World Bank Approves $171 million for Rural Livelihood and Watershed Projects in India

January 11, 2011

WASHINGTON, DC, January 11, 2011 ─ The World Bank today approved an IDA credit of $162.7 million to help improve livelihood opportunities for some 400,000 village households in 17 districts of Rajasthan.  The Bank also approved a credit of $7.98 million additional finance for an ongoing watershed development Project in Uttarakhand that is helping rural communities increase agriculture productivity as well as rural incomes through a decentralized watershed management approach.

The funding for the Rajasthan Rural Livelihoods Project will help improve economic opportunities for rural communities, especially women and marginal groups, in 9000 villages of the state.  It will channel financing for income-generating activities through some 33,000 SHGs; link selected SHGs to markets; and also help develop skills for unemployed rural youth.

The Project aims to help the state government raise income levels for some 400,000 rural poor households in Rajasthan.  Despite rapid decline in poverty from 50% in 1970 to about 24% in 2005, the absolute numbers of poor families in the state of Rajasthan still stand at more than 2 million (Census 2002). Recurring drought and a growing crisis in ground water supply, have further contributed to the challenges facing rural households.

“This Project with the World Bank is building on the successful livelihood initiatives undertaken in India to provide mechanisms by which rural households can improve their overall economic well-being,” said Venu Rajamony, Joint Secretary, Department of Economic Affairs, Ministry of Finance.

“Global experience has shown that while general growth of the economy helps reduce poverty, it needs to be complemented by specific strategies designed to expand opportunities for the poor,” said Roberto Zagha, World Bank Country Director for India.

The Project will build on lessons learned from the earlier Bank-financed Rajasthan District Poverty Initiatives Project (DPIP) which had helped poor rural communities build assets through Common Interest Groups (CIGs); provided linkages to markets; and built a cadre of trained people at the village level. However, the inability of CIG members to access funds for subsequent investments raised questions on the sustainability of the CIG model beyond the project phase.

“The project intends to provide a sustainable mechanism by which rural poor, particularly women, can improve their access to social and financial services.  The design of this project draws on lessons learned from not only the first phase of the Rajasthan DPIP but also from the rich experiences of the on-going second generation livelihood projects being implemented in the states of Andhra Pradesh, Tamil Nadu, Bihar, Orissa, and Madhya Pradesh,” said Nathan Belete, Task Team Leader for the project.

The Project will build the capacity of community institutions to deal more effectively with commercial banks, market institutions, public sector departments, and develop new partnerships with the cooperatives and the private sector.

The credit is provided by the World Bank’s fund for the poorest, the International Development Association (IDA), and has 35 years to maturity and a 10-year grace period.

The additional funding of $7.98 million for the Uttarakhand Decentralized Watershed Development Project will sustain support for ongoing activities like helping farmers set up small agribusinesses.  These are critical to achieving the planned 10% increase in rural incomes in project areas by the end of the implementation period.  The need for additional funds was brought about largely by increases in prices of goods and services since the Project began in 2004.

According to a mid-term impact survey of 400 households in 40 villages conducted by TERI, real income in these households has grown by 7%, two percentage points higher than the mid-term target of 5%. This increase is driven by farm income growth which is twice the non-farm income growth during this period.  Irrigated area under the project has increased by 10%, cropping intensity has gone up by 24%, and crop yields by 7%. The area under high-value horticulture has increased by 30% in the project villages.

“If the current trends are maintained, the targeted 10 percent increase in the household income by end of the Project is likely to be realized,” said Ranjan Samantray, World Bank Task Team Leader for the project.  The additional financing will help support critical agribusiness activities and further boost rural incomes.”

The credit is provided by the World Bank’s fund for the poorest, the International Development Association (IDA), and has 35 years to maturity and a 10-year grace period.

The Bank's current engagement in Rajasthan includes two state-specific projects in irrigation & water resources and health systems development, together comprising around $253 million. Besides, Rajasthan is also a major shareholder in the multistate rural roads project, of which Rajasthan's share is around $229 million. Total Bank commitment in Rajasthan: $482 million which constitutes around 2% of the total net commitments in India.

Uttarakhand is currently implementing 2 state projects together amounting to $203 million. This constitutes around 1% of the total net commitments in India.

As of today, India is the largest IDA (International Development Association) and the third largest IBRD (International Bank for Reconstruction and Development) borrower from the World Bank.  The Bank's $21.9 billion-portfolio in the country covers 77 active investment projects.


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