International Political Economy, Essay Example

Risks

Even though India has been fortunate to fare better than most countries during recent global crisis, economic slowdown is still possible though not very likely and prolonged crisis may require change in strategies. The second risk is political since impending elections in many states may force the politicians to succumb to public sentiment though it is quite unlikely. Risk and strength of local institutions has a negative relationship, thus, investments in regions with weak local institutions may considerably raise the overall risk of the entire portfolio.

There is also a risk that implementing agencies may do a poor job of monitoring the progress and the outcomes due to weak accountability standards. A stricter monitoring by the central government of the funds it provides to states will help improve accountability standards. Misuse of resources is another risk as the experience with India’s Health Sector reveals. Misuse of resources will affect the probability of achieving project objectives. There is also a risk that project preparation and supervision costs greatly exceed initial projections. These will be longer-term projects as compared to the past and longer time periods make it difficult to develop reliable projections.

Challenges

One of the primary challenges is the weak governance as well as rampant corruption. One solution is to devise compensation plan that aligns stakeholders’ interests with the performanceAnother major challenge is the bureaucracy which is inefficient and unresponsive but government has taken steps to empower local governments and community-based organizations.In order to improve accountability, World Bank Group (WBG) will also need close collaboration with India’s accountability institutions to increase transparency of development projects. Further complicating the matters is the fact that different Indian states are at different stages of development and require different kinds of planning.

There is also a need for strong economic ties between India and its neighbors such as Pakistan and Nepal. Even though India has taken steps to strengthen economic ties with its neighbors, the progress is not always predictable or guaranteed. Private sector’s access to funds also demands attention because the recent global crisis has made it difficult to raise funds through debt and equity issues.The program also faces a daunting task of improving delivery of services to poor Indians because it will result in more inclusive economic growth. Moreover, rapid growth also creates problems such as growing gap between rich and poor.

Recommendation

WBG should form partnerships with private organizations such as Bill and Melinda Gates Foundation that have acquired valuable experience and contacts over the years. WBG should also pursue capable Indian leaders in the private sector who do not only have connections but also understand the challenges better. One recommendation is to introduce accountability tools that monitor each stage of different projects and abolish support for programs earlythat show little promise so that the resources could be allocated to better use. Different Indian states have different strengths in governance and they should develop a system to share best practices and learn from each other.