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| India Eco Summit: Q&A with Rajat M Nag | | India has extremely good credit rating |
| Vrishti Beniwal / New Delhi Nov 10, 2009, 00:58 IST |
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Faced with a difficult job of creating a balance between maintaining growth and containing inflation, governments should focus on growth while watching inflation, Rajat M Nag, Managing Director-General of the Asian Development Bank (ADB), tells Vrishti Beniwal in an interview. Edited excerpts:
Do you plan to increase your lending to India?
Last year, India was the largest borrower from ADB. Our lending to India was about $2.9 billion, of which $1.8 billion was sovereign fund. It was far ahead of the $1.7 billion lending to the next borrower China... We at ADB are constrained by resources and cannot increase our lending to India substantially. Moreover, India finances most of its projects on its own, either through public sector funding or by mobilising private sector funds.
So, are you lending too much to India and China?
The $2.9 billion ADB lending is a very small portion of the huge development budget of India. Similarly, in China, their borrowing from the ADB is a small fraction of their overall investment. We lend to these two countries because they have got good projects. India is a very good client with an extremely good credit rating.
What are the focus areas in India?
We have large amount of operations in the financial sector, agriculture, and natural resource management. We are focused primarily on infrastructure.
Which Indian states have caught your attention?
One can argue that we should focus on states that have a good track record of project implementation, and have good governance. But there are poor states which need help. We have to do a balancing act. ADB tends to work in the states where poverty incidence is high and the institution’s capacity is low.
How did ADB face the challenges posed by slowdown?
We received substantial capital infusion earlier this year. Our capital was tripled which meant we had more capacity to lend. We provided a $3 billion counter cyclical facility to countries which were going for fiscal stimulus programmes or needed support. In 2009, we expect to lend a total of $17 billion, which is significantly higher than the $12 billion we lent in 2008. In 2010 also, we will probably lend around $17 billion.
What are your growth estimates for India?
We expect growth in India to be about 6 per cent this year, going up to 7 per cent next year. We expect China to grow at 8.2 per cent this year and 8.9 per cent next year.
To what extent have stimulus packages helped fight the slowdown?
Asia has been able to do relatively well as they came out with a fairly aggressive fiscal stimulus and easing of the monetary policy. The recovery has begun. It is a V-shape recovery, rather than W-shape.
When is the right time to exit?
It would be premature to withdraw the stimulus now. Next year may be appropriate.
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