With a population of more than 1.4 billion, India is the world’s largest democracy. Over the past decade, the country’s integration into the global economy has been accompanied by economic growth. India has now emerged as a global player.
AT A GLANCE
India is one of the fastest growing economies of the world and is poised to continue on this path, with aspirations to reach high middle income status by 2047, the centenary of Indian independence. It is also committed to ensuring that its continued growth path is equipped to deal with the challenges of climate change, and in line with its goal of achieving net-zero emissions by 2070.
The growth of the past two decades has also led to India making remarkable progress in reducing extreme poverty. Between 2011 and 2019, the country is estimated to have halved the share of the population living in extreme poverty - below $2.15 per person per day (2017 PPP) (World Bank Poverty and Inequality Portal and Macro Poverty Outlook, Spring 2023). In recent years, however, the pace of poverty reduction has slowed especially during the COVID-19 pandemic, but has since moderated in 2021-22.
Certain challenges persist. Inequality in consumption continues, with a Gini index of around 35 over the past two decades. Child malnutrition has remained high, with 35.5 percent of children under the age of 5 years being stunted, with the figure rising to 67 percent for children in the 6-59 months age group. Headline employment indicators have improved since 2020 but concerns remain about the quality of jobs created and the real growth in wages, as well as around the low participation of women in the laborforce.
India’s aspiration to achieve high income status by 2047 will need to be realized through a climate-resilient growth process that delivers broad-based gains to the bottom half of the population. Growth-oriented reforms will need to be accompanied by an expansion in good jobs that keeps pace with the number of labor market entrants. At the same time, gaps in economic participation will need to be addressed, including by bringing more women into the workforce.
The World Bank is partnering with the government in this effort by helping strengthen policies, institutions, and investments to create a better future for the country and its people through green, resilient, and inclusive development.
Economic Outlook
After real GDP contracted in FY20/21 due to the COVID-19 pandemic, growth bounced back strongly in FY21/22, supported by accommodative monetary and fiscal policies and wide vaccine coverage. Consequently, in 2022, India emerged as one of the fastest growing economies in the world, despite significant challenges in the global environment – including renewed disruptions of supply lines following the rise in geopolitical tensions, the synchronized tightening of global monetary policies, and inflationary pressures.
In FY22/23, India’s real GDP expanded at an estimated 6.9 percent. Growth was underpinned by robust domestic demand, strong investment activity bolstered by the government’s push for investment in infrastructure, and buoyant private consumption, particularly among higher income earners. The composition of domestic demand also changed, with government consumption being lower due to fiscal consolidation.
Since Q3 FY22/23, however, there have been signs of moderation, although the overall growth momentum remains robust. The persisting headwinds – rising borrowing costs, tightening financial conditions and ongoing inflationary pressures – are expected to weigh on India’s growth in FY23/24. Real GDP growth is likely to moderate to 6.3 percent in FY23/24 from the estimated 6.9 percent in FY22/23.
Both the general government fiscal deficit and public debt to GDP ratio increased sharply in FY20/21 and have been declining gradually since then, with the fiscal deficit falling from over 13 percent in FY20/21 to an estimated 9.4 percent in FY22/23. Public debt has fallen from over 87 percent of GDP to around 83 percent over the same period. The consolidation has largely been driven by an increase in revenues and a gradual withdrawal of pandemic-related stimulus measures. At the same time, the government has remained committed to increasing capital spending, particularly on infrastructure, to boost growth and competitiveness.
Last Updated: Sep 27, 2023
THE WORLD BANK GROUP AND INDIA
The World Bank Group’s (WBG) over seven decade-long partnership with India is strong and enduring. Since the first loan to Indian Railways in 1949, the WBG’s financing, analytical work, and advisory services have contributed to the country’s development. International Development Association – the WBG’s soft-lending arm created for developing countries like India - has supported activities that have had a considerable impact on universalizing primary education; empowering rural communities through a series of rural livelihoods projects; revolutionizing agriculture through support of the Green and White (milk) Revolutions; and helping to combat polio, tuberculosis, and HIV/AIDS. In FY18, the relationship reached a major milestone when India became a low middle-income country and graduated from International Development Association financing.
COUNTRY PARTNERSHIP FRAMEWORK
The WBG’s present engagement with India is guided by its Country Partnership Framework for FY18-22 (CPF). The CPF builds on the decades-long partnership and seeks to address the country’s development aspirations and priority needs identified in the Group’s Systematic Country Diagnostic for India. It aims to work with India so that the country’s rapidly growing economy makes much more efficient use of resources; fosters inclusiveness by investing in human capital and generating more quality jobs; and develops strong public sector institutions that are capable of meeting the demands of a rising middle-class economy. The CPF’s approach combines a focus on ‘what’ the WBG will work on and ‘how’ it will engage India in the process.
What will the WBG work on?
How will the WBG amplify the impact of its work in India?
In all its activities, the WBG will seek to address climate change, gender gaps, and the challenges and opportunities afforded by technology.
WORLD BANK GROUP PROGRAM
The World Bank’s lending program consists of 98 lending operations. Of the $21.4 billion in commitments, $19.3 billion is from IBRD, $2.0 billion is from IDA – the Bank’s soft lending arm - and $0.1 billion is from other sources, primarily grant funding from the Global Environment Fund.
Roughly a little more than one third of these operations and around 40% of commitments are either for central or multi-state operations, while the remainder consists of state-specific operations in 26 of India’s 28 states.
The four largest portfolios are Agriculture (15 operations totaling $3.1 billion in commitments), Energy, (11 projects totaling $4.0 billion in commitments), Health, Nutrition & Population (11 projects totaling $2.8 billion) and Transport and Water (11 projects each totaling $2.5 billion respectively).
In FY23, the Bank approved 15 operations amounting to $4.37 billion. Of this, $ 4.32 billion is lending from IBRD and $0.05 billion from IDA (recommitted from cancelled IDA programs). Around 15-18 projects are expected to be delivered in FY24, with total commitments in the range of $3.5 – 4 billion.
For the IFC, India is the biggest client country, accounting for over 10 percent of its global portfolio with a committed portfolio of US$6.5 billion as of June 30, 2023. IFC has more than 250+ active projects in sectors including infrastructure, health, energy, manufacturing, housing, technology, and finance. Since its first engagement in 1958, IFC has invested more than US$27 billion (including mobilization) in over 500 companies in India. India is the sixth largest shareholder in IFC, owning a 4.01 percent stake.
IBRD and IFC work together in several areas, most notably in energy, transport, water and health. The World Bank partnership has been particularly strong in raising financing for renewable energy initiatives, especially in supporting the Government of Madhya Pradesh in setting up the largest solar park project that provides solar power with a total capacity of 2.25 gigawatts at a record low cost, reducing carbon emissions by 3.8 million metric tons per year and powering 60% of the Delhi metro. Similarly, IFC and IBRD collaborated under the Government of India’s flagship Clean Ganga program, ‘Namami Gange,’ helping revamp sewage treatment plants using hybrid annuity-based PPP projects, treating 218 million liters of water per day in three cities, and contributing to the steady rejuvenation of the sacred river for millions. IFC led the PPP mandate, while IBRD loan facilitated payment guarantees to boost private sector participation in the sector.
The Multilateral Investment Guarantee Agency (MIGA) does not have exposure in India. MIGA has been working closely with the Ministry of Finance to provide credit enhancement solutions at the state-level and state-owned enterprise (SOE) level. This will enable state governments and SOEs to utilize long-term commercial financing, which can complement concessional lending provided by other multilaterals and development finance institutions.
The WBG has a wide-ranging program of Advisory Services & Analytics. The program informs policy debate, provides analytical underpinnings and learnings for operations and strategy, facilitates the scale up of innovative solutions, and helps to improve state capability. As of October 2021, some 18 analytical studies and 15 advisory activities were ongoing. Key areas of focus include poverty and macroeconomic analysis, financial sector reform, enhancing human capital including universal health coverage and gender, air quality management, as well as state capability and governance.
*FY23 means Financial Year from July 2022 - June 2023
Last Updated: Sep 27, 2023
WBG financing supported India’s achievement of numerous results over the past five years, highlights of which include:
Education: The World Bank’s approximately $2.7 billion support for education in India covers primary, secondary, and tertiary education, as well as skills development for its young population.
The World Bank’s $250 million Skill India Mission Operation (SIMO) is backing Central and State government initiatives to skill young people—including the disadvantaged and vulnerable—to acquire the skills needed for a wide range of jobs that are in demand in the market. The project has trained almost 6 million young people, 34 percent of whom are women. Some 40 percent of the trainees were employed within six months of completing their course.
The World Bank also supports state government programs for reforms in primary and senior secondary education. School education projects in Andhra Pradesh, Chhattisgarh, Gujarat and Nagaland are helping strengthen foundational learning of the students, provide training and resources for the professional development of teachers, and use data-driven programs to improve learning assessment systems for remedial education.
A new World Bank program - Multidisciplinary Education and Research Improvement in Technical Education Project to be implemented in 14 States and Union Territories will support research and innovation in climate change and sustainable energy. The program is expected to benefit around 350,000 students. In Madhya Pradesh and Odisha, reforms in tertiary education have helped close to 2 million students from disadvantaged groups get access to quality higher education and skills, making them more employable.
Social Protection:
During the COVID-19 pandemic, World Bank support of $1.65 billion through two projects, Accelerating India’s COVID-19 Social Protection Response Program and Creating a Coordinated and Responsive Indian Social Protection System helped protect the poor and vulnerable through transfers in cash and kind. About 320 million vulnerable people received cash transfers into their bank accounts. About 800 million people received additional food rations.
In Jharkhand, a market-driven skills training and secondary education program has helped set up about 13,000 strong community level clubs that provide skills and education to over one million adolescent girls and young women.
In West Bengal, an ongoing program is providing social protection services to poor and vulnerable groups, with a focus on strengthening institutions for delivering care to elderly persons and those with disabilities. The program is also working to increase female labor force participation. Digital transfers through the Jai Bangla Platform reached 3.1 million beneficiaries in the first half of 2023.
Health
The World Bank’s current health portfolio in India of around $2.8 billion includes both national and state-level projects:
A $1 billion COVID-19 Emergency Response Project helped the government strengthen health facilities in states, procure essential medical supplies – such as testing-equipment and kits, personal protective equipment, gloves, masks, and oxygen cylinders. It also helped insure 2.2 million frontline health workers. In addition, it helped expand health facilities dedicated to COVID-19, raising their number from 163 in March 2020 to more than 23,000 in June 2022. Over 926 million COVID-19 tests were supported and 3,362 testing laboratories created.
An additional $1 billion in World Bank support is helping the government strengthen health service delivery. This includes all aspects of pandemic preparedness and response, improving real-time disease surveillance, better One Health coordination and enhancing capacity for biosecurity.
World Bank is also supporting the National Tuberculosis (TB) Elimination Program to improve success rates of treatment, including of multidrug-resistant TB (MDR-TB). It is also scaling up direct transfer of cash benefits into the bank accounts of TB patients.
In Andhra Pradesh, Meghalaya, Mizoram, Nagaland, Tamil Nadu, and Uttarakhand ongoing programs focus on improving the quality of health care services, and strengthening the management of non-communicable diseases. In Uttarakhand, clusters of public health facilities, using a public private partnership (PPP) model, now have specialists available regularly, resulting in improved service delivery. Digital health strategies for improved service delivery are being implemented in Andhra Pradesh, Nagaland and Tamil Nadu.
Rural Water Supply and Sanitation: Since 2000, World Bank projects have contributed over $2.8 billion in financing for rural water supply and sanitation. About 30 million people from over 30,000 villages—with populations ranging from 150 to 15,000—have gain better access to drinking water. About 167 million rural people have benefitted from improved sanitation. Many of the projects have helped promote women’s participation in discussions around changing age-old sanitation behaviors. Local institutions have been strengthened to improve operations and maintenance of water and sanitation infrastructure and upgrade service delivery.
Agriculture
World Bank-financed projects are promoting climate resilient agriculture in Andhra Pradesh, Himachal Pradesh, Karnataka, Maharashtra Odisha and Tamil Nadu. The focus is on introducing climate smart technologies, using water more efficiently, adopting crop diversification for better soil health and using climate resilient seeds. World Bank is also focusing on reducing greenhouse gas emissions and using clean energy in post-harvest activities. Since 2016, World Bank-financed projects have brought around 1.7 million hectares of land under climate resilient agriculture. Around 2 million farmers are adopting improved agriculture technologies.
Empowering Rural Women
Since 2003, World Bank has provided $2.2 billion in support of the Women’s Self-Help Group (SHG) movement in India through several state and national projects. Around 32 million rural women have been mobilized into 2.9 million SHGs. Rural women have been trained and now earn their own livelihood as Pashu Sakhis (looking after animals), Bank Sakhis (helping rural people operate Bank accounts), or operating canteens at government hospitals and offices, and as masons building toilets. These empowered women have also been encouraged to become entrepreneurs, running small businesses like poultry and goat farms, grocery shops, and cottage industries, and provided access to markets. These entrepreneurial initiatives have helped the SHGs access commercial finance of over $14.5 billion. These projects were also the genesis of the Government of India’s National Rural Livelihoods Mission (NRLM), which is world’s largest platform for women’s social and economic empowerment. As of April 2023, the NRLM supports over 91 million women through 8.4 million SHGs.
Last Updated: Sep 27, 2023