Commonwealth Network

The Indian Budget 1996-97 The Indian Economy Overview

World Bank Furor - Citizens Against World Bank

[World Bank in India] [Related Pages: 1 2 ]

An Open Letter to the President of the World Bank - as released by the activist forum "Citizens Against World Bank" in a press release titled "World Bank Quit India"

October 19,1996

Dear Mr. James Wolfensohn,

By the time you receive this letter, you must be at the end of your visit to India. We hope that your visit must have revealed to you the impact of the World Bank's projects and programmes in this country. If you have looked really beyond the superficial, we believe that the enormous environmental destruction and the social disruption will not have escaped you.

Unfortunately, Mr. President, the World Bank - the institution that you now head - bears a significant part of the responsibility for this. Over the decades, the policies imposed by the Bank have significantly distorted development priorities, destroyed the resources and impoverished millions. And now, the 'new' policies that are being promoted by the Bank, under the Structural Adjustment Programme and in the name of Liberalisation, Privatisation, Globalisation are aggravating these impacts many times over. We are sure all this cannot have escaped your notice.

The Changing Face of the World Bank

The Bank is claiming that it has changed in the last decade. The Bank now claims to have Environment on the top of its agenda. The Bank claims to be more concerned about the human impacts of the Structural Adjustment Programme. The Bank, as you have stated, is keen on participation and the involvement of NGOs.

Unfortunately, our experience shows that none of these has made any difference on the ground. The fact is - there is hardly any difference between the kinds of project and programmes that the Bank was funding a decade ago, and the ones that it is funding now. The rhetoric has improved, the language has changed - but as the experience shows nothing has changed on the ground. The latest in the vocabulary hijacked by the WB is its concern against corruption. The shallowness of this concern is evident from the continuous financing of projects by the Bank in which corrupt practices have been well established and exposed. The Bank's emphasis on huge mega projects and intensive exploitation of natural resources, driven by a market-led consumerist society has only intensified. Promotion of intensive irrigation networks in regions where these were not needed has destroyed the productivity of soil. The net impact of the Bank's involvement has been destruction of the environment, enormous social disruption, increasing displacement and a net transfer of resources from the poor and the tribals to the both national and international elite. We wish to focus on a few of the aspects of the claimed 'new face' of the Bank.

The Structural Adjustment Programme

In 1991, India joined the list of other third world countries, which have received structural adjustment loans with very harsh conditionalities from the Bank. Faced with the Balance of Payment crisis in 1991, India accepted these loans to service foreign debt. Since then, a series of policy measures which include devaluation, liberal industrial policy, disinvestment policy, foreign investment policy, liberalisation of imports and domestic economy were based on the World Bank's Memorandum titled "Trade Reforms in India" (November 30, 1990). Perhaps you are not aware that this Memorandum was not disclosed to the then Prime Minister, Finance Minister and Cabinet Secretary.

With the implementation of adjustment programme, the Bank is not just controlling, single projects (such as Singrauli), or sectors (such as agriculture, energy sectors), it now, is commanding the entire macro-economy. It appears that the Indian Government is on its way to losing control over economy, especially in regard to its future directions. In fact, the macro fundamentals are so precariously balanced that the slightest of disturbances, like failure of monsoon for consecutive years, can create the same crisis as faced in June 1991, before launching of Structural Adjustment Programme.

Whatever growth is achieved in agriculture and industry is distributed most unequally with respect to employment opportunities, incomes and consumption among the people. For instance, with a record foodgrain production of 186 million tons, we have the proportion of people below the poverty line going up! The number of starvation deaths are growing and are occurring not only in remote areas but also in semi-urban and urban areas.

In the health sector, the Bank's "targeted programmes" are combined with cost recovery, privatisation and withdrawal of the State from health services. These programmes have failed to help the poor who cannot afford to buy health services like any other commodity from the market. Health, far from being accepted as a basic right of the people, is now being shaped into a saleable commodity. The Bank's contention that 'targeting' will improve the health status of the poor is absolutely unfounded. Targeting the poor sees them in isolation and is based on the acceptance of existing social structures and institutionalised injustice. It merely attempts to help the poor adjust better to the situation, rather than change their situation. Besides, diseases of poverty cannot be cured with 'targeting' and medicines, the poor need elimination of poverty through a more equitable distribution of resources.

The Bank attempts to show that the poor suffer from ill-health due to factors like misuse of funds, apathetic doctors, inefficient management and restricted role of private sector. Whereas, the reality is that the basic underlying cause is the socio-economic system in which over 40% of population is below poverty line.

The Bank has also justified the cutbacks in public health expenditures by emphasising that how money is spent by the Indian government appears as important as how much money is spent. Given the poor conditions of public health infrastructure in India, any further cutback directly affects the millions of poor people who are totally dependent on public health care as they cannot afford private health services.

The education scenario of the country presents a picture in which privatisation and commercialisation will provide education for upward mobility to a few urban and rural rich. For the rest, soft loans from multilateral funding agencies like the World Bank are likely to sustain a token educational process with increasing influence on its content and process from the donor agencies.

The World Bank prescription on food and agriculture are targetted at further endangering our food security system. The gravest of the threat comes from the control which the Bank has over the Consultative Group on International Agricultural Research (CGIAR). Systematically over the years the Bank through its control over the CGIAR has been able to steer the agenda of Indian agricultural research bodies towards ensuring the supremacy of Transnational Corporations (TNCs) in world foodgrain markets.

The World Bank's emphasis on promoting foreign investment is misconceived. Since 1991, over 70% of foreign investment that has come to the country has been portfolio investment to buy shares of Indian companies. Given its speculative nature and volatility, portfolio investment can go out almost as easily as it comes in. Thus, a reverse flow can severely affect foreign exchange reserves. Since 1994, there has been a gradual decrease in the country's foreign exchange reserves. At the end of March 1996, the country's foreign exchange stood at $17 billion. With rising trade deficit, there is a growing danger of a renewed foreign exchange crisis. For the past many years, India is experiencing negative external aid inflows. Despite adjustment, India's debt burden rose from $72 billion in 1991 to $99 billion in 1996.

In the rush to attract foreign investment, environmental regulations which the Government was required to enforce in the past are now being liberalised. Failure to make environmental protection and sound natural resource management an integral part of foreign investment policy is leading to unsustainable rates of resource exploitation. Many TNCs with products which are hazardous to human health and the environment have been given permission to establish operations in India. Additionally, foreign investments in many export-oriented units are being approved aimed at earning foreign exchange. These investments are being targeted primarily at fisheries, shrimp cultivation, acquaculture and agribusiness operations. Since 1991, for instance, over 100 joint ventures with foreign companies for marine fishing and fish processing, largely in deep sea areas, have been approved despite resistance from traditional fisherfolk. The fish catch along India's coast is declining, mainly due to overfishing, and such investments will not only lead to loss of traditional fishers' livelihood but also loss of domestic fish markets as well as depletion of marine resources.

Deregulation of trade and investment policies has encouraged the dumping of toxic wastes as well as migration of polluting and hazardous technologies to India. Due to stronger environmental rules in many industrialised nations, polluting production processes such as chlorine manufacture are being shifted to countries such as India eager to attract foreign investment or technology transfer at any cost!

The Bank's concern for conservation and forestry development has given rise to the contentious issues of the rights of forest dwellers vis-a-vis conservation policies. The latest controversy surrounds the ambitious forestry project in Madhya Pradesh and West Bengal.

The Changing Role of the Bank - From Funder to Enabler

We believe that this new role of the Bank is leading to very destructive impacts. This role is nothing but euphemism for unbridled privatisation, in all sectors of the society. The Bank's advocacy of privatisation as a panacea for all ills demonstrates that it is totally cut off from the reality in India.

In the power sector, for example, the Privatisation drive is destroying the State Electricity Boards (SEBs) and a huge infrastructure and human resources painstakingly built over decades. While there is talk of competition and level playing field, no one is offering the same terms and conditions to the SEBs as to the private firms. This alone, we believe would obviate the need for a large part of the privatisation.

Privatisation per se will not solve any problems. Perhaps, what is required is restructuring of loss-making public sector enterprises which means worker's participation, effective and transparent organisation, less interference from bureaucrats and politicians better management techniques and accountability. Privatisation without restructuring will yield nothing, whereas restructuring, without privatisation, can achieve a lot.

In India, private sector is not as efficient as we are told. There are over 2,00,000 sick units belonging to the private sector in the country. In fact, private sector in India has developed because of low-cost infrastructure and other services subsidised by the public sector. That the Private concerns are far less accountable is well recognised in the Indian context. Beyond doubt, increasing privatisation is going to lead to more environmental damage and social disruption, and less accountability.

Participation and Consultation

The Bank claims to have become more open to the NGO voices, and is claiming that it has incorporated the concerns regarding participation in its projects. However, there is vast difference between the Bank style participation and consultation and what we believe is real participation.

NGOs are being seen by the Bank, nay even being used by the Bank as essentially implementors - especially of the difficult and troublesome aspects of rehabilitation and environmental mitigation measures. This is nothing but sharing of worries without sharing of responsibilities.

Further, the role of the NGOs seems to begin only after everything has been tied up - after the project has been planned, decisions taken, contracts signed and implementation begun. Unless there is consultation at the planning stage, there can be no meaningful participation of NGOs.

The other concern is the increasing direct funding of the NGOs by the Bank. The eagerness with which ever growing number of NGOs are embracing this new found partnership with the World Bank, we feel, is a disturbing trend. While the Bank is free to fund them and NGOs are free to receive funds, we believe that such an arrangement directly compromises the watchdog role of the NGOs - their primary responsibility towards the civil society. There is a tendency in the Bank then to 'consult' or involve only such NGOs. Witness the NGO meetings convened by the Bank for you in Mumbai and New Delhi. There is almost a total absence of groups working with the people directly affected by the Bank's projects/programmes, and of NGOs critical of the Bank policies and programmes.

However, what is most alarming is the tendency to restrict 'consultation' and 'participation' to NGOs bypassing the people themselves. We are afraid that this is leading to the creation of another set of 'middlemen' - with all the attendant ills that are associated with them. What is required is a genuine participation in the decision making process right from the planning process itself for the people to be positively or adversely affected - something which the Bank has failed to ensure, and its new policies are making it even more difficult.

Retrograde Steps in Rehabilitation

Clearly, the blind focus on privatisation and the mad rush for industrialisation under the name of infrastructure development is leading to massive displacement - a problem that is becoming more and more difficult to handle. A direct consequence of this seems to be the abandonment of some of the more progressive principles that had been adopted over the last decade in the rehabilitation process. Even though these were difficult to implement, they were thought as necessary to ensure rehabilitation and justice to the affected people.

However, the difficulty of resettlement seemed to be challenging the very viability, desirability and ethicality of many of the projects - and instead of trying to seek better alternatives (which have been shown to exist) - the Bank seems to have taken the easier approach - take retrograde steps in rehabilitation policies and principles. In a recent paper "Resettlement and Rehabilitation : Project Preparation and Planning Against Identified Risks', Mr. Sam Thangaraj, the R&R Specialist in the Social

Development Unit of the World Bank's Delhi Office says:

"The case studies presented and experiences shared raised many questions related to land acquisition, 'land for land', and definition of Project Affected Persons. The concept of 'consent award' was considered inappropriate while 'land for land', though a need, was considered impractical in all situations because of the limited amount of agricultural and forest land available. The emphasis on 'major sons' that is increasingly coming to include 'major children', it was pointed out, was affecting the traditional social support system that centres around a family as 'major sons' have the tendency to break away from the family resulting in loss of support to the young and the old. .... we would like you to formulate a strategy that would result in sustainable livelihood and reduction in social risks. In other words, the emphasis needs to be on ways and means to reduce 'marginalization' and to initiate the process of 'upward mobility' that would result in social development and social change."

This is nothing but laying grounds for a dilution in the rehabilitation policies and reversal of the gains made, failing which the Bank may have to abandon many of the projects that it is currently taking up. Justice is the first casualty on the altar of 'development' for these retrograde steps will be easy to push through - all it needs is more use of the police force and repression.

Ignoring People Oriented Development Options

The most serious issue is that the Bank has been consistently ignoring the growing - and strident voices all over the World, and especially in India, that are not just challenging this 'destructive' model of development, but are offering just and viable solutions that are truly participatory, whose benefits can reach out to the poorest and the most needy, and which will be socially and environmentally benign, even enhancing.

It is unfortunate that you have missed the opportunity to try and understand all this in your visit to India. Unfortunately, our experience with the Bank over the past decades does not allow us the luxury of optimism. We have been left with no option but to conclude that the World Bank has no positive role in India.

The World Bank must Quit India.


Campaign Against the World Bank and Destructive International Aid
Narmada Bachao Andolan
National Alliance of Peoples' Movement
Enron Virodhi Sangarsh Samiti
Rajasthan Kisan Sangathan
National Fishworkers Forum
Chotanagpur Adivasi Seva Sansthan
Icha-Kharkai Bandh Visthapit Sangh
Bargi Bandh Visthapit Sangh
Visthapit Mukti Vahini
Progressive Students Union
Samajwadi Jan Parishad
Orissa Krushak Mahasangh
Ekta Parishad
Kisan Adivasi Sangathan
Khedut Mazdoor Chetna Sangath
Adivasi Mukti Sangathan
Public Interest Research Group
The Other Media
Delhi Forum
The Goa Foundation
Sanctuary Magazine
Vadodara Kamgar Union
Lok Adhikar Sangh
Azadi Bachao Andolan


Rajni Kothari
Kishan Patnaik
Dalip Swamy
Sulabha Brahme
Krishna Kumar
Anil Sadgopal
Baljit Malik
Anand Patwardhan
Anita Soni
Damodan Tandil
Devender Sharma
Dr. G.G. Parekh
Gajanand Khatu
Jagdish Bhardwaje
Madhu Kohli
P. Kaul
P.M. Suniti
Ralli D.
Xavier Dias
N. Bhattacharya
Kuldeep Singh Arora
For further details contact:PIRG (Public Interest Research Group) 142, Maitri Apt, Plot No 28, Indraprastha Extn. Delhi 110092. India. Ph: 2432054 Fax: 2224233
[World Bank in India] [Related Pages: 1 2 ]

Navigation ToolBar
Copyright 1996-97 MediaWeb India, except where otherwise noted.

Latest Updates | Advertising Info | About this Site | Web Development