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World Bank happy with India's progress on reform path

Ela Dutt
India Abroad Correspondent in New York

India's economic dynamism depends on its state governments, according to a senior World Bank official. But more states must embrace change, said Edwin Lim, Country Director for India at the bank, speaking to India Abroad.

"It is the increasing dynamism at the state level that strikes me. Several (states) are undergoing significant reform," said Lim who was in Washington for the board approval process. "Some states are pursuing comprehensive reforms and others are doing it in certain sectors."

Lim also said he saw changes in the bureaucracy, long considered the immovable behemoth.

"It is very encouraging over the past year or so. Much greater attention is being given to improving government effectiveness. There is a growing recognition but only among a few states - unfortunately," he said.

Trends in the economy are both encouraging and discouraging, Lim said. "You can see some states like even UP (Uttar Pradesh) embarking on a comprehensive reform program, breaking out of the track. But at the same time many states are being left behind. It is not only poor states, but also some very well off states that may not be reforming," he emphasised.

As for structural changes, he noted, some states were slowing down while others were speeding up.

"At the Centre, the reform seems to be slow," Lim conceded. But he said there was a much greater recognition of the fiscal deficit problem and also of subsidies being responsible for part of this problem.

While some states are dealing with this and bringing down their deficits, "the Centre has recognised the need to bring down the deficit, but the progress has not been very satisfactory."

Lim, who has been India manager at the World Bank for the last four years, said: "It is a very exciting time in India and I probably have the best job in the bank. Our program is the largest of any in the world."

On June 21, the World Bank approved four loans and credits totaling US $ 913.8 million for the current fiscal year to the government of India to support programs it considers "vital to lasting poverty reduction."

The four loans and credits finance programs are to be implemented at the national, state, and local levels.

"The government of India's strategy for poverty reduction encompasses a range of initiatives from community-level projects to nationwide development of social and infrastructure programs," Lim pointed out.

The World Bank considers these programs as reinforcing initiatives by the government to support economic reforms at the state level.

Two of the loans and credits approved support reforms and poverty reduction within Karnataka. The Karnataka Watershed Development Project (US$ 100.4 million) finances improved services to poor communities in semi-arid regions and the Karnataka Economic Restructuring Project (US$ 150 million) supports ongoing efforts to improve fiscal stability and government effectiveness in the state.

The Grand Trunk Road Improvement Project (US$ 589 million) is part of the government's broader program to relieve transport bottlenecks on India's key highways. The expanded highway, which passes through some of India's poorest states, is expected to facilitate trade and the movement of people and goods while reducing the high number of road accidents.

The Second Rajasthan District Primary Education Project (US$ 74.4 million) supports expansion of the nationwide District Primary Education Program in Rajasthan. The project builds on successful experiences in parallel programs in other states and within Rajasthan.

In the current fiscal year (FY 2001), lending to India has reached US$ 2.5 billion for a range of programs implemented at national, state and local levels, Lim noted. Roughly 45 per cent of this assistance supports centrally-administered programs ranging from education and health to power and roads. The remaining 55 per cent supports Central government initiatives to accelerate economic development and improve economic management at the state level.

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