Banking on India’s States:
The politics of World Bank reform programs in Andhra Pradesh and Karnataka
Jason A. Kirk
University of Pennsylvania
Paper prepared for the Annual Convention of the International Studies Association, Honolulu, HI,
March 1-4, 2005. Comments welcome: ## email not listed ##
I. Introduction
Since 1996, the World Bank has been engaging in a strategy of selective “focus states”
lending in India, targeting for special assistance sub-national states that, in its estimation,
exhibit strong commitment to policy reforms conducive to economic growth and poverty
reduction. In essence, the Bank’s “structural adjustment” loans—which provide
borrower governments with general budgetary support, but carry “conditionality” meant
to ensure implementation of market-oriented reforms—are being taken to the state level
in India. India’s central government, which launched a major program of economic
liberalization in 1991 and is keen to incorporate the states into the reform process, has
granted requisite approval to the Bank’s focus states loans. Besides positioning the Bank
as an encourager of reform and enforcer of fiscal discipline at the state level, architects of
the strategy hoped that the Bank’s focus states would serve as models, and that their
achievements in growth and poverty reduction would provide powerful “demonstration
effects” leading other states to emulate their policies.
This paper analyzes the politics of reform in two of the Bank’s focus states, the
neighboring southern states of Andhra Pradesh (AP) and Karnataka.
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These two states
have garnered international attention in recent years as exemplars of a “new India,”
owing largely to the identification of their capital cities—Hyderabad and Bangalore,
respectively—with India’s emerging prowess in information technology (IT) and
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