No fresh aid pledges for India

Donors will help India with tax reform plans

Indian government officials and aid donors have ended their first meeting in three years with an agreement to speed up action against poverty - but no new pledges of aid.

It was the first such meeting since 1997, because India's nuclear tests in 1998 led many countries to freeze or suspend assistance, and many of the sanctions are still in place.

The World Bank, which hosted the two-day gathering in Paris, agreed to help control India's budget deficit.

The head of the Indian delegation, EAS Sarma, said India had presented a good case for new aid donations, but he refused to be drawn on whether the meeting had discussed lifting the sanctions.

'Too many still poor'

Mr Sarma said the World Bank's statement of support for India's poverty reduction programme was significant in view of the three-year gap since the last meeting.

Aid stopped after nuclear tests two years ago

The donors - representing 21 countries and organisations - noted that India's strong economic growth in recent years had not led to an equivalent reduction in poverty.

More than 300m people or a third of the population still live below the national poverty line.

And they expressed deep concern at the deteriorating fiscal position of both the central government and state authorities, noting that almost half of all central revenue went on interest payments.

A World Bank official said this was "horrifying".

Reform plans

The donors pointed out that India's state governments were finding it difficult to invest in vital health, education and infrastructure projects because they could barely raise enough revenue to cover salaries, pensions and interest payments.

The World Bank country director for India, Edwin Limm, said that India's central government and state authorities had to come up with ideas for a reform programme.

"Then the money from the external agencies will flow," he said.

Many of India's states have populations larger than countries elsewhere, with 13 having populations of more than 20m.

For the first time three states (Andhra Pradesh, Uttar Pradesh and Karnataka) were invited to attend the meeting.