Country Assistance Program Evaluation for India (2007)

Date: September 2007
Type: Evaluation Reports
Country:
Subject:
ADB administration and governance; Evaluation
Series: Country Assistance Program Evaluations

Description

This first country assistance program evaluation for India covered two decades (1986-2006), with emphasis on the more recent decade. The main objectives of the evaluation were to assess the performance of ADB's operations in India and to identify forward-looking lessons for the preparation of the next country strategy.

Summary of findings

  • ADB's strategies and programs were well aligned with ADB corporate objectives and the Government's development strategies, but also reflected the latter's shortcomings, particularly during the pre-reform area, when infrastructure investments were financed despite deficient policy and institutional frameworks.
  • ADB's lack of sector strategies for the first 10 years of operations in India negatively affected the sequencing and continuity of ADB assistance in a number of sectors. The shift from central to state-level operations after 1996 has helped improve the geographic and institutional focus of ADB's country program, which, together with comparatively high sector selectivity, facilitated a more efficient and effective use of ADB's resources.
  • Although ADB's assistance compared to India's overall investment requirements has been small, ADB made significant contributions to the development process, most importantly through its support for project design and implementation, advisory services, and policy dialogue at the state level. However, ADB failed to add much value in the provision of knowledge products and services and risk mitigation.
  • Although India is the largest recipient of loans and investments under ADB's private sector window, ADB's private sector operations have been largely limited to the financial sector. ADB's contributions to the mobilization of funds from commercial sources for the country's infrastructure development have been modest due to a lack of synergies between ADB's public and private sector operations, lack of expertise in private public partnership issues, and difficulties in effectively addressing relevant regulatory issues in its policy dialogue.
  • ADB's focus on project approvals, inadequate staff resources, limited delegation of authority for project implementation to the India Resident Mission (INRM), and application of its safeguards and procurement policies, as well as unaddressed capacity problems of executing agencies contributed to significant project implementation delays. Proactive portfolio management measures jointly instituted by ADB and the Government, and the use of new modalities under ADB's Innovation and Efficiency Initiative have led to recent improvements in portfolio implementation performance.
  • Energy and public resource management sector operations were deemed "successful". Operations in the transport, urban, and financial sectors were judged "partly successful on the high side". The effectiveness of financial sector operations was reduced by cancellations of financial intermediation loans, which accounted for a large share of sector assistance, due to lack of effective demand resulting from unaddressed sector-level structural problems and the ready availability of domestic funds. The efficiency of transport projects is likely going to be affected by lower-than-forecast traffic volumes and implementation problems that may lead to cost overruns. Lack of adequate funds for operation and maintenance activities and weaknesses in institutional capacity might reduce the sustainability of projects in the roads and urban sectors.
  • The overall rating for ADB's assistance program in India is "successful", albeit on the low side, which is based on commensurate strategic/institutional and sector performance ratings.

Recommendations

  • Improve the strategic focus of ADB's operations in India by carefully analyzing and selecting sectors for inclusion in ADB's assistance program; concentrating resources in a manageable number of focus states; anchoring an expansion in lending volumes and addition of new sectors and states to commensurate increases in staff and TA resources; and considering support for environmental issues.
  • Improve the quality of ADB's sector lending by discontinuing financial intermediation lending for which there is no effective demand or value addition; addressing project sustainability issues through stakeholder consultations on project/program design options and related tariff or fiscal requirements and through capacity development support; preparing realistic project implementation schedules and arrangements; and strengthening staff incentives for project implementation.
  • Increase the level of private sector operations by developing a joint operations strategy covering both the public and private sector sides of ADB; equipping INRM with more capacity and accountability for private sector and other non-sovereign transactions; expanding headroom for private sector lending to India; shifting funding from ADB's public to private/nonsovereign windows whenever feasible; and catalyzing more funding from commercial sources through the use of risk mitigation instruments.
  • Improve the relevance and effectiveness of nonlending services by focusing economic and sector work on topics relevant to ADB's lending operations; strengthening staff incentives for ESW; providing staff resources with infrastructure regulatory, policy, institutional, public-private partnership, and financing expertise; and encouraging the recruitment of exceptionally well qualified international and domestic consultants.
  • Improve responsiveness to client concerns by considering decentralization of additional functions and delegation of more authority to INRM; and harmonizing the approach to common safeguards issues in India and gradually moving toward country systems where equivalence with ADB principles exists.

Contents

  • Executive Summary
  • Introduction
  • General Assessment of ADB's Country Operations
  • Evaluation of ADB's Sector Assistance
  • Overall Assessment
  • Conclusions, Issues and Recommendations