The World Bank Group (WBG) is conducting its first Systematic Country Diagnostic (SCD) for India. The SCD articulates the Group’s analysis of the principal challenges facing India today, as the country seeks to consolidate its status as a middle-income economy. In the months to some, the diagnostic will provide the analytical base for the WBG’s Country Partnership Framework (CPF) for India. The CPF is the roadmap that will determine the Bank Group’s engagement with the country over the next four years. Summary of consultations: In Delhi with representatives from policy think-tanks: The participants, by and large, endorsed the major thrust areas identified in the presentation. They were almost unanimous in identifying the criticality of job creation as perhaps India’s most pressing development challenge, and of strengthening state capabilities as an important cross-cutting theme for India. To promote the efficient use of land and water in agriculture, participants said that this could also be achieved by providing farmers with the right incentives and technology. In this context, they pointed out constraints such as the Essential Commodities Act (which limited the stocks of agricultural produce that could be held), and the minimum support price for food grains which they said remained unrealistically low compared to China, or even Pakistan. Free power for agriculture had led to the reckless use of groundwater, resulting in a crisis in groundwater levels. With the right incentives and support, however, farmers could double output, they said. On building human capital, participants emphasized that the state had to increase expenditure on health and nutrition, education, and other critical aspects of the social sector. Despite huge investment in skilling, trained youth only found jobs in the minimum wage bracket, so many preferred to stay away. Regarding the creation of manufacturing jobs, they said the Factories Act was the main reason for enterprises remaining small as employers tried to remain within the threshold of 10 employees. To boost manufacturing, funds from the AMRUT program could be used to improve infrastructure in small towns that had the potential to emerge as manufacturing hubs. This would also enable more rural women join the work force. Declining female labor force participation in fact came in for repeated discussion. Participants said the reasons for the drop in women’s employment needed to be further investigated, including issues of women’s safety. The employment potential of the non-farm sector in rural India also deserved a closer look, they said. Endorsing the focus on state capability, participants pointed out that reform needed to be continued over the long term. Several participants dwelt on various aspects of reforms needed, as well as on the pathology of the reform process. Accountability structures needed to be strengthened and also to be rationalized, they said; in this context, one participant pointed out the anomaly of having the Commission on Railway Safety reporting to the Ministry of Civil Aviation. Others focused on regulatory structures and how vital they could be, but also said that these authorities were only effective when empowered and managed professionally. The discussion on administrative reforms and state capabilities was expansive but nuanced. Some participants pointed out that bureaucrats could become wary of innovation if the “cost” of a mistake or failure was perceived as being “too high”. Others were of the view that the state-based cadre system hindered the optimum use of good officers; even when a bureaucrat did excellent work he/she was not sent to replicate the good work in another state. Several participants urged the World Bank to delve deeper into accountability issues in the governance/administrative system, and make a bigger push for transparency. It was emphasized that all levels of governance should have the funds and capacity to perform. Yet, even after the 74th Constitutional Amendment, the downward flow of funds remained a problem, they said. There was a lively discussion on urban governance and participants lamented the seeming unwillingness to cede control to the lower levels, and urged for a greater empowerment of urban local bodies, including of city mayors. Regarding where the World Bank should focus, participants said that as implementation of programs and policies took place in the states, the proposed deepening of the partnership at the state level was an appropriate step. It was said that the World Bank should focus on states that were amenable to reform, and that interventions should be concentrated in areas where the institution had expertise and experience. Given the low planning and implementation capabilities in the states, they said the World Bank should help build states’ capacity to improve governance, performance, and last mile delivery, with ‘hand-holding’ becoming increasingly important. Participants suggested the World Bank use its leveraging ability to take up certain cities and support them through an integrated urban development program that tapped into multiple sources of funding – from the AMRUT and Smart City programs, as well as from other schemes. Urban sanitation, for instance, was an area that was singled out for focus. Participants suggested the World Bank identify one or more cities/towns and fund a comprehensive pilot to show what would work. Participants also said that the World Bank needed to follow through on successful pilots that it had backed, especially on the provision of last-mile delivery of services. One participant demanded that the World Bank also examine the fall-out of its less-successful programs (such as electricity reforms of the 1990s) to learn from those lessons. Yet others called for more emphasis on PPPs, which could still be an important model for meeting India’s investment needs. One participant was of the opinion that PPP also had many success stories and the Government was keen to revitalize the concept with lessons learnt from first generation PPP experience It was also suggested that the SCD look beyond malnutrition and the stunted growth of children to include public health issues like non-communicable diseases and obesity.
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