By Snigdha Kalra
On the 29th of June, the Asian Development Bank (ADB) proposed to invest a sum of $10 billion in India over a period of five years, in order to support its infrastructural projects. This is one of the many investments that the ADB has been planning for India. The ADBs president, Takehiko Nakao, announced this on his visit to New Delhi.
The areas of investment
The main focus of the ADB is on developing the infrastructure of the country. 90% of the proposed investment will be used to develop infrastructure in sectors like transport, water supply, and smart city projects. Through this round of investment, the ADB aims to improve the economic performance of low-income states in India such as Uttar Pradesh, Bihar, Jharkhand, Chhattisgarh and Orissa. $5 billion will be dedicated to building necessary infrastructure in these states.
The other half will be used for the development of the East Coast Economic Corridor (ECEC). The ECEC is the first coastal corridor along the Eastern Coast of India. It is 2,500 km long and stretches from Kolkata to Kanyakumari. Last year, the ADB had approved a loan of $631 million to build the 800 km stretch between Visakhapatnam and Chennai.
The ADB has also decided to increase its annual funding to India to $4 billion, an increase of about $1 billion. This clearly shows the banks interest in investing in India.
Why invest?
The Asian Development Bank has been investing money in India as it finds a huge potential for growth in the country. It expects India to grow by 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, said Nakao, at a press briefing.
The Indian government has been focusing on ambitious projects for the development of infrastructure. Two major examples are the Sagarmala and Bharatmala projects, which were launched in order to improve transportation in India through the development of road network and the building of new sea ports.
Nakao praised the governments efforts at increasing competitiveness and easing norms for foreign direct investment in infrastructure. He also added that there was a need for improvement in labour markets and an increased cooperation with other countries.
He stated that the creation of a single national market through the Goods and Services Tax (GST) was an important achievement. However, there could be some challenges in its implementation due to the different tax slabs. Nakao added that India is an important country because of its capacity to implement projects to eliminate poverty.
All in all, the ADB sees a potentially growing market in India and believes that the growth can be accelerated through these investments.
Benefits for India
On his 3-day visit to New Delhi, Nakao met with the Finance Minister, Arun Jaitley, and the Commerce and Industry Minister, Nirmala Sitharaman. The discussion revolved around cooperation between the ADB and the Indian government. Nakao also promised to provide further assistance to the underdeveloped states in India in transport, health, and overall urban development.
This positive cooperation will boost the governments efforts for infrastructural development in the country, as well as give it more power on the global front, through integration with the Association of South-East Asian Nations (ASEAN). As long as it keeps its deficit under control, it is a win-win situation for the Indian economy.
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