WBG) Country Partnership Strategy (FY2013-2017) supports the government’s goal of faster, sustainable, and inclusive growth.  It seeks to tackle India’s most pressing development challenges, especially in its poorest states—Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Rajasthan and Uttar Pradesh—where the fight against poverty has to be won to make a significant dent in the global poverty rate by 2030.  WBG is addressing these challenges with an integrated package of support that includes financing, advisory services, analytical work and capacity building across three broad areas of engagement:

Economic Integration: Improved domestic, regional, and global integration will boost India’s growth, as will more balanced growth across its low-income and more advanced states.  To promote economic integration, WBG support focuses on improving infrastructure—mainly transport and power; strengthening the manufacturing sector; developing a skilled labor force that can respond to the needs of a fast growing economy; and improving the business climate to attract more private sector investment.  Work is ongoing to support several of the government’s high-profile initiatives such as those that aim to provide 24/7 Power for All - with a particular focus on solar power, improve the business climate, and help modernize India’s massive railway system.

Rural-Urban Transformation: The faster a country urbanizes, the faster it grows, and Indian cities are growing quickly.  In just one decade, the number of towns increased from 5,000 (2001) to 8,000 (2011), and some 53 cities have populations of over one million. The WBG is helping India address the many challenges of this massive rural to urban transformation by focusing on improving the ‘livability’ of cities—providing better infrastructure, greater access to basic services, and strengthening the  institutional capacity of urban governments.  Support to key initiatives includes the development of 100 Smart Cities across India and improved access to public services in 500+ cities under the AMRUT program.  Successful urbanization cannot take place without an equally pronounced focus on rural development.  Accordingly, improving the ’livability’ of India’s villages, increasing agricultural productivity while creating more off-farm jobs is also central to India’s efforts to manage its ongoing transformation.  Recognizing that urbanization, and sustained high economic growth, can be both a detriment to the environment as well as an opportunity to promote energy efficiency and reduce greenhouse gas emissions , the WBG supports government efforts to better manage the environment  to protect India’s vast natural resources.  Cleaning and rejuvenating the iconic Ganga River, whose basin has a population of 450 million people, is central to Bank support in this area.

Inclusion: If India wants to realize its potential for sustained growth, poverty reduction and shared prosperity, enhancing economic opportunities of all—regardless of social grouping, age, gender or where they live—is essential.  This will call for significant improvements in the quality of education at all levels, better health, nutrition, and social protection, as well as for the creation for more and better quality jobs.  It will also call for more attention on reducing gender inequities, and creating more opportunities for girls and women across India.  One area of particular concern is the decreasing rate of female labor force participation, a rate that is lower in urban than rural areas.  Through operations and analytical work, the World Bank Group is focusing on addressing gender throughout an entire lifecycle—from the womb, to the classroom, to the work space.   Since building skills will be critical to ensure India’s global competitiveness and inclusive growth, the World Bank is scaling up its support for India’s ambitious ‘Skilling India initiative that aims to equip 500 million youth with skills for a changing job market.  Analytical work on skills is increasingly taking a lifecycle approach, looking at both life and technical skills throughout the life of a worker, from birth to education, training and beyond, and identifying the challenges at each stage.  Since nutrition is the starting point, the Bank, together with domestic and international partners, is stepping up efforts to help India address its very high child malnutrition rates.  

Additional information on the entire WBG program in India is available on Open India.

Results

International Development Association (IDA) support to India’s development agenda has contributed to improving outcomes in health, education, rural development, and increasingly to disaster risk management.  Some results are highlighted below:

Education: 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.

IDA 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. In just the past three years, rural livelihoods projects have trained 350,000 youth, and 250,000 of them have been placed in jobs.  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 growing towns and cities where better-paid work is more readily available. 

Rural livelihoods: Rural livelihoods programs have mobilized more than 30 million poor households in 90,000 villages into 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). Local-level value added activities carried out by these groups and the direct market linkages provided by them have resulted in 30-40% higher prices for SHG products, tilting the terms of the trade in favor of the poor in India.

Rural water supply and sanitation: Over past two decades, IDA 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.  Many projects have helped promote women’s participation in meaningful discussions around changing age-old sanitation behaviors, as well as in decision making about the use and maintenance of water and sanitation infrastructure. 

Health: 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. To date, the IDA-supported National AIDS program has reached about 81% of female sex workers (FSW), 66% of men having sex with men (MSM) and 71% of injecting drug users (IDU), with targeted interventions. However, continued attention is needed to secure these gains.

IDA 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 and malnutrition rates have declined, stunting rates remain significantly higher than those in comparator countries such as the BRICS nations (Brazil, Russia, India, China, and South Africa).

Disaster management: Support to the National Cyclone Risk Mitigation Project (Phase I) has funded the building of 420 cyclone shelters in Andhra Pradesh and the low-income state of Odisha, and handed them over to communities. Given each shelter’s capacity of accommodating 2,000 people, half a million people can now be kept safe during cyclones and other adverse weather conditions.  In addition, a total of 740 kilometers of roads has been completed in these states, together with seven saline embankments and 20 bridges in the state of Andhra Pradesh. 

Rural Roads: From September 2004, IDA support of some US$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 as one-third of the rural population still lacks access to an all-weather road.

Agriculture and watershed development: Over the past decade or so, IDA support has helped farmers in the rain-fed regions of Karnataka, Himachal Pradesh and Uttarakhand to 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 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.

Bank Group Contribution

The WBG has been a long-term development partner with India, supporting the country’s efforts to tackle fundamental developmental challenges and build a modern economy. Since the first IBRD loan to the Indian Railways in 1949, it has provided financing, knowledge, advisory services, and technical assistance where and when it was most needed.

IDA has contributed to improving outcomes in health, education, and rural development.  IDA supported India’s efforts to tackle polio (there has been no case of polio since January 2011), tuberculosis, leprosy, river blindness, and HIV/AIDS, improving the lives of millions of people and contributing immensely to global efforts to control these diseases. WBG financing (particularly credits from IDA) and technical assistance played a key role in the Green Revolution—a landmark in India’s development that freed the country from dependency on food imports, turning it into a net food exporter and helping millions escape hunger and poverty. And in education, IDA together with the European Union and United Kingdom’s Department for International Development played an important role in universalizing primary education.

As of April 7, 2015, the WB portfolio in India included 58 IDA-financed projects (of which seven were IBRD/IDA blend projects), totaling $12 billion in net commitments. Approximately $2.6 billion is committed in education sector, $2.5 billion in agriculture and rural development, $1.8 billion in disaster risk management, $1.3 billion in rural water and sanitation, and $613 million in health and nutrition.  IDA continues to play an important role in supporting India’s low-income states to tackle their development challenges.  In FY 2013-15, over half of all IDA commitments ($5.6 billion), supported projects in these poor and isolated states.

Partners

IDA has leveraged its resources through closer collaboration with partners. For instance, for over a decade, it has partnered with the United Kingdom’s Department for International Development (DFID) and the European Commission in the education sector, first on primary education and more recently on improving access, equity and quality at the secondary level. IDA is also co-financing three nation-wide health operations with DFID. Collaboration with development partners (Asian Development Bank and DFID) has been particularly effective in the low-income state of Bihar. In 2007, a joint donor strategy was developed for Bihar, to enable the state to benefit from coordinated support based on a shared vision of the government’s development priorities.

Moving Forward

The World Bank Group’s Country Partnership Strategy for FY2013-2017 envisions two strategic shifts in the program in India. The first is a scaled up engagement on urban development and the second is a more pronounced focus on India’s seven low-income and seven special category states (mostly Northeastern states that are geographically isolated), which are home to the vast majority of India’s poor and vulnerable people.  IDA’s increased engagement across all sectors in these diverse states aims address their specific development challenges with an integrated, multi-sectoral approach that focuses on extensive capacity building, technical assistance, as well as analytical work that underpins lending operations.

At the end of the Strategy period, the goal is to rebalance the portfolio so that 30 percent of the active portfolio is committed in these focus states.  At the mid-point of the implementation of the strategy, commitments have nearly doubled from 11 percent (FY2013) to 19 percent (FY2015).