In a boost to India’s infrastructure development programme, the Asian Development Bank (ADB) on Thursday committed to investing $10 billion in the country over the next five years.
The investment, part of ADB’s new strategy for India, was announced by the multilateral agency’s president Takehiko Nakao in New Delhi. The bank’s focus is on lifting the economic performance of low-income states and developing economic corridors, particularly along the coasts.
While $5 billion will be used for creating infrastructure in states such as Uttar Pradesh (UP), Bihar, Jharkhand, Odisha, and Chhattisgarh, the balance $5 billion will be used for developing the 2,500 km East Coast Economic Corridor, which will ultimately extend from Kolkata to Tuticorin in Tamil Nadu. ADB had last year approved $631 million to develop the 800-km industrial corridor between Visakhapatnam and Chennai.
ADB has invested around $43 billion in India over 30 years. It expects India’s economy to grow at 7.4% in 2017-18 and 7.6% in 2018-19.
“ADB is expecting growth to be stronger this year and even stronger next year. These expectations are based on stronger reform efforts,” Nakao said at a press briefing.
The National Democratic Alliance (NDA) government has moved ahead with politically tough reforms and announced on Wednesday to privatise the national carrier Air India.
Of the $10 billion investment proposed on Thursday by the ADB, around 90% will be deployed for infrastructure creation in sectors like roads, rail, water supply, smart cities and green energy projects, said Kenichi Yokoyama, ADB’s country director. Nakao also travelled to Lucknow to meet UP chief minister Yogi Adityanath.
India is working on ambitious plans such as Sagarmala and Bharatmala to improve transport connectivity in the country. While the total road length to be developed as expressways under Bharatmala will be around 51,000km, the Sagarmala programme envisages construction of new ports to harness the country’s 7,517km coastline and setting up as many as 142 cargo terminals at major ports. In what may strengthen India’s stand on its frequent border disputes with China, the funding agency is also willing to finance infrastructure projects in Indian border states such as Sikkim and Arunachal Pradesh that abut China, said Yokoyama.
This is significant because previously multilateral lending agencies have been unwilling to fund projects in the so-called disputed border states of India. In 2009, China protested the inclusion of a water management project in Arunachal, parts of which India’s northern neighbour lays claim to, as part of a $2.9 billion loan that ADB had promised India.
Nakao lauded the government’s efforts on goods and services tax (GST) aimed at creating a single national market. “GST is an important achievement,” said Nakao, adding that its implementation may be a challenge.
“There are challenges for businesses and tax authorities…There can be some transitional issues,” added Nakao, who met finance minister Arun Jaitley earlier in the day.
Experts termed the ADB move as significant not only for India but also for the Association of Southeast Asian Nations (ASEAN) region.
“We were not linked to the $2.5 trillion ASEAN economy due to the absence of physical or economic infrastructure. If we combine the Indian economy with that of ASEAN we become a hefty economy posing a counterbalance to other economies in the region,” said Jaijeet Bhattacharya, partner, infrastructure, and government services, KPMG.
Source: Mint