India : evaluating Bank assistance for public sector management - a country assistance evaluation

This paper reviews, and evaluates the Bank's involvement, and performance in the area of public sector management. It also takes a close look at the state-level policy-based lending in India, which has gained major importance in recent years. Under public sector management issues, fiscal adjustment, public enterprise reform, governance, and institutional development are covered. The Bank has considered fiscal adjustment an integral part of public sector reform, since persistent fiscal deficits in the public sector has been the major macroeconomic weakness of the country's economy. As of the mid 1990s, the Bank shifted attention to the finances of the states, but it also needs to explore ways to address central fiscal problems. Regarding the pace of public enterprise, it is considered slow, thus it was agreed that reforming the public enterprise sector is essential because of its large impact on the economy, and of its negative contribution to overall fiscal deficit. Furthermore, the Bank should explore entry points to contribute to the dialogue in governance issues, considering lending in specific areas, such as legal reforms, and, continue to focus on institutional development issues, strengthening linkages between government reforms, and sector institutions.