19
Jun
ADB to increase India lending as China-backed AIIB emerges
The Asian Development Bank (ADB) will increase lending to India by a third—from nearly $3 billion a year to $4 billion a year—during the three years ending 2018 because of India’s strong repayment record and the bank’s need to streamline its lending following the emergence of newer bodies such as the Asian Infrastructure Investment Bank (AIIB).
ADB president Takehiko Nakao, who met finance minister Arun Jaitley, commerce minister Nirmala Sitharaman, power minister Piyush Goel and urban development minister Venkaiah Naidu for talks on Tuesday, told reporters he expects India to grow by 7.8% in 2015-16 —higher than China’s projected 7.2%.
The talks focused on how India can increase foreign direct investment (FDI) and infrastructure investment, said Nakoa, adding “in the coming years, if the policies are right, the economy can grow” at 8% or higher.
“ADB aims to increase its sovereign and non-sovereign lending (to India) from the present $7 billion to $9 billion in three years from 2015-17 to $10 billion-$12 billion between 2016-18 using ADB’s expanded lending capacity,” he added.
This means the ADB will lend around $4 billion a year— 40%-50% more than before “because we now have higher lending capacities”.
Nakao was referring to the Manila-based institution streamlining its lending based on a merger of its Asian Development Fund lending and its Ordinary Capital Resources balance sheet that is expected to increase to as much as $20 billion a year from the current $13 billion.
ADB will focus on supporting the government’s new initiatives, including Make in India aimed at boosting manufacturing, Skill India aimed training young people to enter job market, Clean India Mission, or Swachh Bharat Abhiyan, and creation of smart cities.
“India is a very good borrower for us. They have never missed repayment…there are huge financing requirements (in India). India has a lot of potential,” said Nakao. “India is a good place to increase our lending.”
The government’s “proactive role in pushing key reforms will lead to an improved business climate…strong commitment in the budget on raising public investment by 25% in critical infrastructure sectors, such as roads, railways, and urban development will further crowd in much-needed private investment,” Nakao added.
Asked if the ADB faced competition from the BRICS Bank set up by Brazil, Russia, India, China and South Africa, as well as the China-anchored Asian Infrastructure Investment Bank (AIIB), Nakao acknowledged that the ADB was similar to the AIIB and that there were many areas for the two institutions to cooperate. “We will be co-financing the projects in infrastructure,” Nakao said.
But the ADB was also making efforts to speed up the process for approval of loans for projects in a bid to make the institution more competitive. To fast-track its decision-making process, the bank has also decided to authorize its India office to take decisions with regard to the funding of projects, Nakao said.
On India’s economic growth prospects, Nakao said the ADB would be announcing revised growth projections for the current fiscal year in July. “ADB’s latest economic outlook for India published in March projects GDP growth of 7.8% in 2015-16, rising to 8.2% in 2016-17.”
The strong growth outlook is backed by good macroeconomic indicators, such as a fall in inflation, narrowing current account deficit, reforms to further open up certain sectors for FDI and a reduction in fuel subsidies.
Nakao was of the view that with lower inflation, the Reserve Bank of India (RBI) has the room to further cut interest rates.
Source: http://www.livemint.com/Politics/Fn3WTCaIO4kmQuTwn731AL/ADB-to-increase-India-lending-as-Chinabacked-AIIB-emerges.html
Source: http://www.livemint.com/Politics/Fn3WTCaIO4kmQuTwn731AL/ADB-to-increase-India-lending-as-Chinabacked-AIIB-emerges.html