USAID Supports State Fiscal Reform

May 17, 2004

NEW DELHI   - The U.S. and India are collaborating in Karnataka, Jharkhand and Uttaranchal to bolster fiscal management systems for better forecasting, budgeting and investment of public resources. The $20 million, five-year initiative led by USAID signals another step in the strategic partnership between the democracies.

Despite strong growth rates registered by the Indian economy, state government finances are strained, limiting investments in social and physical infrastructure - such as education, health, roads, ports and agricultural irrigation. States continue to be stressed by high fiscal deficits, raising concerns about the long-term sustainability of India 's overall growth. There are not enough resources for needed social investments and capital improvements, which often cuts services to those who need and use them most: the poor, the unemployed and the illiterate.

Areas of focus in three states include: better budget preparation processes; updated information systems to guide financial decision-making; practices to track and manage state debt; and use of appropriate international standards in public finance to inform and engage the public in
decision-making.

The USAID effort, called REFORM, was a result of detailed dialogue with the Government of India Ministry of Finance and the three state governments: Karnataka, Jharkhand and Uttaranchal.

USAID has awarded a five-year, $11.8 million contract to the U.S.-based firm Bearing Point, formerly known as KPMG Consulting, to implement the first phase of activities.