The Hindu Business Line : World Bank lauds pace of reforms in AP, vows more aid

Dr C. Rangarajan, Chairman, Economic Advisory Council of the Prime Minister, with the Chief Minister, Dr Y.S. Rajasekhara Reddy, and Mr Michael F. Carter, Country Director, World Bank, in Hyderabad on Wednesday. - H. Satish

Hyderabad , June 22

WORLD Bank is bullish on the economic reforms underway in Andhra Pradesh. The global lending agency will also extend its financial assistance to the State, Country Director (India), Mr Michael F. Carter, said.

According to him, AP has received one of the largest sums from the World Bank and would continue to do so. "We are keen on funding AP," he said.

Talking to newspersons at the conference on `Fiscal Responsibility and Intergovernmental Finance' at the Administrative Staff College of India (ASCI) here on Wednesday, Mr Carter said the bank was currently in discussion with the State for a fresh tranche of structural adjustment loan (SAL).

A decision would be reached soon, he said. Of the planned 4-5 SALs, the State has received two, he said.

On financing projects such as roads and highways, irrigation and urban development, Mr Carter said the bank was likely to extend nearly $250 million for urban development projects in the next quarter.

Stating that the details for other projects were not finalised, he said the assistance would likely be of similar magnitude.

Notwithstanding the State's focus on rural economy, the economic reforms did not suffer, Mr Carter said. He welcomed the state government's recent decision to confine free power programme to the needy sections alone.

Mr Carter said the World Bank continues to emphasise the importance of fiscal reforms in India. "This is not primarily because we see it as a macro risk, but because of the negative developmental impact of poor fiscal performance. This is especially the case at the state level, where we have seen that poor revenue performance, large wage increases, and heavy interest payments leave states with little to spend on development, and in fact dis-empower them as agents of development. We support fiscal reforms at the state level from this positive perspective — empowering state governments to accelerate development."

Mr Carter said that the fiscal reforms enforced by many state governments were paying off. World Bank data suggested a drop in the fiscal deficit of several states.

Stressing on the need for institutional backing for fiscal reforms, Mr Carter said state governments, central government schemes, and even World Bank adjustment lending programmes can come and go.

"If you really want good fiscal policy over an extended period, you need legislative backing."

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