Orissa Socio-Economic Development Loan/Credit

closed

The proposed Orissa Socio-Economic Development Load Project, is the first in a series over the next five years, to support the medium-term program for socio-economic development of Orissa, the poorest and perhaps most fiscally stressed of India's major states, located on the east coast. The project, consistent with the Country Assistance Strategy (CAS) objectives, aims to stabilize the fiscal situation, and introduce growth-enabling reforms in the poorest, though major states, reinforcing recent initiatives by the Government to accelerate economic growth, and improve public service delivery to reduce poverty. Benefits would include: a) more rapid economic growth; b) improved fiscal performance, and contribution to reduction of public sector borrowing in India; and, c) enhanced quality of governance and service delivery. Notwithstanding, the Orissa program entails significant risks. First, implementation of the reform program may be slower than planned, because of institutional capacity constraints. Second, opposition by powerful interests could slow down the pace of reform. Third, non-adherence to the targets set in the Medium-Term Fiscal Reform Framework (MTFRF), could derail Orissa's adjustment path. However, several factors contribute to a mitigation of these risks. The Government has already implemented up-front actions, laying the foundation for subsequent reforms. To help alleviate capacity constraints, and in close cooperation with other donors, the Bank will seek to ensure that significant technical assistance is available, to follow through on the reform measures supported by the proposed operation, while close attention is also being paid to sequencing reforms.