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ADB to provide $10 bn assistance to India over 5 years

ADB and Govt have agreed to a new country partnership strategy for 2013-2017 which supports the country's 12th Five Year Plan

Press Trust of India  |  New Delhi 

asian development bank

Multilateral lending agency Asian Development Bank ( ADB ) will provide loan of $2 billion annually for five years till 2017 to India to create jobs, enhance investment reforms, and improve infrastructure.

"The ADB and Government of India have agreed to a new country partnership strategy for 2013-2017 which supports the country's 12th Five Year Plan. The strategy comes with a financial envelope of around $10 billion...," the Manila based lender said in a statement.

The resource envelope for sovereign operations is about $2 billion per year for the next five years and India will remain ADB 's largest single country borrower, it added. It further said that ADB 's allocated resources to India could double in amount if third-party financing and lending to private and state-owned is taken into account.

The country partnership strategy, it added, supports the Five Years Plan to create jobs for youth, enhances ongoing investment reforms, and improves infrastructure in critical areas such as energy, transport, urban services and water.

The agency will also partner with India to anchor transactions that can tap national, regional and international capital markets which can help to shift savings into infrastructure development.

"India is taking credible steps to stabilise the economy and its currency, modernise its infrastructure, and promote social programmes. This strategy is a reflection of the government's desire to bring high, inclusive and sustainable growth, create jobs, and cut red tape," said Juan Miranda, Director General for ADB 's South Asia Department.

The strategy combines physical investments with knowledge products to target emerging issues such as urbanisation, water scarcity, climate change, emission controls, internet connectivity, vocational training, and development of capital markets, said ADB , which is owned by 67 members. Under the strategy, ADB said, operations will centre on lagging states with high poverty levels and gaps between rural and urban sectors.

Citing an example, it said the northeast is a land-bridge for India to reach fast growing and lucrative ASEAN markets, illustrating why furthering regional cooperation and integration is a cornerstone of the strategy.

"This will be matched by work in economic corridor development, particularly in south-east India, which provides access to cost-effective shipping routes," the agency said.

In enacting this strategy, ADB said, COBPs (country operations business plans) will focus on energy, transport, and urban services (water supply and other municipal infrastructure and services).

Investment in these areas is expected to account for about three-fourths of ADB 's total programme. ADB will selectively invest in special purpose vehicles (SPVs) for infrastructure financing, water resources management, skills development, and state-level fiscal reforms.

Cost-sharing between ADB and India was on an 80:20 basis during the 2009–2012 CPS (country partnership strategy) period.

However, in December 2011, the government introduced new guidelines proposing a minimum counterpart share of the government of 50 per cent for central projects, 30 per cent for general category state projects, and 20 per cent for special category states.

In this backdrop, ADB has proposed a new cost sharing ratio of 75:25 for the loan portfolio during 2013-17 CPS.

India is ADB 's fourth largest shareholder. Since launching its lending operations in India in 1986, ADB has approved 168 sovereign loans amounting to $27.2 billion. As of December 2012, the portfolio included 78 ongoing sovereign loans amounting to $11.2 billion.

ADB 's sovereign lending assistance to India increased from an annual average of about $1.16 billion in 2000–2006 to $1.85 billion in 2007–2012. India has been ADB 's largest borrower for the last 3 years (2010–2012).

First Published: Wed, November 06 2013. 18:12 IST