World Bank Supports Reforms To Boost Growth In Bihar

The First Bihar Development Policy Loan/Credit is designed to improve fiscal policy, public financial management, and governance. It aims to boost economic growth through reforms in agriculture, investment climate, and basic infrastructure, with an emphasis on roads. It will also support improving public service delivery in education and social protection.

While India has emerged as one of the fastest growing countries in the world, it faces the challenge of addressing widening economic disparities. Bihar is the poorest state in India with about 39 percent of population living in poverty. Economic growth at 4 percent in recent years has been much slower than the rest of the country. While the state has 8.5 percent of India’s population, it accounts for only 1.6 percent of the country’s GDP.

“Bihar is a crucial state for poverty reduction and inclusive growth in India,” said Isabel Guerrero, World Bank Country Director for India. “It is India’s poorest as well as one of its slowest growing states. But with arable land, water resources, favorable demography, and unexploited tourism potential, Bihar has the necessary preconditions to accelerate development. By focusing on accelerating growth and improving public service delivery, this operation will assist Bihar towards achieving the development goals set out in its Eleventh Plan.”

The project supports the priorities of the government’s forthcoming 11th Five Year Plan. The Plan, which is discussed in Bihar’s Legislative Assembly and based on extensive consultation and expert feedback, has a strong ownership and commitment among key stakeholders at all levels of government and political leadership.

‘In a short span of time, the Government of Bihar has established a strong track record of implementing policy reforms in a wide range of areas, with visible effects and results on the ground,” said Dipak Dasgupta, World Bank Lead Economist and co-team leader for the project. “During the past two years, the state has initiated comprehensive reforms, ranging from fiscal policy, stepped up public investment, improved, investment climate, and greater accountability, to the better delivery of key services to the people in health, education, and agriculture.”

The project will support further reforms in public fiscal and financial management, state and rural roads, agriculture, regulations and education. It will also support initial positive steps in reform of Bihar’s social protection system such as strengthening overall management of anti-poverty programs.

“It is important for the Bank’s mission to support the Government of Bihar implement a strong home-grown reform program that could help turn around one of the poorest states of India.” said Ahmad Ahsan, World Bank Lead Economist and co-team leader for the project. “In addition to supporting the government’s overall development program, this operation supports measures will help put the state on a strong fiscal footing, improve public expenditure effectiveness, reform the regulatory climate to attract private investment in general and private participation in infrastructure development, and strengthen the hands of local governments and communities in a key sector such as primary education. Monitoring and evaluation activities will also be strengthened as part of this program.”

The US$150 million loan is provided by the International Bank for Reconstruction and Development (IBRD), and has 20 years to maturity and a 5-year grace period.

The US$75 million credit is provided by the International Development Association (IDA), the World Bank’s concessionary lending arm and has 35 years to maturity and a 10-year grace period