ADB Efforts in Reducing Poverty and Inequality: India’s Case

ByJyotsnaMohanSingh*Popular literature often touts India as an industrial powerhouse, supplemented by its largeconsumer base. Despite its huge population of 1.23 billion,1 India exhibited a modest averagegrowthof1.64%annuallyfrom2001to2011.However,363million(29.5%ofthepopulation)stilllives below the poverty line from 2011 to 2012. Given its diverse and dynamic nature, India'sdemography merits a closer examination, both to identify potential growth opportunities andpossible problems associatedwith it. On the onehand, the growth opportunities come from theimmense human resources inviting foreign investments on account of cheap labor and skilledmanpower.Theproblems,ontheotherhand,arerootedinpoverty,vastinequalityinincomeandeducation,andconsequently,hugedisparitiesinstandardsofliving.TheAsianDevelopmentBank(ADB),beingthemaindevelopmentbankintheregionmandatedtoeradicatepoverty,hasbeenadevelopmentpartnerofIndiasince1986.Foralmostthreedecadesnow,mostofitsprogramstrategiesinthecountryprimarilyfocusongovernmentpriorities,suchas transportation, energy, and water and other urban infrastructure.2 However, while the ADBcontinues to support these programs, poverty in India still remains significantly high over theyears.Jyotsna Mohan Singh is actively involved in diverse social issues affecting Indian NGOs. She is currently the Programme Manager ofVoluntary Action Network India, an organization that promotes volunteerism and the voluntary sector in India using advocacy as itsprincipleinstrumenttocatalyzechange.

1GovernmentestimateasofMarch2014.2DevelopmentEffectivenessBrief,India,India–ADB:PartneringforSustainableandInclusiveGrowth(2014),ADBPublication

AsianDevelopmentBank

AggravatingPovertyandInequalityinIndiaMeasuringpovertyratesishighlypoliticizedinIndia with changing definitions from onegovernmentregimetoanother.TheRangarajanCommittee (2014) was tasked with revisitingthe Tendulkar Formula (2011-2012) forestimationofpovertyand identificationof thepoorafteramassivepublicoutcryeruptedoverthe abnormally lowpoverty lines fixed by thelast UPA (United Progressive Alliance)government.Therecommendationofthepanelresulted in an increase in thenumber of poorliving below poverty line (BPL), which isestimated at 363 million (29.5% of thepopulation) in 2011-2012. This is 35%higherthan theestimated270millionpeople (21.9%of the population) based on the TendulkarFormula.TheRangarajanreportalsoestimatedthat the share of the BPL group in the totalpopulation was 38.2%, translating into adecline in poverty ratio by 8.7 percentagepointsoveratwo-yearperiod(2009-2010).3The gap in income between the richest 10%andthepoorest40%ofthepopulationinIndiahas been on a constant rise since 1995. Thebenefitsofgrowthhaveincreasinglyaccruedtotherichestmembersofsociety,pushingincomeinequality evenhigher. Figure 1 demonstrateshowIndia’snationalincomeissharedbetweentherichest10%andthepoorest40%.

Figure1.IncreasingInequalityinIndia4

4Evenitup;TimetoEndExtremeInequality(2014),OxfamInternational

Asamatteroffact,ninetymillionIndianscouldbeliftedoutofextremepovertyby2019ifonlythe country manages to prevent a rise inincome inequality. If the government of Indiasuccessfully reduce inequality by 36%, then itcould eliminate extreme poverty in thecountry.5However,inequalityinwealthisevenhigher than the inequality in income. Theincome of dollar millionaires, known as HighNetWorthIndividuals,rosefromUS$10millionin 2009 to US$13.7million in 2013. The totalnumber of India’s billionaires also increasedfromjusttwo(2)inthe1990stosixty-five(65)in early 2014.6 Their net worth would beenough to eliminate absolute poverty in thecountrytwiceover.7A significant number of India’s billionairesmade their fortunes in sectors highlydependent on exclusive government contractsand licenses, such as real estate, construction,mining, telecommunications, and media. A2012 study estimated that at least half ofIndia’sbillionairewealthcamefromsuch‘rent-thick’sectorsoftheeconomy.There are various reasons cited for theincrease in inequality rates between the richand the poor, and one of them is tax havens.Tax havens facilitate the process of ‘round-tripping’ which allows companies andindividualstotaketheirmoneyoffshore,coverit in financial secrecy, and then bring it backinto the country in the guise of foreign directinvestments(FDI).Thisallowsthemtoreaptherewardoftaxbenefitsonlyavailabletoforeigninvestments;themoneyissubjecttotaxbreaksrather than capital gains and income tax thatshouldhavebeen rightly chargedondomesticinvestments.In 2013, the United Nations DevelopmentProgramme (UNDP) reports that India ranks136th out of 186 countries on the HumanDevelopmentIndex(HDI)that iscalculatedon

5Ibid6Ibid7http://www.dailymail.co.uk/indiahome/indianews/article-2551814/Rich-richer-Net-worth-Indian-billionaires-eliminate-absolute-poverty-country-twice-says-IMFs-Lagarde.html

the basis of Multi-dimensional Poverty Index(MPI).TheMPIidentifiesmultipledeprivationsin the samehouseholds in termsofeducation,health, and standard of living. When India'sHDIisadjustedforgenderinequality,thesamereport suggests that it is South Asia's worstperformingcountryafterAfghanistan.However, despite overwhelming poverty andinequality in India, the government stillcontinuestounderspendonsocialservicesforthe most vulnerable. In 2011, for instance,public health expenditure per capita in Indiawas just 4% of the OECD country average inpercapitaterms.ADBStrategiesandPrioritiesinIndiaResponding to this, the ADB has been adevelopment partner of India for decades.Initially, its programs and strategies weredesigned to match the early priorities of thereform agenda, assisting with theinfrastructure and foreign exchangerequirementsfortradeliberalization.TheADBhas provided India with amix of lending andnon-lending products, including loans,technical assistance, and grants. Investing ininstitutional strengthening and capacitydevelopment, aidedbyaneffectiveknowledgeprogram focusing on a project- and sector-specific knowledge is integral to ADBoperationsinIndia.8

Figure2.ADBLoanstoIndiabySector,1986-20139ANR – agriculture and neutral resources; ICT – information andcommunication technology; PSM public sector management; WUS –waterandotherurbaninfrastructureandservices.Notes:Datalabelsshowsector-wiseshareintotalapprovalsbyperiod.Multisector includes technical assistance projects across themes suchasknowledge,capacitydevelopment,gender,andsoon.

8 Development Effectiveness Brief, India, India–ADB: Partnering forSustainableandInclusiveGrowth(2014),ADBPublication9ADBEstimates

However, ADB’s operational strategies andgeographic focus have changed in line withgovernmentprioritiesover theseyears. In thefirstdecadeof itsoperations,ADB’s initiativeswere focused largely onnational-level entitieswith some presence in States; whereas thepresentscenarioisconsiderablydifferentwithADBhavingapresencein23IndianStates.ADBhas investments in basic infrastructure andservices, such as electricity, roads, and watersupply (Figure 3). These are of particularsignificance for people living in isolated ruralareas, the urban poor, and women, as thisopens up new opportunities formainstreaming.10

Figure3.TechnicalAssistanceProjectsbySector,2000-201311ANR – agriculture and neutral resources; ICT – information andcommunication technology; PSM public sector management; WUS –waterandotherurbaninfrastructureandservices.Notes:Datalabelsshowsector-wiseshareintotalapprovalsbyperiod.Multisector includes technical assistanceprojects across themes suchasknowledge,capacitydevelopment,gender,andsoon.ADB’sportfolioalso includesspecific technicalassistance projects and grants at national andstate levels. Technical assistance is providedfor capacity development, improved projectpreparedness and implementation, public–private partnership (PPP) initiatives, andknowledge products. During the periodcovering 2000–2013, ADB approved technicalassistanceprojectsworthUS$218.5milliononacumulativebasis.

10Ibid11Ibid

ADB’sWorkinIndia:CritiqueonADBProjectsinKeySectorsofIndiaFoodSecurityADB'sagriculturalprojectsinIndiabroadlyfallinto the following categories; (a) irrigation,water management, and flood protection; (b)erosion protection and (c) agribusiness andmarketing.Among the three categories, agriculture andmarketing are most central to the ADB'sapproach to food security. In the view of theOperationalPlan,itisonlythroughsuchsupplychains that production can be translated into"sustainablefoodsecurity."Currently,therearetwomain projects already underway in India,withoneincludinganumberofsubsidiaryandalliedprojectswith it. These twoprojects are:Project 43105, "Improving Small Farmers'Access to Market in Bihar and Maharashtra"(approved in 2010)12 and Project 37091,"Agribusiness Infrastructure DevelopmentInvestmentProgram"(approvedin2010).13Both of these projects are concernedwith theStatesofBiharandMaharashtra.Itisnotclearif the former is a supplement to the latter ornot. Neither project appears to have begunactiveworkinthefieldasyet,thoughthelatterwassupposedtohavedonesoearlier,butwasdelayedbythefailuretosignaloanagreementwith the Bihar government on time. It is notclear where the first project will beimplemented, but the latter is focused on theMuzaffarpurandPatna-NalandaareasofBiharand the Aurangabad and Nashik areas ofMaharashtra. News reports indicate thatproject work has formally begun in May andJuly 2012 in Maharashtra and Biharrespectively(seeDayal,201214andDeshmukh2012).1512ProjectDataSheetavailableat:http://www.adb.org/printpdf/projects/43105-012/main13http://www.adb.org/projects/search/513%2C21268&ref=countries/india/projects?keyword=3709114Dayal,Ravi(2012)."ADBtoprovide$67mloanforagri-business",TimesofIndia,July12.15Deshmukh,Nikhil(2012)."StateplansPPPforagriinfrastructure",May20.

Bothprojectsclaimtohavebeendesignedafter"extensive consultations”. For instance, theProject Data Sheet (PDS) for the first projectstatesthatsuchconsultationsincluded"crucialstakeholders in the public, private, andcooperative sectors at the central and statelevels,aswellasfarmers,entrepreneurs,tradeorganizations, and financial institutions at thestateandlocallevels...[andwith]communities,community-based organizations/ non-government organizations (CBOs/NGOs),existing cooperatives/agro-enterprises, andgovernments..."However,noneoftheprojects’available documentation provides any detailsoftheconsultations:whowereconsulted,whenandwhere did these consultations take place,and themanneruponwhich the consultationswereconducted.Intheabsenceofsuchdetails,it is difficult to verify how consultative theprocessactuallyis.The focus in both projects is the creation of"integratedvaluechains"(IVCs)intheseareas.In the latter, larger project, consultants haveidentified four such IVCs in each State. Theformerprojectclarifiesthatitsmainfocusison"fresh fruits and vegetables." In the latter,accordingtoanoteputoutbytheADBandtheFinanceMinistry in2011, the focus ison IVCsfor "high-value crops". In total, the IVCs willencompass more than 50 market sites. Eachsitewillseeitsinfrastructuregreatlyupgradedwithwashingandcoldstoragefacilitiesaswellasbettertransportandinfrastructure.ThenotegoesontostatethattheIVCsaretobecreatedthrough public-private partnerships in whichprivate companies "will be selected in atransparentandcompetitivewayfordesigning,building, financing,operating,andmaintainingthe IVCs." Meanwhile, the program willorganize "groups of small producers intofarmer companies and provide them withtraining..."

Enabling Environment for Private SectorParticipationStategovernmentshaveprovidedassuranceonfacilitating policy and regulatory environmentfor such investments, undisputed landavailability, and support in establishingbackwardlinkageswithfarmers’organizationsforaccessingrequiredproductionoffruitsandvegetables. It may be noted that as of mid-2011, both States had already completed landacquisition for these projects and appointed"projectmanagementunits."As neither project has begun work on theground, it is not possible to examine theiractivitiesinthefieldortoreviewtheirimpact.However,even fromthevery limitedavailableinformation, certain facts are already clear.First, the ADB is indeed implementing its"connectivity"approachalmostpreciselyinthemanner that its Operational Plan and CountryPartnershipStrategy indicates.The focus isonhigh-value crops and the method of"transforming"supplychainsisthroughfarmergroups and privately controlled infrastructure(thoughtechnicallythisisbeingdoneinaPPPmodelwithcontrolinthehandsoftheState,itis clear that private investors will find aresponsiveStateadministration).Howrelevantis such a model in these districts?Unfortunately, the Agricultural Census hasapparentlynotbeendoneatthelevelofanyofthese fourdistricts foravery longperiod,andhence it is difficult to obtain data on thedistribution of landholdings or tenancy levelsinthem.However,theCensusof2001indicatesahigh levelof landlessness,particularly in thedistricts of Bihar, as the comparison of thenumber of cultivators to agricultural laborersindicatesinTable1.16

16S.Gopalakrishnan,CriticalAnalysisoftheAsianDevelopmentBank'sApproachtoFoodSecurityinIndia,https://www.academia.edu/2342725/Critical_Analysis_of_the_Asian_Development_Banks_Approach_to_Food_Security_in_India

District Cultivators AgriLaborersPatna 314,106 468,888Nalanda 320,883 380,460

Muzaffarpur 292,359 519,070Nashik 823,669 540,102

Aurangabad 441,125 289,765Table1.AgriculturalCensusinIndia,2011.17

Theprevalenceof landlessness is, of course, acrude method of critiquing these projects.However, it does force one to confront thefundamentalirrelevanceoftheADB'sapproachintheIndiancontext.Therearethreepossiblebenefits that could reach the landless andmarginalpeasantpopulation,accordingto thisproject. The first is inclusion in these high-value chains, which, as discussed above, ishighly unlikely for marginal peasants andimpossibleforlandlesspeopletoparticipatein.For the landless, the ADB holds out thepossibility of "employment generation" as aresult of these supply chains. However, itshould be kept in mind that these are notentirely new supply chains, but an effort to"upgrade"thosealreadyexistingthroughaPPPmodel.Thus,inordertogenerateemployment,the 'new' supply chain has to generatesufficientnew jobs toemploy thosewhowereoriginallyworkingintheprevioussupplychain(aswellasadditionalnewpeople).Notwithstanding these projections, the realityisthatin2005,99.4%oftheunitsand86.8%ofthe jobs in food processing wereunorganized.18 In such context, theintroduction of large private players withcapitalintensivestrategiesintothissectormaywell result in displacement rather thangeneration of employment. Thus, it is likelythat few marginal farmers and landlessworkers will benefit from the ADB's project.Indeed, they will not even benefit aspurchasers nor consumers of food, whichmostlydonotincludesuch"highvalue"crops.

17Ibid18 Dev, Mahendra S. and Chandrashekhar Rao, N. (2005) “FoodProcessing and Contract Farming inAndhra Pradesh: A Small FarmerPerspective”,EconomicandPoliticalWeekly,June25.

TheADB appears to be promoting amodel of"transformation" of supply chains whose keyimmediate beneficiaries will be some privateinvestors and companies, and possibly, anarrowsegmentofcultivators.Inthelongrun,bothproducersandconsumerswould thenbesubjecttotherisksintroducedbysuchasupplychain. These include the problems associatedwithcontractfarminganddirectprocurement.More fundamentally, they potentiallystrengthen the element of speculation andprofiteering in the food supply chain,empowering private entities to exercise theircontrol over vital links in a manner that hasalready been shown to be risky. Suchspeculation can have a ripple effect even onmarketsfornon-"highvalue"crops.Improvement in agricultural infrastructure isalways welcome. However, it is still not clearwhy such improvement must be done in amanner imposed by the ADB. In particular, itappearshighlydoubtfulthatsuchprojectswillcontribute to effectively addressing the foodsecurity situation in the country. Rather, theymay, in fact, increase the risk of further foodsecuritycrisis.ADB’sInvolvementintheWaterSupplyandSanitationADB’s water supply and sanitation (WSS)projectsinIndia19areclassifiedunderabroadurban portfolio and generally combined withtargeted poverty reduction components,municipal governance, and policy reforms. Astated key objective of ADB funding is toincrease access and involvement of slumdwellers through NGOs in planning andmanagement of WSS to improve the overallquality of their lives and reducepoverty.ADBenteredtheWSSsectorinIndiain1998andtodate has invested US$960 million in fiveIntegrated Urban Development Projects. In2004, around 14% of its total investment inIndiawas in urbanWSS-related projects. ADBstartedwith the developed state of Karnatakaandisnowleveragingitsexperienceintheless19 ImplementationofADB’sWaterPolicy in India:AReview,WaterAidIndia,2006

developed states like Rajasthan, MadhyaPradesh, North-East, Jammu & Kashmir, andUttaranchal. ADB’s Country Strategy andProgramme envisages one new urbandevelopment project annually and anestimated 56%of the total project cost of theIUD projects is allocated to WSS-relatedactivitiesandmunicipalcapacitybuilding. It isestimated thatby2015,ADBwillhave funded6%of the totaloutlayofresourcesneeded for100 percentwater and sanitation coverage inurban areas, using estimates prepared by theExpert Group on Commercialization ofInfrastructure Projects (EGCIP).20 However,direct pro-poor components under slumpackages comprise a mere 2.84% of totalproject funding. Low priority is given to thesanitation sector, despite the high cost ofsanitation infrastructure and the sanitationcoveragegap.By ADB’s own admission, water sectorassessmentshavenotyetbeencarriedout forinfluencingnationalwaterpolicychangeseventhough it was recommended in the internalADB assessment of its own water policy in2003.Focuseddialogueonwaterpolicyat thestateornational levelhasnotyet takenplace.WaterAidbelievesnationalsovereigntyhastobe upheld and national policies need to beconsultativeandlegislativebutiftherearepro-poor elements missing, ADB should focus onfacilitating amendments to incorporate thesameintheirloanagreements.Thisneedstobeworked out in a consultative and legislativemanner.Despitethreegenerationsofloans,projectsforthepoorcontinuetobedesignedasstandalonerather than integrated/mainstreaminterventions; inequitable state policies onserviceprovision inslumshavebeenacceptedandupheld,andcommunityinclusionandNGOinvolvement has received low priority in all

20TheEGCIPestimateatRs1505billion,isinclusiveofcostestimatesfor new infrastructure (i.e. drainage, sewerage, solid wastemanagement)andit ishighestcomparedtoMoUDestimateofRs514billion for Urban water &sanitation and UNICEF/WHO/PlanningCommissionestimateofRs304billion formeetingMDGUrbanwaterandsanitationtarget.Source:DrinkingWaterandSanitationStatusinIndia:Coverage,FinancingandEmergingConcerns,WAI-2005,Page31.

stages, i.e. project conceptualisation, design,investment,andmonitoring.Despitefundingatechnicalassistanceonurbanpoverty and making commitments to povertyreduction,ADBappearsnot tobeencouraginggovernments to adopt pro-poor elements inpolicies.By itsownadmission, this isdue toalackofunderstandingofpovertyissues.OtherCriticismsonADBSincetheADB'searlydays,criticshavechargedthat the two major donors, Japan and theUnited States, have had extensive influenceover lending, policy, and staffing decisions. 21Oxfam Australia has criticized the AsianDevelopment Bank of insensitivity to localcommunities. "Operating at a global andinternationallevel,thesebankscanunderminepeople's human rights through projects thathave detrimental outcomes for poor andmarginalized communities."22 The ADB alsoreceived criticism from the United NationsEnvironmental Program, stating in a reportthat "much of the growth has bypassedmorethan 70% of its rural population, many ofwhom are directly dependent on naturalresourcesforlivelihoodsandincomes."23TherehadbeencriticismthatADB'slargescaleprojects cause social and environmentaldamage due to lack of oversight. One of themost controversial ADB-related projects isThailand's Mae Moh coal-fired power station.Environmental and human rights activists sayADB'senvironmentalsafeguardspolicyaswellas policies for indigenous peoples andinvoluntary resettlement, while usually up tointernational standards on paper, are oftenignoredinpractice,aretoovagueorweaktobeeffective, or are simply not enforced by bankofficials.The ADB has been criticized over its role andrelevance in timesofcrisis.TheADBhasbeen21Kilby,Christopher(2002)."DonorInfluenceinMDBs:TheCaseoftheAsianDevelopmentBank"(PDF).TheReviewofInternationalOrganizations68(4):509–528.Retrieved2010-09-16.22OxfamAustralia."TheMekongandAsianDevelopmentBank23IPS."UNEPfaultsAsiandevelopmentproject."

accused by civil society of ignoring warningsleading up to the crisis. It has also beencondemned for pushing loan conditions thatunfairly pressure governments to deregulateandprivatizeagriculture, leading toproblems,such as the rice supply shortage in SoutheastAsia.The ADB has also been criticized by VietnamWar veterans for funding projects in Laos,becauseoftheUnitedStates'15%stakeinthebank, underwritten by taxes.24 Laos became acommunist country after the U.S. withdrewfrom Vietnam, and the Laotian Civil War waswon by the Pathet Lao, which is widelyunderstood to have been supported by theNorthVietnameseArmy.Recommendations• Making the ADB accountable: As an

international institution, the ADB is notlegally bound by national or internationallaw. The only way communities can holdthe ADB accountable is through its ownpolicies which are supposed to protectthoseaffectedbyitsoperations.

• Asnoted in oneof the case studies, accesstolandremainsacriticalconstraintforthefood security of many small and marginalcultivators aswell as for landlessworkers.Rather than ignoring this issue, the ADBshouldattheleast,statethatitisinfavorofimplementationofIndia'slandreformlaws,distribution of ceiling-surplus land andsecurityof landholdingsforforestdwellersandthosecultivatingwithouttitle.

• Supporting PPP models for infrastructure

andhandingovercriticalelementsofmarkthesupplychaintoprivatecompanies fliesin the face of the Indian and globalexperienceoverthelastdecade.Advocatingand promoting direct corporateprocurement from farmers and contractfarming will, in the long run (despite

24Walsh,Denny(2008-04-23)."Laosplotcasebackinfederalcourt".SacramentoBee.Retrieved2008-04-23

apparentshort-termbenefits),threatenthelivelihood security of farmers, increaseprice volatility for consumers and furtherencourage speculative activities in themarket supply chain. ADB’s promotion ofsuchactivitiesshouldbestopped.

• Investing in support for low impact, low

input agriculture would be a better fit forthe ADB’s ostensible objective of tacklingclimate change and increasing ‘resilience’thanwhatitscurrentapproachprovides.