World Bank

 

Introduction

  • The World Bank is an international organization dedicated to providing financing, advice, and research to developing nations to aid their economic advancement.
    • The bank predominantly acts as an organization that attempts to fight poverty by offering developmental assistance to middle- and low-income countries.
  • The World Bank was created in 1944 out of the Bretton Woods Agreement, which was secured under the auspices of the United Nations in the latter days of World War II
  • The World Bank are headquartered in Washington, D.C
  • Though titled as a bank, the World Bank, is not necessarily a bank in the traditional, chartered meanings of the word.
    • The World Bank and its subsidiary groups operate within their own provisions and develop their own proprietary financial assistance products, all with the same goal of serving countries’ capital needs internationally
  • Through the years, the World Bank has expanded from a single institution to a group of five unique and cooperative institutional organizations, known as the World Banks or collectively as the World Bank Group; the details of which are as follows:
World Bank GroupFocus areas & Details
The International Bank for Reconstruction and Development (IBRD)An institution that provides debt financing to governments that are considered middle income
International Development Association (IDA)This is a group that gives interest-free loans to the governments of poor countries.
The International Finance Corporation (IFC)This organization, focuses on the private sector and provides developing countries with investment financing and financial advisory services
Multilateral Investment Guarantee Agency (MIGA)This is an organization that promotes foreign direct investments in developing countries
International Centre for Settlement of Investment Disputes (ICSID)This is an entity that provides arbitration on international investment disputes.

Organisation and Structure

  • The World Bank is related to the UN, though it is not accountable either to the General Assembly or to the Security Council
  • Each of the bank’s more than 180 member states are represented on the board of governors, which meets once a year.
    • The governors are usually their countries’ finance ministers or central bank governors
  • Although the board of governors has some influence on IBRD policies, actual decision-making power is wielded largely by the bank’s 25 executive directors
  • Throughout the World Bank’s history, the bank president, who serves as chairman of the Executive Board, has been an American citizen.
  • Voting power is based on a country’s capital subscription, which is based in turn on its economic resources
    • Thus, the wealthier and more developed countries constitute the bank’s major shareholders and thus exercise greater power and influence.
  • The bank obtains its funds from the capital subscriptions of member countries, bond flotations on the world’s capital markets, and net earnings accrued from interest payments on IBRD and IFC loans

 

India and World Bank

  • The cooperation between the World Bank and India goes back to the foundation of the International Bank of Reconstruction and Development in 1944
  • India received its first bank loan of US$34million from the International Bank of Reconstruction and Development in November 1948 for railway rehabilitation
  • During the 1950s, the IBRD was India’s sole source of World Bank borrowings
  • During the 1960s and 1970s, the IDA accounted for nearly three-fourths of all WB lending to India and, in turn, India was by far the largest recipient of IDA funds, accounting for more than two-fifths of all its lending
  • The lending portfolio changed sharply after the 1991 macroeconomic crisis
    • India became one of the last important borrowers in order to undertake structural adjustment lending
  • Currently, the World Bank Group (WBG) has approved a $25-30 billion commitment plan for India for the period 2019-22

 

Projects and Alliances supported by World Bank in India

CategoryProject/AllianceLaunched YearDetails
EducationSarva Shiksha Abhiyan (SSA)2001·         The program aimed to provide elementary education for around 200 million children across the country

·         The program focuses on improving quality and developing learning indicators by the National Council for Education Research and Training in order to evaluate children’s progress in acquiring educational knowledge

 Odisha Higher Education Program for Excellence and Equity2017The development objective of the Program is to improve the quality of and students’ equitable access to selected institutions and enhance governance of the higher education system in Odisha
    
AgricultureNational Dairy Support Project2012·         The development objective is to increase the productivity of milch animals and improve market access of milk producers in project areas
 Atal Bhujal Yojana (Abhy)-National Groundwater Management Improvement2018·         This is an initiative for ensuring long term sustainability of ground water resources in the country
    
HealthProgram Towards Elimination of Tuberculosis2019·         The objective of the programme is to improve the coverage and quality of TB control interventions in the private and public sector in targeted states of India.
 Innovate in India for Inclusiveness2017·         The development objective of Innovate in India for Inclusiveness is to facilitate innovation in biopharmaceutical products and medical devices that address public health priorities in India.
    
Food SecurityNational Nutrition Mission (also known as ICDS Systems Strengthening and Nutrition Improvement Project: Additional Financing)2018The development objective of the National Nutrition Mission Project for India is to support the Government of India and participating states to

·         strengthen the Integrated Child Development Services (ICDS) policy framework, systems and capacities, and facilitate community engagement, to ensure greater focus on children under three years of age; and

·         strengthen convergent actions for improved nutrition outcomes

    
InfrastructureDam Rehabilitation & Improvement Project2019·         This is to improve the safety and operational performance of selected existing dams in the territory of the participating states
 Eastern Dedicated Freight Corridor Project2016·         The Government of India and the World Bank today signed a $650 million agreement for faster and more efficient movement of raw materials and finished goods between the north and eastern parts of India
 India Low-Income Housing Finance2013·         This is to provide access to sustainable housing finance for low income households, to purchase, build or upgrade their dwellings.
 IN National Ganga River Basin Project2011·         The objectives of the National Ganga River Basin Project for India are to support the National Ganga River Basin Authority (NGRBA) in:

·         building capacity of its nascent operational-level institutions, so that they can manage the long-term Ganga clean-up and conservation program; and

·         implementing a diverse set of demonstrative investments for reducing point-source pollution loads in a sustainable manner, at priority locations on the Ganga.

 Sustainable Urban Transport Project2009·         The objective is to promote environmentally sustainable urban transport in India and to improve the usage of environment-friendly transport modes through demonstration projects in selected cities
  The Pradhan Mantri Gram Sadak Yojana Project2000·         The project aims to connect unconnected habitations with all-weather roads. Key to the program is an all-weather access to the respective roads
    
Skill DevelopmentSkill India Mission Operation2017·         The project has been developed to enhance institutional mechanisms for skill development and increase access to quality and market-relevant training for the workforce.
 Nai Manzil – Education and Skills Training for Minorities2016·         The project aims to improve completion of secondary education and market-driven skills training for targeted youth from minority communities.
    
Climate ChangeInnovation in Solar Power and Hybrid Technologies2019The Objectives are to demonstrate the operational and economic feasibility of utility-scale innovative               renewable energy technologies and battery energy storage solutions, and to strengthen institutional capacity to facilitate scale-up of such technologies on a commercial basis in India.
    
EnergyIndia Energy Efficiency Scale-up Program2018The development objective of Energy Efficiency Scale-up Program Project for India are to scale up energy savings in residential and public sectors, strengthen Energy Efficiency Services Limited’s (EESL) institutional capacity, and enhance its access to commercial financing
    
Disaster ManagementIntegrated Coastal Zone Management2010·         The project has been launched by World Bank to assist Government of India (GoI) in building national capacity for implementation of comprehensive coastal management approach in the country, and piloting the integrated coastal zone management approach in states of Gujarat, Orissa and West Bengal
    
Human Resource DevelopmentCountry Partnership Framework for India2018·          The partnership emphasizes an efficient and sustainable growth path and fosters competitiveness to create new job opportunities and investments in human capital.

·         It is embedded in the Sustainable Development Goals of the United Nations and focuses on strengthening of public-sector institutions in order to create strong governance.

·         The country partnership framework between the World Bank and India is the largest country partnership framework in the World Bank Group and it supports India’s transition to a middle-income country

 North East Rural Livelihoods Project (NERLP)2012·         The development objective of the North East Rural Livelihoods Project for India is to improve rural livelihoods, especially that of women, unemployed youths and the most disadvantaged, in the participating North Eastern States.

World Bank Criticism

  • Structural under-representation of the Global South
    • One of the central criticisms of the World Bank relates to the political power imbalances in their governance structures where, as a result of voting shares being based principally on the size and ‘openness’ of countries’ economies, poorer countries – often those receiving loans from World Bank – are structurally under-represented in decision-making processes
  • Undermining democratic ownership
    • The issue of political power imbalances is exacerbated by another long-standing critique of the Bank: that the economic policy conditions they promote – often attached or ‘recommended’ as part of loans, projects, technical assistance, or financial surveillance – undermine the sovereignty of borrower nations, limiting their ability to make policy decisions and eroding their ownership of national development strategies
  • Weak ability to learn from past mistakes
    • The World Bank created the Independent Evaluation Group (IEG) in 2006, integrating several individual accountability mechanisms, and was charged with evaluating the activities of the entire World Bank Group and determining what works, what doesn’t and why.
    • However, the Bank has been criticised for failing to implement the recommendations
  • Restricting the macroeconomic environment for human rights
    • At the macroeconomic level, following on from the original Washington Consensus, the Bank continues to push a particular set of macroeconomic policy prescriptions across their member countries.
      • Most typically, these are fiscal consolidation measures (or austerity), and include reducing the public wage bill, introducing or increasing VAT and other indirect regressive taxes in particular, labour flexibilisation, rationalising (cutting) and privatising social services, and targeting social protections and subsidies, while maintaining low levels of inflation, corporate taxation rates and trade tariffs.
    • This ‘pro-cyclical’ approach has been criticised for leading to a decline in economic activity, leading to lower consumption, lower public revenues, lower investment in vital public services, and higher levels of inequality, which in turn also lowers growth
    • Further, Labour unions, for instance, have long opposed the World Bank’s systematic weakening of labour rights either directly through conditionality or indirectly through policy advice in flagship reports, such as the World Bank’s 2018 World Development Report
  • Growth-based model unsustainable
    • The growth-based approach to poverty reduction that the World Bank and IMF both promote has immense environmental consequences, as is evidenced by the deepening climate crisis.
    • While the Bank has increasingly tried to account for environmental and climate factors in their work over recent decades, these efforts have largely been limited to attempting to integrate these concerns into a growth-based development model
  • Focus on mega-projects
    • Since 2015, there has been a particular emphasis on promoting ‘infrastructure as an asset class’, in order to crowd in institutional investors
    • This policy initiative is highly dependent on mega-infrastructure projects, and currently lacks a framework for aligning such mega-projects with the Paris Climate Agreement or the Sustainable Development Goals (SDGs)

 

Way forward

  • The proposals for more impactful and efficient functioning of World Bank include:
    • Use independent organisations to identify the issues better
      • The Bank has been very effective at large scale implementation and at leveraging resources to take forward clearly defined reform programmes. However, it has not always been good at responding flexibly and adaptively to problems and opportunities as they arise, particularly in fragile states.
      • Hence, the need to engage independent organisations who have the experience and the flexibility to play this role
    • Harness strengths from different specialist areas
      • The Bank’s internal reorganisation is largely complete. It now needs to demonstrate it can connect and harness different professional groups in addressing problems, identifying bottlenecks and advancing innovative solutions
    • Prevent creating monolithic reform programmes as these can stifle complementary initiatives
      • Co-ordination is vital, but there may still be some functions or aspects of reform that bilateral and other agencies are better placed to take forward. If these are well co-ordinated, they will improve the functioning and implementation of the larger reform programmes
      • Hence, while funding large scale initiatives, World Bank must ensure that it doesn’t stifle others who may be better placed to support discrete initiatives
    • Banks should maintain engagement at Different levels
      • Discussions and agreements with ministers and senior staff are essential as authorisation is needed to take forward reform, but this does not make change happen by itself.
      • In this perspective, the Bank needs to ensure that it undertakes multi-layered engagement to secure practical traction and change