The bank, in its completion report of Assam Governance and Public Resource Management Sector Development Program, said the impact of the programme on economic activity in Assam is significant and likely to be felt across many sectors and affect a wide stratum of society.

Three loans were given under this programme, which kicked off in 2005 and concluded in 2012. This strategy coincided with the Centre’s requests to extend state-level assistance to poorer states, especially in the northeastern region, to help contain growing interregional disparities.

“The created revenue and fiscal surpluses have already enabled the government to allocate more resources to much-needed infrastructure spending. Subsequently, despite its remoteness and the lower levels of private sector interest in Assam compared with areas of the country, the implementation of public-private partnership projects has made the state an attractive area and begun to propel it along the growth trajectory. Furthermore, by phasing out inefficient public sector enterprises, the programme has opened up new resources for private sector investment,” the report said.

Sources said the pat by the ADB to the Tarun Gogoi government on fiscal reforms would help it ward off criticism from the Opposition, which has been blaming the government for not doing anything. On the social front, the impact of the programme on poverty reduction is likely to stem from the acceleration of economic activity because of higher investment and spending on social services that further increase employment opportunities.

“The programme promoted the transparent use of public funds, improvements in the quality of governance, and the effective and efficient delivery of public services in areas that are most critical to the poor such as health, education, transportation, and water” the report said.

Until the implementation of the programme, Assam was suffering from chronic revenue and fiscal deficits because of the high expenditures such as salaries, pensions and interest payments. With lower capital expenditure, economic growth suffered, which adversely affected revenue receipts.

In addition to such structural issues, administrative and compliance factors decelerated the growth of key revenue sources.

The programme was initiated following the Assam government’s commitment to the Assam Fiscal Responsibility and Budget Management Act. The primary indicator of effectiveness is the improvement in the economy and the fiscal condition of the state. The revenue deficit and fiscal deficit in 2003-04 was replaced by surpluses in four consecutive fiscal years, from 2005-06 to 2008-09, despite the implementation of revised pay scales in 2009, as the government steadily increased its total revenue receipts with tax reforms.

The bank said on the political front, the return of Tarun Gogoi as chief minister of a Congress-led coalition government after elections in March 2006 eliminated any political risks that could hinder the completion of the programme.

The state government successfully implemented the reforms in politically sensitive areas by resisting spending-oriented populist pressures during the electoral cycles, and by maintaining timely communication with major stakeholders.

The bank said the closure of loss-making and inoperative public sector enterprises also implied that the budgetary burden was reduced.

It would also continue its dialogue with the Assam government for future loan opportunities in sector-specific reforms and public private partnership projects, particularly in the areas of tourism, energy and infrastructure.

Reasons for selecting Assam

Higher-than-average poverty incidence — to maximise the poverty reduction impact of ADB operations

lImportance to regional co-operation

Strong commitment to reforms

Capacity and willingness to take loans from Centre

Before the ADB program

During the Ninth Plan period (1997-2002), Assam’s average annual Gross State Domestic Product (GSDP) growth rate was 2.1% while India’s GDP growth rate was 5.4%

During the ADB program

During program implementation, real GSDP grew at 5.33% for 2002-2007, and increased to 6.78% during 2007-2012. Projected GSDP growth for Assam is 6.88% in 2012-13, compared to India’s GDP growth rate
of 4.96%