Countries and Regions

1. Poverty Reduction Through Growth

10. With a quarter of the population still under the poverty line, poverty reduction is a high priority both for the Government and for ADB. In addressing this challenge, ADB’s operations in India, especially direct poverty interventions in the social sectors, are constrained by India’s lack of access to concessional ADB assistance. Consequently, ADB’s operational strategy in India addresses the challenge of poverty reduction primarily through support for infrastructure-led growth. The effectiveness of this approach is borne out by compelling evidence of the strong poverty reducing impact of growth in India and elsewhere, especially the rapid reduction of poverty during the past decade of high growth.⁵ This aspect of the operational strategy has worked well and is being maintained.

2. State Level Operations

11. An important dimension of ADB’s operational strategy in recent years has been the focus on state level operations. Following the adoption of a new operational strategy in 1996, ADB has concentrated state level operations in three focal states, i.e., Gujarat, Madhya Pradesh, and Kerala to fully exploit complementarities and the synergy between interventions, thereby maximizing the development impact in a given region. However, now there is concern about growing inter-regional disparities, and concentration of external assistance in a few focal states might reinforce this process. The Government is also keen to strengthen development assistance to the northeastern states and improve connectivity to these states in the subregional context. ADB state level operations are therefore being extended to a few more second tier states. ADB already has significant operations in West Bengal because of its strategic importance in developing regional cooperation. Assistance is also being extended now to Assam and Sikkim in the northeast and the new state of Chhattisgarh, which has been carved out of the focal state of Madhya Pradesh. State level operations will now account for 33% of ADB lending in India. Such extension of operations to high poverty incidence states will further strengthen the poverty reducing impact of ADB operations.

3. Addressing Thematic Priorities

12. Interventions to address crosscutting thematic priorities have been integrated with ADB’s operations in the priority sectors, state level operations, and through advisory technical assistance.

13. Private Sector Development. Support for private sector development is an integral part of ADB's operational strategy in India. The main emphasis has been on developing the policy, institutional and regulatory frameworks for private sector participation in economic development, particularly in the roads, ports, hydrocarbon and communication sectors and at the state level, in the power sector. This strategy includes facilitating private sector investment in infrastructure. improving the commercial framework through support for developing alternate dispute settlement mechanisms, and providing direct financial assistance for strategic private sector initiatives. Finally, ADB’s guarantee products will be used as credit enhancement tools wherever appropriate.

14. Social Development and Gender Equity. Despite recent improvements in India’s social indicators, it still ranks 124 out of 173 countries in terms of the human development index (HDI) and 105 out of 173 countries in terms of the gender development index. The Government recognizes that the provisions of basic social services such as access to education, health care, potable water, and sanitation are a key element of poverty reduction. These social services are state subjects, and ADB is addressing these through its state-level public resource management programs. Social aspects have also been safeguarded in infrastructure and urban development projects through appropriate social assessments including impact on indigenous people, resettlement plans, and involvement of civil society. Finally, ADB is conducting a gender assessment that will identify specific action for better integrating gender concerns in ADB operations.

15. Governance. ADB has been assisting governance reforms in India through its support for reforms in public resource management, the power sector, urban and rural development, transport and communication, and financial markets. More recently, ADB has increased its focus on strengthening the capacity and capability of local, state, and central governments to (i) ensure the provision of equitable and affordable services, particularly to the poor and the marginalized; and (ii) create an enabling environment for private sector investment and job creation. The sector and thematic support programs of ADB are designed to improve (i) the accountability of public sector staff and organizations; (ii) participation of community and interest groups in decision-making on the delivery of services; (iii) predictability of markets, regulations, and legal frameworks; and (iv) transparency in dealings between the private sector and government. The Citizens’ Charter initiative promulgated by the Central Government and a number of state governments provides a sound framework for catalyzing improvements in the delivery of public services. With links to the budget and performance management, the service delivery framework provides a sound model for reform. ADB will focus increasingly on providing support for initiatives that will develop and implement an efficient public service delivery model.

16. Environment Protection. The Ministry of Environment and Forests (MOEF) is the nodal agency in the administrative structure of the central Government responsible for the protection and management of the environment in the country. The Central Pollution Control Board and the state pollution control boards form the regulatory core for controlling and monitoring environmental degradation in the country. ADB has provided technical assistance (TA) for enhancing the capacity of the MOEF for environmental impact assessment, use of market-based instruments and cleaner production, and TA to strengthen capacity of the State Pollution Control Board (SPCB) in Madhya Pradesh. TA and a loan are programmed for replacement of coal by gas as a cleaner fuel in Kolkata. ADB has also promoted environment improvement through social infrastructure projects to develop water supply and sanitation systems, improve water resource management systems in Madhya Pradesh, and for conservation of biodiversity in the Sundarbans. ADB will assist the Government in tapping the potential of renewable energy estimated at 100,000 Megawatt. ADB will also continue to increase its portfolio in environmentally oriented projects by seeking opportunities for leveraging concessional funds through cofinancing, including from the Global Environment Facility.

4. South Asia Subregional Economic Cooperation (SASEC)

17. India is now playing a leading role in the South Asia Subregional Economic Cooperation (SASEC) program initiated by ADB to promote subregional cooperation among Bangladesh, Bhutan, India, and Nepal. The program has made rapid progress especially during the past year. Working groups of senior officials and business leaders from the four countries are now engaged in developing an action program of priority subregional projects in energy; transport; tourism; environment protection; and trade, investment and private sector cooperation. The last working group is chaired by India. Several loans and TAs with subregional implications in the transport and energy sectors are being included in the India program. India also hosted a regional roundtable on information and communications technology, which generated several proposals for subregional cooperation projects in information technology. The northeastern states and West Bengal have an especially important strategic role, as the eastern and western flanks of the SASEC subregion, in anchoring the connectivity for the seamless flow of goods and people as well as energy, information, and investments across the subregion. Accordingly, these states have been included in the ADB program.