India and the World Bank

World Bank
Since inception in 1944, the World Bank has expanded from a single institution to a closely associated group of five development institutions. Its mission evolved from the International Bank for Reconstruction and Development (IBRD) as facilitator of post-war reconstruction and development to the present day mandate of worldwide poverty alleviation in close coordination with our affiliate, the International Development Association, and other members of the World Bank Group, the International Finance Corporation (IFC), the Multilateral Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID).
Apart from reconstruction, World Bank’s activities include:
* poverty reduction and the sustainable growth in the poorest countries, especially in Africa;
* solutions to the special challenges of post-conflict countries and fragile states;
* development solutions with customized services as well as financing for middle-income countries;
* regional and global issues that cross national borders--climate change, infectious diseases, and trade;
* greater development and opportunity in the Arab world;
* pulling together the best global knowledge to support development.
At today's World Bank, poverty reduction through an inclusive and sustainable globalization remains the overarching goal of its work. The World Bank's two closely affiliated entities—the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)—provide low or no interest loans (credits) and grants to countries that have unfavorable or no access to international credit markets.

* Fund Generation
IBRD lending to developing countries is primarily financed by selling AAA-rated bonds in the world's financial markets. While IBRD earns a small margin on this lending, the greater proportion of its income comes from lending out its own capital. This capital consists of reserves built up over the years and money paid in from the Bank's 185 member country shareholders. IBRD’s income also pays for World Bank operating expenses and has contributed to IDA and debt relief.
IDA is the world's largest source of interest-free loans and grant assistance to the poorest countries. IDA's funds are replenished every three years by 40 donor countries. Additional funds are regenerated through repayments of loan principal on 35-to-40-year, no-interest loans, which are then available for re-lending. IDA accounts for more than 40% of our lending.
* Loans
Through the IBRD and IDA, World Bank offers two basic types of loans and credits: investment operations and development policy operations.
Countries use investment operations for goods, works and services in support of economic and social development projects in a broad range of economic and social sectors. Development policy operations (formerly known as adjustment loans) provide quick-disbursing financing to support a country’s policy and institutional reforms.
Each borrower’s project proposal is assessed to ensure that the project is economically, financially, socially and environmentally sound. During loan negotiations, the Bank and borrower agree on the development objectives, outputs, performance indicators and implementation plan, as well as a loan disbursement schedule. While it supervises the implementation of each loan and evaluate its results, the borrower implements the project or program according to the agreed terms.
IDA long term loans (credits) are interest free but do carry a small service charge of 0.75 percent on funds paid out. IDA commitment fees range from zero to 0.5 percent on undisbursed credit balances. For FY09 commitment fees have been set at 0.0 percent.
* Trust Funds and Grants
Donor governments and a broad array of private and public institutions make deposits in Trust funds that are housed at the World Bank. These donor resources are leveraged for a broad range of development initiatives. The initiatives vary significantly in size and complexity, ranging from multibillion dollar arrangements—such as Carbon Finance; the Global Environment Facility; the Heavily Indebted Poor Countries Initiative; and the Global Fund to Fight AIDS, Tuberculosis, and Malaria—to much smaller and simpler freestanding ones.
The Bank also mobilizes external resources for IDA concessionary financing and grants, as well as funds for non-lending technical assistance and advisory activities to meet the special needs of developing countries, and for co-financing of projects and programs.
Direct World Bank grants to civil society organizations emphasize broad-based stakeholder participation in development, and aim to strengthen the voice and influence of poor and marginalized groups in the development process.
IDA grants—which are either funded directly or managed through partnerships—have been used to:
o Relieve the debt burden of heavily indebted poor countries
o Improve sanitation and water supplies
o Support vaccination and immunization programs to reduce the incidence of communicable diseases like malaria
o Combat the HIV/AIDS pandemic
o Support civil society organizations
o Create initiatives to cut the emission of greenhouse gases
See how these grants have made a difference at IDA at Work. Visit the Grants website for more information.
* Analytic and Advisory Services
While World Bank is best known as a financier, another of our roles is to provide analysis, advice and information to our member countries so they can deliver the lasting economic and social improvements their people need. We do this in various ways. One is through economic research and data collection on broad issues such as the environment, poverty, trade and globalization Another is through country-specific, non-lending activities such as economic and sector work, where it evaluate a country's economic prospects by examining its banking systems and financial markets, as well as trade, infrastructure, poverty and social safety net issues, for example.
It also draws upon the resources of our knowledge bank to educate clients so they can equip themselves to solve their development problems and promote economic growth. By knowledge bank it mean the wealth of contacts, knowledge, information and experience we've acquired over the years, country by country and project by project, in our development work. Our ultimate aim is to encourage the knowledge revolution in developing countries.
These are only some of the ways our analyses, advice and knowledge are made available to our client countries, their government and development professionals, and the public:
o Poverty Assessments
o Public Expenditure Reviews
o Country Economic Reports
o Sector Reports
o Topics in Development
* Capacity Building
Another core Bank function is to increase the capabilities of our partners, the people in developing countries, and our own staff —to help them acquire the knowledge and skills they need to provide technical assistance, improve government performance and delivery of services, promote economic growth and sustain poverty reduction programs.
The International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries. Established in 1960, IDA aims to reduce poverty by providing interest-free credits and grants for programs that boost economic growth, reduce inequalities and improve people’s living conditions.
IDA is one of the largest sources of assistance for the world’s 79 poorest countries, 39 of which are in Africa. It is the single largest source of donor funds for basic social services in the poorest countries.
IDA lends money (known as credits) on concessional terms. This means that IDA credits have no interest charge and repayments are stretched over 35 to 40 years, including a 10-year grace period. IDA also provides grants to countries at risk of debt distress.
Since its inception, IDA credits and grants have totaled US$207 billion, averaging US$14 billion a year in recent years and directing the largest share, about 50 percent, to Africa.

The World Bank Program in India
To support India 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 India’s Eleventh Plan. It focuses predominantly on supporting the fast-track development of much-needed infrastructure to spur investment and generate employment, and on providing additional support to the seven poorest states to achieve higher standards of living for their people.

The World Bank is currently working on several large projects in crucial infrastructure areas including:
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• Dedicated Freight Corridor ($2.7 bn IBRD)
• Ganga River Basin Authority ($1bn IDA)
• Rural Roads II ($1.5 bn IDA)
• National Highways ($1 bn IBRD)
• National Urban Development Program, JNNURM ($1bn IDA)
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More specifically, the World Bank’s support to India includes:

1. Achieving Rapid and Inclusive Growth
Lagging 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 - are lagging behind. These states are home to more than half of India’s poor. It will be essential for these States to kick-start development by becoming attractive investment destinations, and improving social services to raise the standards of living of their people. Reforms have started in all these States; in many the Bank is an active partner. The World Bank’s Development Policy Lending (DPL) – to Andhra Pradesh, Karnataka and Orissa and more recently to Bihar, and Himachal Pradesh – are helping states to implement reforms and spreading the lessons of success. The Bank continues to fund and support the implementation of the Government of India’s reform program for short term rural credit cooperatives, which are a crucial link for channeling agricultural credit to millions of farmers. The World Bank also continues to provide technical assistance to the Government of India for improving its traditional agricultural insurance program as well as for the relatively recent weather indexed insurance for farmers.
Financial Sector Development and Support to Small and Medium Enterprises (SME): 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 credit, including to SMEs, infrastructure and the rural economy. Further, in April 2009, the World Bank provided additional financing of $400 million to the Small Industries Development Corporation of India (SIDBI) to assist India's SME sector through the financial crisis.
Agricultural and Rural Development: Some two-thirds of India’s people depend on rural employment for a living. In 2007/08, agricultural growth touched 4.9% facilitated by a good monsoon, greater production of high-value crops, an increase in the minimum support prices for grains, and the rise in global prices for agricultural products. However, in the last two years, the agriculture sector grew at only about 2.5-3% on account of lower rainfall and the worst drought since 2002/03. Going forward, it will be essential for India to build a productive, competitive, and diversified agricultural sector and facilitate rural, non-farm entrepreneurship. Encouraging policies that promote competition in agricultural marketing will ensure that farmers receive better prices. World Bank support to the sector includes:
* Raising agricultural productivity: In a number of states, the World Bank is improving soil and water conservation on degraded lands, rehabilitating and modernizing surface irrigation systems (Madhya Pradesh, Maharashtra, Rajasthan, Uttar Pradesh), reviving traditional rain water harvesting systems, and assisting farmers to diversify crops and reclaim saline lands. The Bank is also working to raise agricultural productivity by linking public research organizations and farmers to promote the use of agricultural innovations.
* Improving rural livelihoods: Rural livelihoods projects support the empowerment of the rural poor and the development of their livelihoods. Projects are ongoing in a number of states including Andhra Pradesh, Chattisgarh, and Tamil Nadu, with new projects commencing in Orissa, Bihar and Madhya Pradesh.
* Upgrading rural water supply and sanitation: The Bank is also working to improve the quality of life in the rural areas by improving water supply and sanitation. Since 1991, World Bank support has helped India first pilot and then scale up a rural water supply and sanitation services (RWSS) reform program. Bank support to three states (Maharashtra, Karnataka, and Uttar Pradesh) has been followed by support to Kerala, Uttarakhand, Punjab, and Andhra Pradesh, and further support to Karnataka and Maharashtra. In all, the Bank will soon have provided over $1 billion in support to the sector, benefiting 20 million rural people so far.
2. Improving Infrastructure
Infrastructure: India’s rapidly growing economy has been placing huge demands on power supply, roads, railways, ports and transportation systems. But, infrastructure bottlenecks have been eroding the country’s competitiveness. Increases in power generation during the Tenth Plan period fell short of target; when the economy was growing at a rapid 8% a year, power supply grew at only 4%. And, although the national highway network doubled in size between 1997 and 2007 – almost 35,000 kms were added during this period – soaring demand has far outstripped supply. Urban infrastructure is a severe constraint to the expansion of key centers of growth, while weaknesses in basic rural infrastructure—from roads to electrification—have constrained the growth of the rural economy. World Bank support to the sector includes:
Improving Infrastructure: To help India continue to expand its critical infrastructure, the World Bank has, in September 2009, agreed to extend $1.195 billion to the India Infrastructure Finance Company Limited (IIFCL) to help finance private-public partnerships in infrastructure, especially in the roads, power and ports sectors.
Power: 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.
Transport: In the transport sector, 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, Mizoram, Kerala, 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.
Urban Development: India’s growing cities and towns face major challenges in creating adequate infrastructure including in the transportation, communications, solid waste, water, and power sectors. The World Bank is helping streamline urban transport in Mumbai and improve the delivery of urban civic services in Tamil Nadu, Karnataka, and Andhra Pradesh. It has recently supported a successful pilot to provide continuous, reliable water supply in three urban areas in Karnataka. If economic growth is not to be constrained, it will be essential for India to make faster progress in urban development by investing in public goods and services, including through the Jawaharlal Nehru National Urban Renewal Mission (JNNURM).
3. Ensuring Sustainable Development
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), and has projects in the pipeline to support the National Ganga River Basin Authority and industrial pollution management. 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 also supporting India in its efforts to increase the generation of clean 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 so that they produce more energy with the same amount of fuel, reducing their carbon emissions. The Bank is also helping to strengthen power transmission networks to ensure that the power produced reaches consumers efficiently and losses in transmission are reduced. It is also seeking to expand its support for the promotion of energy efficiency in various sectors ranging from small and medium enterprise, to chillers. .
4. 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. World Bank support to the sector includes:
Elementary Education: India has made huge progress in getting more children, especially girls, into primary school. Since 2001, the government’s flagship elementary education program, the Sarva Shiksha Abhiyan, has helped to bring some 20 million children into school, most of whom are first-generation learners. The gender gap has reduced and more children are transitioning from primary to upper primary school. Many of India’s states are now either approaching universal primary enrollment or have already achieved it. According to the Government, less than 5 million children between the ages of 6 and14 now remain out of school. The program is now focusing on bringing the hardest-to-reach children into primary school, raising access to upper primary education and improving retention and learning outcomes.
World Bank support in the mid-1990s helped India pioneer new initiatives to bring children into school. Since 2003, Bank support to the SSA has played an important role in scaling up the program to the hardest-to-reach communities, improve the quality of learning, and assess learning outcomes. Between 2003 and 2007, the World Bank contributed $500 million of the total program cost of $3.5 billion. Between 2008 and 2010, domestic funding of over $9 billion for the program was complemented by another $600 million in Bank support. Bank evaluations and research provide recommendations for further improvements. These include studies on financing elementary education, teacher absenteeism, instructional time and quality in primary education and the impact of information sharing with village education committees, inclusive education for children with disabilities, comparisons between private and public schooling in UP, AP and MP, and incentives to improve quality.
Secondary Education: With the success of the Sarva Shiksha Abhiyan in significantly improving enrolment and retention at the elementary level, the need for universalizing secondary education has gained in importance as a means to break the poverty cycle and achieve social justice. The World Bank is preparing to support the Government of India’s new centrally sponsored scheme for secondary education, Rashtriya Madhyamik Shiksha Abhiyan (RMSA), with an estimated US$ 650 million. The support is largely based on an analysis of secondary education published in 2009 (Vol 1; & Vol 2) which focused on strategies to improve access to secondary education as well as equity, management and quality issues. The World Bank has also conducted research into the feasibility of expanding public private partnerships at the secondary level. It has supported workshops on the role of information and communication technologies at the secondary level.
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, only 17 % has secondary schooling, and enrollment in higher education is a mere 11%. 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. Another project which aims to improve the quality and relevance of vocational education is now 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. While there is no single measure of health system performance, India compares poorly with other countries of similar levels of economic development. Infant mortality and maternal mortality rates are declining, but slowly. Despite the largest child nutrition program in the world, child malnutrition rates have remained unchanged for nearly two decades, with 43% of India’s children underweight. Tuberculosis, malaria, polio and dengue fever still remain a serious threat in a number of States, and although the prevalence of HIV has reduced, it still poses a significant burden. Inadequate access to effective and good quality health services of a large proportion of the population largely accounts for the slow improvement in health outcomes. Thus, to help India achieve the MDGs for health, the World Bank increasingly focuses on improving governance and accountability in the delivery of health services.
Ongoing 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. 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.
Safety Nets: The global economic crisis has lent new urgency to strengthening 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 - or National Health Insurance Scheme - to expand and improve the effectiveness of health insurance for households below the poverty line. World Bank support will help these households cope with major health shocks by increasing their access to medical care and improving the quality of care through reforms in management, institutional development, and the strengthening monitoring and evaluation under the scheme. The effective implementation of the scheme would benefit the people through better health and reduced poverty. Once the project is completed, it is expected that the number of beneficiaries receiving treatment under the program would reach around half a million per annum.
Lending:
At the end of June 2010, the Bank group had 75 active projects with a net commitment of about $21.4 billion.