Exclusive: World Bank's rural projects likely to contribute 5-10 per cent to India's GDP in the next 5-10 years

While we sit here wondering whether any efforts by the successive governments and the RBI will bolster our dwindling economy, significant work is silently on in the bylanes of our rural corridors for the last 15 years. Not much is known about World Bank’s several ongoing rural projects, despite the fact that they are likely to become the key contributor to the growth of Indian economy soon.

“We may be able to contribute at least 5-10 per cent to India’s GDP in the next five to ten years,” the lead rural development specialist for South Asia at World Bank, Mr Parmesh Shah told Business Insider during a candid chat.

A lot has gone behind the world’s largest development bank’s aim to change the rural face of India ever since it stepped into the country back in 2000. The Bank is working with not only the actual producers and consumers, but banks, innovators, social entrepreneurs, NGOs and corporate to create an ecosystem in rural areas such that people not only become self sustainable, but budding entrepreneurs who can generate employment for others. That means, people won’t have to move out to cities to get jobs, they will have opportunities where they live – in India’s villages.

World Bank started off working with 3 states in the beginning with the aim of organizing small and marginal farmers who were largely scattered and unorganized, building capacity and helping them prepare forward looking plans to improve their livelihood. Today, apart from having its standalone projects where its inclusive model has created an enabling environment for the poor and shown great results, World Bank is funding Centre’s National livelihood mission that caters to 13 high poverty states, where the same successful models of rural capacity building and growth are being replicated.

Parmesh Shah explains to us the rural development models: “CSR models usually fail because merely dumping money into rural areas as charity doesn’t help; investment has to be done in a sequence.. First, we help them to build higher quality social capital - save money, revolve that money via an activity that helps them generate cash and then do something with that money. Once they show track record of being able to do something productive with their own money, then World Bank steps in. We put in risk funds, but largely play the role of facilitators in building an ecosystem for them by getting social entrepreneurs, NGOs, banks, corporate, government to look at them as partners.”

In Bihar, the World Bank’s project helped poor to get rid of their high cost debts which were an impediment in the way of the rural poor investing money in productive activities, as the earned money would often go into clearing the loans and interests.

“We had already worked in Andhra Pradesh and realized that it had much more enabling conditions than Bihar. However, several social entrepreneurs were innovating despite constraints of the society, but on a low scale. We picked 15 out of them and scaled them up,” he said, adding that until government started a project JEEVIKA with World Bank, the poor were largely being served inefficiently.

“We organized them, helped them save money and become clients for the banking system rather than mere applicants. World Bank gave them the managerial and technical capabilities, access to technology and risk funds to get started. Soon, banks started lending them money, government released funds too that they did not have access to earlier due to safety net. Social entrepreneurs came to work with them. Now they had pool of resources at their disposal,” explains Parmesh.

The first funding that World Bank provided to Bihar was $63 million, while the Bihar government put in $7 million. However, before the project completion, the government wanted to scale up further geographically and sought $100 million more. Currently, World Bank is working with more than 3.8 million people in Bihar alone, and aims at connecting with 12.5 million people in the next four years.

Parmesh says, while a lot of effort is on in Bihar and it may start showing result when funding to the tune of $1 billion is achieved in the next 2 to 3 years, Andhra Pradesh has already reached the threshold stage with $16 billion investment by World Bank till now. It is an attractive spot for corporates now as they see it as an aggregated market full of opportunities.

“Andhra has invested in that ecosystem for very long now and has reached the threshold point with $1.5 billion credit flowing and $1 billion savings. Unless you reach threshold limit, it does not become a market opportunity. Large players will look at an aggregate market as opposed to small markets,” he says.

The Bank now aims at creating retail, SME and producer model such that farmers in the state are linked to global value chains, SME culture can help in generate jobs, and producers are linked to markets and state.

“All of this will contribute to a jump in our GDP, propelling growth of Indian economy. Some states like Andhra Pradesh, Kartanaka and Tamil Nadu may show quicker results, while others like Bihar and Jharkhand can take time, but eventually all of them will,” he says, adding that government change, governance of the place, social systems, the perception of the region in the world are several factors that contribute to how fast a particular region develops.