Banking on India's States: The Politics of World Bank Reform Programs in Andhra Pradesh and Karnataka

The World Bank has taken structural adjustment lending to the state level in India. This essay traces the implementation of World Bank-sponsored reform programs in the neighboring states of Andhra Pradesh (AP) and Karnataka from the late 1990s to the early aftermath of electoral turnovers in both states in May 2004. Although Karnataka's reform process has been much less contentious and its continued implementation appears more secure, the Bank put more money and emphasis into the AP program, largely on account of the state's special importance to India's ruling coalitions during the period. In lending more heavily to AP and in adopting a softer stance on its government's diverges from its reform promises, the Bank may have inadvertently undermined broader support - both from other states and from the center - for its bold new strategy of selectively subnational reform lending in India.