Portal de Periódicos da CAPES

Banking on India's States: The Politics of World Bank Reform Programs in Andhra Pradesh and Karnataka

2005; Routledge; Volume: 4; Issue: 3-4 Linguagem: Inglês

10.1080/14736480500430984

1557-3036

Jason A. Kirk,

Economic Theory and Policy

Abstract Jason A. Kirk is a lecturer in the International Relations Program at the University of Pennsylvania. Notes The author wishes to thank the following for their comments on earlier versions of this essay: Sunila Kale, Peter Kingstone, and four anonymous reviewers and the editorial staff at India Review. This essay draws upon research conducted for a dissertation on subnational World Bank lending and the federal politics of economic reform in India. The analysis has benefited greatly from feedback from a number of people on various aspects of the larger project, including Tom Callaghy, Rudy Sil, Rahul Mukherji, Francine Frankel, John Echeverri-Gent, Tulia Falleti, and Douglas Verney. Responsibility for any factual or analytical errors rests with the author. 1. Author's interview with Joëlle Chassard, World Bank country coordinator for India, July 17, 2002, Washington, DC. 2. In India, the Bank's state adjustment loans legally specify the Government of India as "borrower," with the relevant state as "beneficiary" to receive the rupee equivalent of the Bank's dollar-denominated loans. This is a country-specific arrangement reflecting the Indian central government's preference for control over foreign loans to states. In contrast, in Brazil, where state governments enjoy more liberal borrowing privileges, they can be the "borrower" on World Bank loans so long as the federal government provides a sovereign guarantee (required by the Bank's Articles of Agreement). Article 293, Clause Three of the Constitution of India asserts the center's control over states' international borrowing: "A State may not without the consent of the Government of India raise any loan if there is still outstanding any part of a loan which has been made to the State by the Government of India or its predecessor Government, or in respect of which a guarantee has been given by the Government of India or by its predecessor Government." Since all states have outstanding debt to the center, in practice this clause means they must seek its express permission to borrow from outside the territory of India. 3. Author's email correspondence with James Manor, Professor, Institute of Development Studies, Sussex, UK, September 16, 2002. 4. Author's interview with Joëlle Chassard. 5. Author's interview with Edwin Lim, World Bank country director for India (1996–2002), July 14, 2003, Osterville, Mass. 6. Caste politics in AP are complex and cannot be adequately addressed here. For detailed analyses, see Rama S. Melkote, "Andhra Pradesh: The Reform State and its Dilemmas," paper presented at a workshop on State Politics in India in the 1990s: Political Mobilization and Political Competition, organized by the Developing Countries Research Centre, University of Delhi, and London School of Economics, December 16–17, 2004, New Delhi; Atul Kohli, "The NTR Phenomenon in Andhra Pradesh: Political Change in a South Indian State," Asian Survey Vol. 28, No. 10 (October 1988), pp. 991–1017; and K. C. Suri, "Democratic Process and Electoral Politics in Andhra Pradesh," Overseas Development Institute Working Paper No. 180 (September 2002). 7. N. Chandrababu Naidu with Sevanti Ninan, PlainSpeaking (New Delhi: Viking/Penguin Books India, 2000), p. 17. 8. This poll has been cited in a number of sources, and referred to by Naidu himself in public speeches. See for example Lloyd I. Rudolph and Susanne Hoeber Rudolph, "Iconisation of Chandrababu: Sharing Sovereignty in India's Federal Market Economy," Economic and Political Weekly, May 5–11, 2001. 9. Karli Srinivasulu, "Regime Change and Shifting Social Bases: The Telugu Desam Party in the 12th General Election," in Ramashray Roy and Paul Wallace, eds., Indian Politics and the 1998 Election (Thousand Oaks, CA: Sage Publications, 1999), p. 210. 10. For a more detailed discussion of Naidu's conversion, see Sumantra Sen and Francine Frankel, eds., "Andhra Pradesh's Long March Towards 2020: Electoral Detours in a Developmentalist State," Doing Business in India: Political, Social and Cultural Overview (Philadelphia: Center for the Advanced Study of India, University of Pennsylvania, Spring 2005). The author provided research assistance and served as associate editor for this publication. 11. Author's interview with Duvurri Subbarao, finance secretary, Andhra Pradesh (1993–98), September 26, 2002, Washington, DC. 12. Sen and Frankel, eds., "Andhra Pradesh's Long March Towards 2020," p. 4. For a more detailed discussion of the Malaysian model, see Toby Huff, "Malaysia's Multimedia Super Corridor and its First Crisis of Confidence," Asian Journal of Social Science Vol. 30, No. 2 (June 2002), pp. 248–70. 13. The Vision 2020 document asserts that "knowledge-led growth" in fields such as IT services, biotech, and pharmaceuticals – along with other select "growth engine" sectors such as agro-industry, mining, and tourism – would by 2020 permit the state to achieve "a level of development that [would] provide its people tremendous opportunities to achieve prosperity and wellbeing and enjoy a high quality of life." See Government of Andhra Pradesh, Andhra Pradesh: Vision 2020 (Hyderabad: State Secretariat, January 1999). 14. Author's interview with Edwin Lim. 15. World Bank, India – Andhra Pradesh: Agenda for Economic Reforms, January 16, 1997. 16. Author's interview with Edwin Lim. 17. National Sample Survey data, cited in C. P. Chandrasekhar and Jayati Ghosh, "The Continuing Possibilities of Land Reform," http://www.macroscan.com/the/food/nov04/fod231104Land_Reform.htm. 18. K. Srinivas Reddy, "Extremist Resurgence," Frontline: India's National Magazine, October 11–24, 2003. The term Naxalite comes from the radical movement's origins in Naxalbari, West Bengal, in the late 1960s. 19. See for example, World Bank, "World Bank to Assist Human Development Needs in India's Lead Reforming State," News Release No. 98/1850/SAS, June 25, 1998. 20. "Booting Up in Andhra Pradesh: The State Election to Watch in India," The Economist, September 11, 1999; emphasis added. 21. Loraine Kennedy, "The Political Determinants of Reform Packaging: Contrasting Responses to Economic Liberalisation in Andhra Pradesh and Tamil Nadu," author's manuscript, p. 42. This paper was published as a chapter in Rob Jenkins, ed., Regional Reflections: Comparing Politics across India's States (New Delhi: Oxford University Press, 2004). The World Bank is only a minor actor in Kennedy's analysis of AP (and it did not have a focus state relationship with Tamil Nadu during the period she describes), but she suggests that its loans "have contributed to locking the state government into [its] pro-reform stance by creating constraints, in the form of conditionalities." In actual practice, the Bank was more lenient in its enforcement of conditionalities in AP than in Karnataka, as the analysis here shows. 22. "He Knows His Friends, Foes, and Priorities," The Economic Times of India, October 8, 1999. 23. This argument is also advanced in James Manor, "Explaining Political Trajectories in Andhra Pradesh and Karnataka," in Jenkins, ed., Regional Reflections: Comparing Politics across India's States. 24. Author's interview with Montek Singh Ahluwalia, Director, Independent Evaluations Office, International Monetary Fund, July 2002, Washington, D.C. 25. Celia W. Dugger, "Even the Poor Pay Heed to the Esoterica of India's Riches," The New York Times, September 10, 1999. 26. Though under "first-past-the-post" rules, the vote shares translated into 91 seats for Congress, 180 for the TDP, and 12 for the BJP (of the Assembly's 294 seats). 27. Manor, "Explaining Political Trajectories in Andhra Pradesh and Karnataka"; Suri, "Democratic Politics and Electoral Process in Andhra Pradesh." 28. This point is made in V. Sridhar, "The Neo-liberal Consensus," Frontline: India's NationalMagazine, April 23, 2004. 29. See for example Jos Mooij, "Smart Governance? Politics and the Policy Process in Andhra Pradesh, India," Overseas Development Institute Working Paper No. 228 (October 2003). 30. World Bank, "India: Power Sector Reform in Andhra Pradesh," Participation in Macroeconomic Policies: Case Studies, http://www.worldbank.org/participation/web/webfiles/indiapower.htm. 31. Rajen Harshe, "Stakeholder Participation in Andhra Pradesh Reform Process," draft report submitted to the World Bank as an internal document (2001); shared with the author by Rajen Harshe, August 2002. 32. World Bank, "India: Power Sector Reform in Andhra Pradesh." 33. R. J. Rajendra Prasad, "WB Chief's Remarks General: Gov't.," The Hindu, September 6, 2000, http://www.hinduonnet.com. 34. Syed Amin Jafri, "AP House Rocked by World Bank Official's Statement," Rediff.Com, September 5, 2000, http://www.rediff.com. 35. The power minister, K. Subbarayudu, did not score high marks for public relations when he retorted that copies of the documents were available on the Bank's website, since this defense only invited an opposition rejoinder about the government's technological elitism and lack of concern toward poor citizens. 36. Remarks by BJP floor leader Indrasena Reddy as reported in V. Sridhar, "Brutal Crackdown," Frontline: India's National Magazine, September 16–29, 2000. 37. "Riding Two Horses" (editorial), The Hindu, June 4, 2000. 38. Lionel Messias, "World Bank Praise for AP," Gulf News, November 10, 2000. 39. Even in 2000, before the drought, AP had accounted for 385 of 480 cases reported across India. Though analysts attribute these tragedies to multiple factors, state policies were substantially implicated in a recurring scenario: indigent and lacking access to formal credit, many of the victims had taken on large personal debts to local moneylenders in order to purchase fertilizer, pesticide, and other inputs – the prices of which, like power tariffs, increased as Naidu's government withdrew subsidies to meet its fiscal adjustment targets. 40. "Electricity Might Determine the Fate of TDP," Indo-Asian News Service, April 16, 2004. 41. Sen and Frankel, "Andhra Pradesh's Long March Towards 2020," p. 23. 42. As opposed to other factors, such as a delayed expression of public indignation at the communal violence in Gujarat in 2002, which took place on the party's watch. 43. World Bank, Unlocking Andhra Pradesh's Growth Potential: An Agenda to Achieve the Vision 2020 Growth Targets, August 2004. Accessible via http://www.worldbank.org. 44. Subhomoy Bhattacharjee, "World Bank May Cut Off State Loans," Rediff.com, August 9, 2004. 45. "Heels Over Head: YSR turn pro-World Bank," The Economic Times, May 18, 2005. 46. K. V. Kurmanath, "Pace of Reforms Has Slackened in Last One Year: World Bank," Business Line, May 4, 2005. 47. Author's interview with B. K. Bhattacharya, former Chief Secretary, Government of Karnataka, August 2002, Bangladore. 48. Parvathi Menon, "Loan as Lever," Frontline: India's National Magazine, November 19, 2004. 49. "A Blend of Reforms Needed," The Statesman, November 9, 2000; see also "India: State's 'Admirable' Plans Praised," The Hindu, November 10, 2000. 50. Parvathi Menon, "Karnataka's Agony," Frontline, August 18–31, 2001. 51. "India: Cabinet Decides against Power Tariff Hike," The Hindu, September 14, 2001. 52. "Karnataka: Subsidy Bill may Torpedo Fiscal Correction Plans," The Hindu Business Line, April 19, 2002. 53. S. L. Krishna, budget speech delivered to the State Assembly on March 21, 2002, http://www.kar.nic.in/finance/bud2002/part-a.htm. 54. Divya Sreedharan, "WB Loath to Release Funds for Reforms in Power Sector," The Hindu, May 5, 2003. Carter succeeded Edwin Lim after his retirement from the Bank in September 2002. 55. "VRS Scheme has had a Negative Impact – Study," The Hindu, December 26, 2003. 56. "Krishna May Become IT CEO Again," The Economic Times, May 17, 2004. 57. "Rs. 72.84 Cr Revenue Surplus Budget for Karnataka," The Financial Express, July 20, 2004. 58. "Control Fiscal Deficit to Ensure Rapid Progress," The Hindu, August 5, 2004. 59. Subir Roy, "'I Want to Show that Good Politics is also Good Economics'," Business Standard, August 11, 2004. 60. "World Bank Happy with Reforms Process," The Hindu, January 26, 2005. 61. Author's interview with Sumir Lal, World Bank external affairs officer, August 11, 2003, New Delhi. 62. "World Bank to Back Investment Lending in Tamil Nadu," The Hindu Business Line, May 19, 2005. 63. The basic guidelines state that states must fulfill four conditions: first, devise a medium-term fiscal framework to limit the fiscal deficit to less than 3% of GSDP and achieve a zero revenue deficit within 3–5 years; second, contain subsidies, especially in the power sector; third, raise user fees for services; and fourth, improve governance and reduce administrative costs. 64. World Bank, India: Country Assistance Strategy 2005–08 (Washington, DC: The World Bank, 2004). 65. World Bank, Assessing Aid: What Works, What Doesn't, and Why (Oxford: Oxford University Press for the World Bank, 1998). 66. On this, see for example Jonathan Rodden, "Federalism and Bailouts in Brazil," in Jonathan Rodden, Gunnar S. Eskeland, and Jennie Litvack, eds., Fiscal Decentralization and the Challenge of Hard Budget Constraints (Cambridge: The MIT Press, 2003), pp. 213–48. 67. For a review, see M. Govinda Rao, "Incentivizing Fiscal Transfers in the Indian Federation," Publius: The Journal of Federalism, Vol. 33, No. 4 (Fall 2003), pp. 43–62. 68. Lloyd I. Rudolph and Susanne Hoeber Rudolph, In Pursuit of Lakshmi: The Political Economy of the Indian State (Chicago: The University of Chicago Press, 1987), pp. 1, 13, 3.