World Bank helps Assam to unlock its growth potential.

The World Bank is providing Assam with a $125 million development policy loan to unlock Assam's growth potential by boosting exports, investment and jobs, strengthening climate resilience and green transitions and unleashing agriculture and tourism potential.

According to the project information document, the Bank says the proposed operation seeks to support the Government of Assam’s ambitious reform program to unlock the state’s growth potential and build on recent development gains after emerging from years of conflict.

"Over the past decade, Assam's GSDP growth was 5.2 percent, close to the country average but below the fastest-growing states. Despite these improvements, Assam, the largest state in the Northeast Region, remains one of the least developed states in India, with GDP per capita about 36 percent below India’s average" the Bank says.

Assam is also one of the states that is most vulnerable to climate change and extreme weather events that are increasing in frequency and intensity. Its untapped growth potential lies in its strategic location (India's gateway to the Northeast) and natural endowments (gas, oil, fertile land, water resources and wildlife).

LOW EXPORTS AND INVESTMENT:

Assam however is challenged by low levels of exports (0.9 percent of GSDP) and investment. Agriculture is the most critical economic sector but has low productivity (delivers over 50 percent of the employment and 18 percent of value-added). Despite producing surpluses in several agriculture commodities that could be exported, trade is constrained by low investment in diversified production, and underdeveloped agricultural services and agricultural infrastructure (including in processing and logistics)" the Bank says.

The Bank says the lack of connectivity, underinvestment, overregulation and low private sector participation also limit tourism development, which, together with agriculture, offers opportunities for inclusive growth.

Assam chief minister Himanta Biswa Sarma had said the state is targeting to become six lakh crore GDP state by 2026 and our spending on capital projects will touch Rs 20,000 Crore shortly.

Martin Raiser, the new World Bank Vice President for South Asia, and Auguste Tano Kouamé, the new Country Director, World Bank India, had recently met with the Assam Chief Minister, Dr. Himanta Biswa Sarma in Guwahati – to discuss how the Bank could continue to support the state’s future development priorities for maximum impact.

The Bank delegation said Assam, with its strategic geographic location, can benefit significantly from greater regional economic cooperation.

The Bank says India’s and Assam’s macroeconomic policy framework is considered adequate for Development Policy Financing (DPF) reflecting solid fundamentals and capacity to respond.

"Since Assam is a special category state, the central government will support the repayment of the World Bank DPF loan" the Bank says.

The DPF builds on the current World Bank engagements in the state and will focus on logistics, exports and labor markets, strengthen climate resilience, and increase efficiency in agriculture and tourism.

To jump-start growth, Assam’s government is advancing an ambitious structural reform agenda to promote productivity growth. The reforms focus on supporting growth fundamentals (functioning of factor and product markets and human capital investments), shortening economic distance (physical distance and the efficiency of connections to markets) to attract investments and create jobs, and protection of the poor through expanded social safety nets.

"The reforms are aligned with the central government’s priorities on integrated logistics and multimodal connectivity, consolidation and simplification of labor laws, modernization of the agriculture sector and addressing climate change" the Bank says.

NEW STEPS: The support involves revising the state’s logistics policy to reduce barriers to private sector participation, facilitate multi-modal connectivity, and increase logistics efficiency and sustainability.

A State Logistics Council will also be established to improve coordination with the central government and across departments within the state.

Assam's export policy will be revised to promote agriculture exports by introducing State and District Export Action Plans and trade facilitation measures.

The support aims to reduce labor market frictions and increase labor force participation by creating a digital employment platform; increasing social security coverage for female workers in the unorganized sector, to increase female labor force participation; and, addressing policy constraints such as the time taken to obtain permissions and the amount of time spent on maintaining compliance with labor regulations.

The Bank's support will consolidate subsidy programs for agricultural machinery to improve access to mechanized farm implements and increase private sector participation in agricultural input markets.

A new Seed Policy will be adopted aimed at increasing the adoption of improved seed varieties to increase productivity and climate resilience.

The state’s vast potential to develop the tourism sector will be done by introducing a new tourism policy that will institutionalize public-private dialogue, reduce government involvement in the operation of tourist infrastructure and streamline the transport licensing process for tourism-related businesses.

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