The FINANCIAL — The Asian Development Bank (ADB) plans to raise its annual lending to India to a maximum of $4 billion to support the country to accelerate inclusive economic transformation toward upper middle-income status, as laid out in a new ADB Country Partnership Strategy (CPS) for 2018-2022 endorsed on September 27.
ADB’s program in India will focus on three main pillars of activity during the 5-year period—boosting economic competitiveness to create more and well-paid jobs, improved access to infrastructure and services, and addressing climate change and improving climate resilience. About 85% of lending will be focused on transport, energy, and urban infrastructure and services. Other finance will be aimed at public sector management, agriculture, natural resources and rural development, as well as skills development and urban health.
The planned lending level, which includes private sector operations, compares with an average of $2.65 billion a year in loans extended in the period 2012-2016. It will be complemented by technical assistance to help undertake strategic studies, build capacities, and prepare projects, increasing from the current average of $6.6 million in 2013-2016. ADB will also explore cofinancing opportunities, including climate funds for relevant projects.
“ADB’s new 5-year partnership with India supports the government’s goal of inclusive and sustainable growth grounded by economic structural transformation and job creation, with an increased focus on low-income states,” said Kenichi Yokoyama, ADB Country Director in India. “We aim to assist transformative investments, deliver holistic solutions removing sectoral boundaries, and demonstrate high value addition of our assistance in terms of innovation, timeliness, efficiency, and quality.”
India has been growing at an average rate of more than 7% since FY2012, putting it among the world’s fastest growing large economies. The country has also more than halved its poverty rate since FY2004 to 21.9% and has achieved most of the Millennium Development Goals.
To accelerate such positive trends requires that the country create more high quality jobs, since half of India’s workforce is based around agriculture, which is still marked by low productivity and incomes. Infrastructure continues to be a major bottleneck, in which ADB has identified an investment shortfall of $230 billion a year. Other critical challenges include how to close the persistent gap between advanced and lagging regions where most of the poor are concentrated, environmental degradation exacerbated by the impacts of climate change, and building capacity within the country’s institutions.
For its first pillar, ADB will help expand infrastructure networks for transport, energy, and urban centers along economic corridors, enhance corridor business environment, and address skills shortages to support industrialization. The second pillar will tackle infrastructure bottlenecks in lagging regions, improving municipal services for the urban poor, and supporting rural investments to close the income gap with cities. This will be supported by more efficient public sector management. The third pillar of operation will promote sustainable natural resource use, higher renewable energy consumption, green corridors on high-voltage transmission lines, and ensure climate proofing in infrastructure projects.
Under the CPS, ADB will continue to prioritize private sector development and support the government in reviving private financing of infrastructure projects, including through public-private partnerships. ADB’s private sector operations will consider support for transport, power, urban infrastructure (including sewerage and solid waste management), affordable housing, manufacturing, health, and education, among other sectors.
ADB’s regional cooperation and integration operations will be substantially enhanced, building on the South Asia Subregional Economic Cooperation (SASEC) Vision launched by its Finance Ministers in New Delhi in April 2017. Assistance will focus on transport connectivity, energy trade, trade and investment facilitation for intra-SASEC and global value chain integration, and building synergies between economic corridors.