|
|
|
|
|
|
|
|
|
|
  |
 |
  |
India
>> Regional Overview >> India Overview ACTIVITY DATA SHEET
PROGRAM: India
TITLE AND NUMBER: Increased Capacity of Financial Markets and Government to Transparently and Efficiently Mobilize Resources,* 386-011
STATUS: Continuing
PLANNED FY 2001 OBLIGATION AND FUNDING SOURCE: $3,955,000 DA; $4,983,000 ESF
PROPOSED FY 2002 OBLIGATION AND FUNDING SOURCE: $7,805,000 DA; $2,500,000 ESF
INITIAL OBLIGATION: FY 2000 ESTIMATED COMPLETION DATE: FY 2006Summary: This objective responds to the U.S. national interest of economic prosperity, including broad-based growth under USAID's Strategic Plan. The purpose of this objective is to improve the capacity of financial markets (both formal and informal) and government to conduct financial intermediation to accelerate economic growth. More efficient, transparent, broad and deep markets will mobilize more resources, stimulate more investment and raise growth rates. This key developmental goal will be achieved by: (a) improving the institutional capacity of the securities market, insurance and pension funds regulators; (b) assisting in the adaptation and assimilation of sound institutional practices in regulatory oversight, self-regulation, disclosures and risk management; and (c) assisting in broadening and deepening India's financial services, including the securities and contractual savings (insurance and pension) markets, through institutional innovation in microfinance. The objective will build on USAID's past successes in financial markets development and will initiate activities in other key areas. The ultimate customers will be financial markets regulators; domestic and foreign investors; industrial, commercial, and agricultural end-users; old-age pensioners; and millions of poor who currently do not participate in the mainstream financial markets.
India is a large, $400 billion economy. However, with 35% of its one billion people living below the poverty line, it has a larger poor population than Africa and Latin America combined. In 1997, per capita Gross National Product (GNP) was $390, placing India in the bottom quartile of a ranking of 157 countries. Absolute poverty remains large because the post-independence Indian economy has substantially under-performed relative to its potential. Accelerated growth is essential for significant reduction of poverty in India. The drop in the percentage of people living below the poverty line from about 55% to 35% since 1973-74 is mostly attributable to economic growth (World Bank Report, 1997). There is a widespread consensus that India can achieve a trend rate of growth of at least seven percent, provided it launches a second generation of economic reforms. A two percentage point increase in annual economic growth from the current 5 or 6 percent to 7 to 8 percent, sustained over the next fifteen to twenty years, would make a significant contribution to poverty reduction in India.
Financial markets reform is key to India's economic development and poverty reduction. Only a transparent and efficient financial market can mobilize the level of resources required for the development in basic infrastructure, such as power, transportation, water, and communication. While significant progress has been made since 1994 in creating the foundation for market stability and integrity, much more remains to be done. In areas such as regulatory oversight, development of long-term debt, disclosures, and investor protection, the Indian markets remain below international standards. Further, India's insurance market, recently opened to domestic and international competition, is underdeveloped by international standards.
Key Results: Before Glenn Amendment sanctions were imposed, the Financial Institutions Reform and Expansion Regulatory (FIRE-R) program had made significant progress in improving the transparency and efficiency of India's securities markets. The program used technical assistance and training to achieve the following results: (a) reduced the systemic risk in trading, clearing, and settlement by supporting the establishment of India's first electronic securities depository and clearing corporation; (b) created awareness of best practices in regulatory oversight and market operation among the regulators, institutional market participants, and policy makers; and (c) developed a legal, regulatory, and institutional framework for the introduction of futures and options trading. The securities market-related technical assistance (TA) and training under this objective would build on these successes.
Performance and Prospects: USAID plans FY 2001 obligations of $2,100,000 in DA funding and $4,983,000 in ESF funding for the Financial Institutions Reform and Expansion (FIRE-R) program. Subsequent to the presidential waiver of Glenn Amendment sanctions in March 2000 for FIRE-R, USAID completed the design of a securities market activity, in consultation with host-country counterparts. Initially, securities market-related activities will help build the institutional capacity of the Securities Exchange Board of India (SEBI) to develop: (a) institutional best practices in inspection, surveillance, investigation, enforcement, and self-regulation; (c) institutional infrastructure for timely and accurate disclosure of market information; (d) regulatory oversight for Internet and Alternative Trading Systems; and (e) a risk management system for futures and options markets. Under the FIRE-R program, the design is underway on a four-year activity with the newly established Insurance Regulatory and Development Authority (IRDA) to foster an efficient, transparent, and financially sound insurance market. Design work on the private-sector pension funds activity will commence after the Government of India (GOI) selects a regulator for this sector.
A new microfinance activity is slated to receive FY 2001 DA funding of $1,300,000. The design of this activity, aimed at deepening access to financial services (savings, credit and insurance) by the poor, will begin following consent of the GOI.
If sanctions on USAID's non-humanitarian economic growth portfolio are waived, FY 2001 DA funding of $555,000 will be used for fiscal reform activities in two states to help open up the Indian economy and enhance U.S. trade and investment. Activities would help improve tax collection methods, upgrade management information systems, improve debt management and budgeting, and develop in-house analytical capability on fiscal policy. USAID would support state-level fiscal and infrastructure reforms to attract private investment into the infrastructure sector.
Possible Adjustments to Plans: During FY 2001, USAID will review its program and prepare its new strategy in FY 2002.
Other Donor Programs: The Asian Development Bank is currently working on a study of issues related to the growth of the secondary debt market. The World Bank is working on a small grant to prepare a report on the issues related to equity market integrity. The United Kingdom has a microcredit program aimed at providing credit to the poor. Switzerland, Germany, and Australia and the International Food and Agricultural Development organization fund microfinance programs. The World Bank and the Asian Development Bank have state-level program adjustment and sector loans aimed at fiscal policy reform and infrastructure development.
Principal Contractors, Grantees, or Agencies: U.S. Securities Exchange Commission (SEC), Securities and Exchange Board of India, and IRDA. Other contractors will be selected through full and open competition.
Selected Performance Measures: Indicators for this activity are under development. Indicators and baseline data to capture the results of the securities market-related activities will be developed in consultation with the U.S. Securities Exchange Commission, which will implement selected technical assistance and training activities.
* Formerly titled "Increased Capacity to Efficiently Mobilize Resources for Development."
U.S. Financing
(In thousands of dollars)
Obligations Expenditures Unliquidated Through September 30, 1999 0 DA 0 DA 0 DA 0 CSD 0 CSD 0 CSD 0 ESF 0 ESF 0 ESF 0 SEED 0 SEED 0 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA Fiscal Year 2000 3,500 DA 0 DA 0 CSD 0 CSD 0 ESF 0 ESF 0 SEED 0 SEED 0 FSA 0 FSA 0 DFA 0 DFA Through September 30, 2000 3,500 DA 0 DA 3,500 DA 0 CSD 0 CSD 0 CSD 0 ESF 0 ESF 0 ESF 0 SEED 0 SEED 0 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA Prior Year Unobligated Funds 0 DA 0 CSD 0 ESF 0 SEED 0 FSA 0 DFA Planned Fiscal Year 2001 NOA 3,955 DA 0 CSD 4,983 ESF 0 SEED 0 FSA 0 DFA Total Planned Fiscal Year 2001 3,955 DA 0 CSD 4,983 ESF 0 SEED 0 FSA 0 DFA Future Obligations Est. Total Cost Proposed Fiscal Year 2002 NOA 7,805 DA 29,740 DA 45,000 DA 0 CSD 0 CSD 0 CSD 2,500 ESF 7,517 ESF 15,000 ESF 0 SEED 0 SEED 0 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA
 |
|||
Last Updated on: May 29, 2002 |
