Can't bank on them

World Bank President James Wolfensohn's endorsement of the UPA's Common Minimum Programme (CMP) is surely curious, given just what kind of damage some of the CMP's promises will inflict upon the country's fiscal deficit.

It would be charitable to argue that Mr Wolfensohn's comments were more to do with the spirit of the CMP, which, in many ways, is in keeping with the Bank's avowed goals of reducing poverty and achieving the Millennium Development Goals in terms of public health and literacy.

But for an institution that has a lot more economists per square foot than the UPA chairperson's office could possibly ever have, it should have been second nature for the Bank's president to examine the fiscal impact of what is being proposed.

Had he done so, it would have been evident that the assumptions behind the programme are too neat, and its real cost, if implemented in its true spirit, could be many times the Rs 40,000 crore it is assumed to cost""since the programme is open to all rural households, most of whom get paid below the statutory minimum wage, just the fact of one member of each household opting for the programme could make the costs jump to Rs 150,000 crore a year.

Nor, by the way, is there anything in the programme's particular design to ensure that its efficacy (as in the level of leakages) will be much higher than that of existing programmes.

Ironically, this is the same Bank that has been arguing that what's holding India back is poor policies that inhibit growth. Its World Development Report, out two months ago, has details from all over the world on the time taken to start/close businesses and points to how the fact that it takes 89 days in India to start a firm inhibits the country's growth.

Ditto for the long period required to shut down businesses in the country. Similarly, the report has a section on how blips in policy making (very common in India) reduce the probability of fresh investment, and a lot more on similar lines.

If it is poor policies that are hitting growth, surely it is these that need fixing, instead of handing out doles?

Since this is the same Bank that, some years ago, choked off loans to states like Haryana and Punjab once their chief ministers went about making profligate promises, the only logical reason for the changed stance is that the Bank needs India a lot more than India needs it. After all, where is Mr Wolfensohn to lend money if he can't do it to India?

While Africa's a tempting bet, given the levels of poverty there, even if you forget the tricky issue of repaying loans, there is virtually no African nation that has anywhere near India's absorbtive capacity for loans.

If the Bank's chief has been forced to trim his sails to meet the needs of one of his top debtors, this is surely a huge fall for someone who, to use the title of a recent book, is the world's banker.