Orissa Socio-Economic Development Loan/Credit II

closed

The objective of the Second Orissa Socio-Economic Development Loan and Credit Project is to support the continued implementation of structural, fiscal and administrative reforms, needed to boost inclusive economic growth and achieve rapid poverty reduction over the medium term. Consistent with the Country Assistance Strategy (CAS) objectives, the project supports measures to boost rapid, and shared economic growth in one of the under-developed states of India - State of Orissa - to expand income earning opportunities and access to improved basic services for the poor. The program will also improve the efficiency of spending, and reduce the state's dependence on debt financing, while increasing fiscal space for development expenditures along with a rise in its output and outcome orientation. Bank support is complemented by reform-linked assistance from the Government of India. Despite potential risks, the enactment of the Orissa Fiscal Responsibility & Budget Management Act (2005), and the adoption of an updated Medium-Term Fiscal Plan (MTFP), will reduce the risk of deviating from the fiscal correction path approved by the State Legislature. Sensitivity analysis, conducted by the Bank team shows that a temporary growth shock in one year will only postpone the achievement of fiscal correction targets by about one year. And, to help alleviate capacity constraints, and in close cooperation with other donors, the Bank will ensure the availability of significant technical assistance to follow through on the reform measures supported by this operation.