India: Assam Governance and Public Resource Management Sector Development Program

Transcription

1 Validation Report Reference Number: PVR-335 Project Number: Loan Numbers: 2141, 2142, and 2442 November 2014 India: Assam Governance and Public Resource Management Sector Development Program Independent Evaluation Department

2 ABBREVIATIONS ADB Asian Development Bank DMF design and monitoring framework FMU fiscal management unit FRBM fiscal responsibility and budget management GDP gross domestic product IT information technology MTFP medium-term fiscal plan PCR program completion report PPTA PSE RRP SDP sector development program TA technical assistance VAT value-added tax project preparatory technical assistance public sector enterprise report and recommendation of the President NOTE In this report, $ refers to US dollars. Key Words adb, assam, budget management, comprehensive treasury management information system, fiscal responsibility, india, medium-term fiscal plan, tax information management system, policy reform program The guidelines formally adopted by the Independent Evaluation Department (IED) on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. To the knowledge of IED management, there were no conflicts of interest of the persons preparing, reviewing, or approving this report. In preparing any evaluation report, or by making any designation of or reference to a particular territory or geographic area in this document, IED does not intend to make any judgments as to the legal or other status of any territory or area.

3 PROGRAM BASIC DATA Project Number: PCR Circulation Date: Oct 2013 Loan Numbers: 2141, 2142, 2442 PCR Validation Date: Nov 2014 Project Name: Assam Governance and Public Resource Management Sector Development Program Country: India Approved ($ million) Sector: Public sector management ADB Financing: ($ million) ADF: 0.00 Total Program Costs: Program I (2141) Project (2142) Subprogram II (2442) Actual ($ million) Loan: Borrower: OCR: Beneficiaries: Others: Cofinancier: Total Cofinancing: Approval Date: Signing Date: Project Officers: Validator: Quality Reviewer: 16 Dec Dec Sep Dec Dec Oct 2008 A. Goswami K. N. Shin G. Walter, Consultant E. Gozali, Principal Evaluation Specialist, IED1 Effectiveness Date: Closing Date: Location: ADB headquarters ADB headquarters Peer Reviewer: Director: 16 Mar Mar Jan Dec Jun Mar 2012 From: Dec Dec Dec Nov Jun Feb Feb 2012 To: Jun 2006 Jul 2006 Feb 2012 R. Vasudevan, Evaluation Specialist, IED1 W. Kolkma, IED1 ADB = Asian Development Bank; ADF = Asian Development Fund; IED1 = Independent Evaluation Department, Division 1; OCR = ordinary capital resources; PCR = program completion report. A. Rationale I. PROGRAM DESCRIPTION 1. The Assam Governance and Public Resource Management Sector Development Program was approved by the Asian Development Bank (ADB) in 2004 as a cluster program comprising two subprograms that were to be implemented over 5 years and a project loan. The 2004 report and recommendation of the President (RRP) indicated that the program would support the government s efforts in the stabilization and consolidation of state

4 2 finances. 1 The first program was provided with a loan of $125 million, together with a project loan of $25 million. The second program loan of $100 million was approved in It included a technical assistance (TA) grant of $600,000 for capacity building and support for program implementation. 2. The government of Assam faced fiscal- and governance-related structural problems. Its fiscal position was weak due to stagnation in tax and nontax revenues and growing recurrent expenditures. Subsidies for loss-making public sector enterprises (PSEs) and increasing pension liabilities added to the fiscal strain. From the central government perspective, inadequate fiscal consolidation at state level was seen as having the potential to undermine the sustainability of recent economic performance and the delivery of promised economic prospects. Reform efforts in fiscal and governance issues at the state level was seen as key to effective national-level fiscal management, helping to reduce the fiscal deficit as a percentage of gross domestic product (GDP). 3. State-level reform effort was seen as particularly critical in Assam (the gateway to the northeast) to help bridge the widening development gap between different parts of India; Assam lagged most states in India in development, including in growth and per capita income. During the 9th Five Year Plan period ( ), India s GDP grew at 5.4%, while Assam s corresponding state domestic growth was only 2.1% and its per capita income was half the national level. Assam is rich in natural resources but was geographically isolated, had limited infrastructure, and was prone to natural disasters, such as earthquakes and flooding. 4. The program completion report (PCR) did not refer to the loan modality (i.e., program cluster approach within a sector development program), 3 but the RRP noted this allows a holistic approach to the reform of public finances over the medium term, addressing institutional challenges by sequencing institutional development prior to introducing legislation. The addition of the project loan (as part of a sector development program [SDP]) provided essential support for institutional strengthening and capacity building. The program cluster approach has been used by ADB in different countries for several programs supporting financial reforms where continued support for sequenced reforms was needed. 4 The addition of the project loan provided the important capacity building support needed in such reform programs. B. Expected Impact 5. The anticipated impacts of the SDP are best segregated as (i) stabilized and consolidated state government finances for subprogram 1, and (ii) greater efficiency in resource use and improved financial flexibility for subprogram II. Both culminate in enhancing economic growth of the state and in reducing poverty. The project loan component under the SDP provided support to subprograms I and II in the form of training, information and 1 ADB Report and Recommendation of the President to the Board of Directors: Proposed Program Loan Cluster and Project Loan to India for the Assam Governance and Public Resource Management Sector Development Program. Manila. 2 ADB Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistance Grant to India for the Assam Governance and Public Resource Management Sector Development Program (Subprogram II). Manila. 3 ADB. 2013: Completion Report: Assam Governance and Public Resource Management Sector Development Program in India. Manila. 4 For example, see the IED 2009 Performance Evaluation Report on Cambodia: First Financial Sector Program Loan Cluster.

5 3 communication technology systems, and administrative support. As such, the project component does not have a separate impact statement. The SDP activities covered five main areas: reform of state finances, revenue administration, expenditure management and governance, debt management, and PSE reform and reorientation of the role of the state. Together with reduced subsidies for PSEs, this would allow additional resources to be made available for priority spending to increase growth, improve the quality of public expenditures, promote social and physical infrastructure development, enable poverty-targeted subsidies, and ultimately reduce poverty. The design and monitoring framework (DMF) for subprogram I did not include specific indicators for impact, referring only to a level of compliance with targets in the medium-term fiscal plan (MTFP) and to the Assam Fiscal Responsibility and Budget Management Act (FRBM Act). The DMF of subprogram II included more specific indicators: deficits to be within the prescribed limits under the FRBM Act, and a fiscal deficit target of 3% to be attained by FY2008 and maintained during the entire program period, together with a revenue surplus. C. Objectives or Expected Outcome 6. Similar to the impact level, outcomes of subprogram I covered actions necessary to sustain reduction in fiscal and revenue deficits, including achievement of the MTFP revenue mobilization and sustainable debt level targets, and containment of wages and salaries. Outcomes of subprogram II covered four areas: (i) increased tax revenues, (ii) reorientation of expenditures (to allow greater investment and maintenance of assets), (iii) optimal debt servicing, and (iv) mitigation of PSE fiscal risk. The PCR assessed the two subprograms as a whole program, linking activities and achievements of subprogram I with follow-on activities under subprogram II, and grouping them under five components, as in para.7. Appendix 3 of the PCR provides a diagram showing linkages between the two subprograms. The objective of the project loan was to enhance the state government s capacity to support the fiscal and governance reform efforts and strengthen implementation processes. D. Outputs 7. The SDP activities were grouped into five main activities: (i) reform of state finances, (ii) revenue administration, (iii) expenditure management and fiscal governance reforms, (iv) debt management, and (v) public sector enterprise reform and reorientation of the role of the state. 8. Tranche conditions were attached to each component; they are set out in detail in the Policy Matrix included as Appendix 3 in the RRP. Appendixes 1 and 2 of the PCR present the achievements for each activity. The PCR text did not provide a summary of tranche conditions for the program, but the two appendixes gave adequate detail of achievement by component and tranche. 9. Reform of state finances. The approval of the MTFP for FY2005/06, with projections for , establishment of a fiscal management unit, and passing of the FRBM Act were the main first tranche release conditions under subprogram I. 10. Revenue administration. Both subprograms included reforms to broaden the tax base and improve tax collection. Tranche release conditions covered improvements in revenue administration and tax policies and administration, including value-added tax (VAT).

6 4 11. Expenditure management and fiscal governance reforms. The two subprograms covered improvements in state budget planning and administration, improvements in capital and operation and maintenance expenditure with a core investment program, improved financial management and treasury systems and reporting, introduction of outcome-based budgeting, and improvements in the fixed asset register and pension management. 12. Debt management. The tranche release actions under both subprograms were debt management and restructuring; and improved policy and management, including data collection and management. 13. Public sector enterprise reform and reorientation of the role of the state. These were key components of both subprograms, with policy guidelines and PSE closures, social safety net programs, and voluntary retirement scheme compensation disbursement guidelines as tranche release actions. Public private sector partnerships were to be strengthened under subprogram II. 14. The project loan provided capacity building, training, studies, and assessments to help build capacity for the program as a whole, complemented by information technology (IT) support, including equipment. E. Provision of Inputs 15. Two subprogram loans amounting to $225 million and a project loan of $25 million were provided. The first tranche for subprogram I of $45 million was released in December 2004, an incentive tranche of $45 million in December 2005, and the second tranche of $35 million in June 2007 (6 months later than scheduled). The use of an incentive tranche was unusual; the rationale was to provide for flexibility based on progress as it could be released at any point during the program. For subprogram II, the first tranche of $40 million was released in November 2008, the second tranche of $40 million in December 2009 (as scheduled), but the third tranche of $20 million in November 2011 was 6 months behind schedule. 16. Local currency funds generated by the loans were used to finance the costs of structural adjustment under the program, including the establishment of funds (e.g., new employee pension scheme), debt swapping and settlement, and a state fund for PSE reforms. Program adjustment costs are discussed later in the evaluation of efficiency. 17. Technical assistance. Four technical assistance (TA) grants were provided for different phases of the program. These included two project preparatory technical assistance (PPTAs) prior to the approval of subprogram I funded by the United Kingdom, 5 and a third PPTA for subprogram II funded by the Government of Japan Special Fund ($500,000). A TA grant of $600,000 funded by the Government of Japan Special Fund was also provided to subprogram II to assist in program implementation. F. Implementation Arrangements 18. Implementation arrangements set out in the RRP were followed with the state Finance Department as the executing agency, with a program steering committee chaired by the 5 $1.0 million for a PPTA for the loan and $0.7 million was provided to help the government design and develop a time-bound strategy and action plan for reforms under subprogram I.

7 5 principal secretary and comprising other secretaries to provide a strategic overview. A fiscal management unit (FMU) was established in the Finance Department, headed by a project manager, for the day-to-day program management and liaison with ADB and other stakeholders. An asset management cell was established in Assam Industrial Development Corporation under subprogram II to estimate and manage the assets of the PSEs identified for closure and liquidation. II. EVALUATION OF PERFORMANCE AND RATINGS A. Relevance of Design and Formulation 19. The PCR rated the program highly relevant. It noted that while the scope and number of conditions included in the policy matrix were ambitious, these were essential for addressing the fiscal reform needs in proper sequence and led to improving the state government s compliance with the FRBM Act. The loan tranches adequately covered the adjustment costs and helped mitigate potential adverse effects on the labor market and the budgetary burden of the PSE restructuring. The project component of the SDP was highly relevant, providing necessary technical infrastructure, capacity building, and training. Consultations with key stakeholders had helped ensure the relevance of the design and actions. 20. The PCR stated that the program was consistent with the ADB country program for India, citing the 1996 shift in strategy to promote reforms at state government level. 6 The ADB Country Partnership Strategy (CPS) for refers to inclusive growth, 7 specifically referring to the inclusion of weakly performing northeastern states in ADB operations, such as Assam. At completion, the SDP was relevant to the ADB Strategy 2020, 8 where good governance, capacity development, and private sector development are key drivers of change. 21. This validation rates the program highly relevant. The program is in line with ADB country strategies and India s national and state needs where sustainable state reform efforts on fiscal and governance issues were a key to the central government efforts for (i) effective fiscal management, (ii) elimination of the revenue deficit, and (iii) reduction of the national fiscal deficit, which were essential for achieving the Tenth Five Year Plan ( ) goals. 9 While the program s design was ambitious in terms of potential challenges faced during implementation, the program actions, including consultations and capacity building at the early phase, were appropriately sequenced leading to anticipated outcomes. Buy-in of stakeholders helped ensure design relevance. The TA grant and ADB support for implementation helped make the design achievable. This validation notes a minor design shortcoming in the overlapping consultancy resources provided under the TA grants associated with the SDP and the project loan. This issue is also mentioned in sections discussing efficiency and performance of the ADB. 6 ADB Country Operational Strategy Study, dated July 1996, as cited in ADB Country Assistance Program Evaluation: India. Manila. India itself had changed strategy, allowing states to borrow directly from multilateral banks. 7 ADB Country Partnership Strategy: India, Manila. 8 ADB Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, Manila. 9 Planning Commission, Government of India th Five Year Plan. New Delhi.

8 6 B. Effectiveness in Achieving Project Outcome and Outputs 22. The PCR rated the program highly effective. It noted that the primary indicator of effectiveness is improvement in the economy and fiscal condition of the state, and cites evidence that previous revenue and fiscal deficits were replaced by surpluses in four consecutive fiscal years from FY2005/06 to FY2008/09, as total revenue receipts increased with tax reforms. Similarly, current expenditures related to salaries, pensions, and PSE budgetary support were moderated. Fiscal space was created to allow higher capital outlays and social sector expenditures, 10 and the state s own expenditures in education and social welfare were protected from compression. With the fiscal space created, the government launched various investment projects in the following sectors: infrastructure, transport, construction, power, IT, education, and tourism (the PCR cited some examples). Appendixes 1 and 2 of the PCR provided some figures for target achievements on fiscal, debt, and economic outcomes, while Appendix 8 of the PCR provided data on GDP growth, revenue collection, expenditures, capital outlay, fiscal and revenue deficits, and debt levels. These show that the government has achieved substantial fiscal consolidation under subprogram I. Appendix 8 of the PCR is a substantial appendix, which this validation cannot verify. Appendix 2 of the PCR showed outcome achievements for PSEs, covering the numbers closed and restructuring costs. 23. The PCR also referred to the achievement of output measures, which demonstrate the effectiveness of the reforms, such as the simplification of procedures and automation of revenue and expenditure systems (e.g., tax administration, treasury payments, cash management, and adoption of computerized treasury), which collectively have streamlined budget planning and implementation and improved the convenience and efficiency of tax service transactions. There was also transparency and promptness in service delivery, such as in property registration, PSE closures, and settlement of PSE-related debts. These achievements are summarized in the DMF presentation in Appendix 1 for subprogram I, and Appendix 2 for subprogram II. Specific figures were cited showing achievements against DMF targets where appropriate (e.g., VAT users and e-payment transactions, and excise department operations), although several were achievement of planned actions. Again, this validation cannot confirm these achievements, but they are logically presented with supporting details, and the ADB review missions had reported progress on many of these. 24. Achievements recorded in the PCR for Revenue Administration include the introduction of the VAT in May 2005, and changes in excise taxes. An IT-based tax information management system and a comprehensive treasury management information system were introduced to improve the efficacy of the revenue and treasury functions. 25. Expenditure management was improved, with more transparency in state budgeting, use of updated MTFP projections for revenue and expenditure, and steps taken to introduce outcome-based budgeting, linking the budget cycle to the achievement of specified outcomes rather than input-based line-item budget. An actuarial estimation of pension liabilities was completed to assess the vulnerability of state finances, and agreements made with the National Pension System Trust for the operation of the new, defined contribution pension scheme and for the collection of arrears from employees. Funds were transferred to dedicated National Pension System accounts from program disbursements. 10 On capital outlay, the state GDP ratio improved from 1.88% in FY2005/06 to 3.95% in FY2012/13.

9 7 26. Debt management improved, with debt swaps and consolidations to reduce interest rates, creating fiscal space. The total volume of guarantees to be issued by the state government for PSEs was capped at 50% of own revenues or 5% of state GDP, whichever was lower. A guarantee redemption fund was established as a mechanism for addressing liabilities arising from the enforcement of such guarantees. 27. Four key policy actions were introduced to limit unproductive public expenditure and budgetary support for loss-making PSEs, establishing the foundation for the restructuring of certain PSEs. Among the loss-making PSEs, 15 were closed with one-time settlement of government-guaranteed loans. Employees of these PSEs were compensated through a voluntary retirement scheme. The social safety net program provided financial and career counseling. Impediments to private investment were reviewed to strengthen public private sector partnerships and a single-window mechanism introduced for investment facilitation and promotion. An employee database and a public administration rationalization policy were adopted to contain public administration expenditures and improve the quality of service. Anticorruption mechanisms were reviewed and strengthened. 28. Tranche conditions. The PCR noted that of the total 72 conditions for subprogram I, 67 were fully complied with, while 42 out of 46 conditions were complied with for subprogram II. Those conditions that were only partially complied with involved the creation of property and land registration data, which are were still being revised. The employee and pension databases were also being continuously updated. No tranche condition was reported not complied with. 29. The PCR provided a thorough assessment of achievements and a highly effective rating, as given in the PCR, could thus be appropriate. However, this validation considers that such a rating may suggest an almost perfect program outcome, which is not yet the case. As noted in para. 6 earlier, the intended outcomes of the program were to (i) support the state government s efforts in stabilizing and consolidating its finances, and (ii) improve key ratios on tax revenues, expenditures, debt servicing, and mitigate fiscal risks originating from the lossmaking and/or inoperative PSEs. Consolidation and stabilization have been achieved. However, there are indications (PCR, Appendix 2) that improvement in key fiscal ratios was still prone to significant fluctuation and regression during the SDP implementation. A more indepth evaluation of the program at a later date may be able to better determine the efficacy of the SDP, including impacts on poverty. In the meantime, this validation rates the program effective. C. Efficiency of Resource Use in Achieving Outcomes and Outputs 30. The PCR rated the program efficient. The assessment is relatively brief, noting in particular that no major change in scope was required, tranche releases were disbursed generally on time (except for two that were unavoidably delayed by elections), and funds were used as planned. The project loan was not as efficient, with implementation delays, and overlaps and redundancies in the PPTAs. 31. This validation rates the program efficient. The size of the loans was related to estimates of the cost of the reforms. The RRP tentatively calculated adjustment costs of the program as $347 million over the anticipated 5 years, comprising (i) state debt restructuring ($159 million), (ii) cash management reform ($20 million), (iii) pension liabilities ($30 million), and (iv) PSE reform ($138 million). The ADB review mission reports and PCR showed the funds were used to cover these planned actions. The PCR showed disbursements for each

10 8 tranche broken down into these components. The use of funds was matched to the identified actions yielding the intended outcomes. Calculation of rates of return is not appropriate, nor feasible, for such a program. Efficiency also needs to be related to efficiency of progress in implementation of reforms, and efficiency of program processes, including design and tranche releases. As noted earlier, despite initial capacity constraints, the program progressed as planned. Support from ADB and TA consultants helped the processes, and the government itself had implemented the program diligently, following the agreed time schedules set out in the policy matrix and DMF, and thus, was efficient. D. Preliminary Assessment of Sustainability 32. The PCR rated the program likely sustainable based on the strong commitment of the state government to fiscal consolidation, noting that mechanisms had been put in place to make fiscal performance more resilient to changes in financial, economic, social, and political circumstances. Fiscal and economic indicators in Appendix 8 of the PCR supported evidence of sustainability of the program outcomes despite disruptions and costs following disasters and ethnic insurgency, and the local and national elections. The program helped change government attitudes, and the PCR reported concrete examples of the government s continuing effort to reform PSEs. This validation has no basis on which to disagree with this assessment, and given the improved institutional capacity created under the program to implement and sustain achievements to date, the validation rates the program likely sustainable. E. Institutional Development 33. The PCR provided a rating for institutional development, assessing that the program and the capacity building and training provided under the project loan and TA grant had a substantial impact in reforming key legislative, regulatory, and administrative frameworks; and in transforming ineffective and inefficient practices in public administration. It cited the FMU in particular as being instrumental in managing public expenditures, establishing new systems, improving service delivery, and increasing efficiency of resource management. Improvements in many of the budget, tax, and reporting systems; and in corporate governance procedures for PSEs have helped build safeguards against corruption. The PCR highlighted the advisory and training roles of both ADB and the TA grants during the project implementation; particularly the latter s significant contributions to capacity development, with both helping implement policy and institutional changes that strengthened administration systems and procedures in key reform areas. Based on a review of the TA completion report, this validation rates the associated TA grant successful. There were noted improvements in the agencies systems and procedures, and changes in the institutional culture. As such, this validation can concur with the PCR that the institutional development impact of the SDP at its completion was highly significant (equivalent to substantial). D. Impact 34. The PCR rated the impact of the program on economic activities in Assam state significant, citing that increased revenue and budget surpluses have enabled increased resource allocation to infrastructure, leading to increased attractiveness for public private partnership projects in economic sectors such as tourism and, potentially, energy. Phasing out of inefficient PSEs has also encouraged the private sector. Accelerated economic growth will likely contribute to poverty reduction. This validation notes the improvement in the fiscal condition of the state and its economic growth, as presented in Appendix 8 of the PCR. State

11 9 GDP increased from around 2% to over 6% by , but its contribution to the program is unclear as part of the GDP growth may have come from a growth in agriculture (which recovered from floods) and services, and is but a drop in industrial growth. However, improvements in the fiscal parameters and improvements in budget planning and implementation were substantial. Thus, this validation rates program impact significant. III. OTHER PERFORMANCE ASSESSMENTS A. Performance of the Borrower and Executing Agency 35. The PCR rated the performance of the borrower and executing agency satisfactory. It notes that initially the government and the executing agency lacked the capacity to implement such a complex program, but they gained experience as the program proceeded. A key factor was continuity as government officers were retained on the program throughout implementation. The PCR noted that many of the reforms were politically sensitive yet the government s commitment remained strong, resisting spending-oriented populist pressures during the electoral cycles. The compliance status of the covenants under the three loan agreements (two for the subprograms and one for the project) are in Appendix 6 of the PCR. Covenants relating to counterpart funds, sound administrative practices, program responsibilities and coordination, and reporting and program review requirements were complied with. Based on the foregoing, this validation rates the performance of the borrower and the executing agency satisfactory. B. Performance of the Asian Development Bank 36. The PCR rated the overall performance of ADB satisfactory, referring in particular to the program being appropriately designed with well-sequenced legislative, regulatory, and policy-oriented reforms, addressing critical fiscal issues of the state. ADB provided advisory and training assistance during implementation, which was important given the initial weak capacity of the state government and the complexity of the program. The PCR, however, rated the performance of ADB for the project component less than satisfactory, noting duplication of the consultant s work under the loan with that of the PPTAs and advisory TA, resulting in unnecessary expenditure allocations. It also pointed out the limited knowledge and experience of ADB in the initial stages of the project in designing procurement packages, although this improved over time. 37. Review missions were conducted regularly, covering the period from August 2005 to May 2011 (the PCR mission was fielded in 2013), with two review missions per year for subprogram I and at least once a year for subprogram II (TA consultants assumed a regular monitoring role). There was continuity of ADB staff, with the same mission leader for the program from 2006 to The review mission reports showed a clear tracking of progress in tranche release conditions. The preparation of subprogram II in 2008 provided a substantial review of the reform progress which formed the basis for subprogram II. The RRP for subprogram II included a sector analysis update. The review missions involved key government staff indicating that ADB maintained good contact with the government during implementation. This validation rates ADB performance satisfactory.

12 10 IV. OVERALL ASSESSMENT, LESSONS, AND RECOMMENDATIONS A. Overall Assessment and Ratings 38. The PCR rated the program successful. The PCR noted that the 2007 ADB special evaluation study of support to public resource management in India provided similar ex-ante ratings for subprogram I. 11 This validation notes the substantial improvement in the fiscal condition of Assam as a result of improvements in budget planning and implementation, increased revenue, and better expenditure allocations. The corporate governance of PSEs has improved and the loss-making enterprises were closed. It is too early, however, to measure the impact of the program on growth and reduction in poverty. Overall Ratings Criteria PCR IED Review Reason for Disagreement and/or Comments Relevance Highly relevant Highly relevant Effectiveness in achieving project outcome and outputs Highly effective Effective The program was very effective in achieving fiscal stability and/or consolidation (outcomes of subprogram I).However, there was no clear indication that improvement in key fiscal ratios (outcome of subprogram II) can be sustained as indicators were fluctuating during the SDP Efficiency in achieving outcome and outputs implementation (paras ). Efficient Efficient The PCR and this validation rated the performance of the project loan as a component of the SDP less than efficient. The SDP on the whole is considered efficient (paras ). Preliminary assessment of sustainability Likely sustainable Likely sustainable Institutional development Substantial Highly significant (substantial) Impact Significant Significant Overall assessment Successful Successful Borrower and executing Satisfactory Satisfactory agency Performance of ADB Satisfactory Satisfactory ADB performance on the project loan was rated less than satisfactory but for the whole SDP, it was considered satisfactory (paras ). Quality of PCR Highly satisfactory The PCR covers two large reform subprograms and significant efforts were put in assessing and providing evidences. However, more explanation could have been provided in the rating assessment of relevance and efficiency (para. 42). 11 ADB Special Evaluation Study: ADB Support to Public Resource Management in India. Manila.

13 11 ADB = Asian Development Bank, IED = Independent Evaluation Department, PCR = program completion report, SDP = sector development program. Source: ADB Independent Evaluation Department. B. Lessons 39. The PCR listed several valuable lessons although they are not new and have been identified in many PCRs and evaluations. Nevertheless, these are very important and this validation considers them justified to be repeated, as follows: (i) appropriate timing and sequencing of reforms is essential for any reform program; (ii) focus should be on core reforms essential to the program, numerous policy actions should be avoided; (iii) capacity building and development of core competencies are essential for both implementation and sustainability of reform programs; and (iv) involvement of officials and building of institutional memory are essential in institutionalizing and sustaining reforms. C. Recommendations for Follow-Up 40. The PCR cited the following recommendations and further action to make the program more effective: (i) connectivity and fuller use of the comprehensive treasury management information system, (ii) fuller use of the capabilities of the tax information management system, (iii) IT resources to be used for property and land records, and (iv) use of security equipment at check posts. V. OTHER CONSIDERATIONS AND FOLLOW-UP A. Monitoring and Evaluation Design, Implementation, and Utilization 41. The ADB review missions used the tranche conditions policy matrixes for subprogram monitoring, and the review mission reports indicated these were effective in tracking developments and progress. This regular, ongoing interaction with the Department of Finance was adequate for monitoring. No specific monitoring and evaluation system was included for the program, apart from this. Program implementation and monitoring arrangements were established as envisaged in the RRP, with a program steering committee and the FMU as key elements in program monitoring. B. Comments on Project Completion Report Quality 42. The PCR is clearly written and of a high standard and this validation rates it highly satisfactory. It covers two large reform program loans and significant effort has been put in assessing and providing evidences. C. Data Sources for Validation 43. The primary sources for this validation were the (i) RRP for the SDP and the RRP for subprogram II; and (ii) the PCR, which included the TA completion reports as appendixes. This validation also reviewed the (i) ADB review mission reports for May 2011, June 2010, August 2009, April 2007, and December 2006; (ii) India Country Operations Business Plan for and ; and (iii) India Country Partnership Strategy for and Also used were the (i) Country Assistance Program Evaluation of 2007; (ii) 2013 validation of the Country Partnership Strategy, ; and (iii) 2007 Special Evaluation Study on ADB Support to Public Resource Management in India.

14 12 D. Recommendation for Independent Evaluation Department Follow-Up 44. A follow-on study can be considered for the 2007 special evaluation study, focusing on the effectiveness of delivering reform programs such as this, through the cluster and SDP modalities. This may focus on India or deepen the 2007 study.