Financial Daily from THE HINDU group of publications
Friday, May 24, 2002
Industry & Economy
Money & Banking - RBI & Other Central Banks
$6-b ADB aid for India in next 3 years
NEW DELHI, May 23
THE Asian Development Bank (ADB) has agreed to provide $6 billion assistance to India in the next three years (2003-05) as part of its medium term country assistance programme, making India by far the single largest borrowing country among its members.
Winding up its deliberations with the Government of India, the Manila-based regional bank's Country Programming Mission, the Deputy Director-General, South Asia Regional Department, Mr J.K. Lee, announced at a news conference here on Thursday that the bulk of the assistance comprising 75 to 80 per cent would go to infrastructure development programmes, particularly railways, roads and inland waterways comprising transportation sector, power and hydrocarbons.
He said that the large expansion and enlarged lending programme of $2 billion per year was decided in response to the Government's request conveyed to the President of ADB when he visited India earlier this year by the Union Finance Minister, Mr Yashwant Sinha.
By drawing $2-billion loan from the bank, India would account for 60 per cent of loan portfolio of the South Asian countries, overtaking China in terms of loan assistance.
Out of the $6 billion loans, the grant component would amount to $500 million over a three-year period, he added.
Delineating the programme contours, the Bank's Chief Economist for India, Mr Sudipto Mundle, said that the bank prepared a lending programme of about $2 billion (Rs 10,000 crore per year), doubling its past lending level of $1 billion per year.
Altogether 28 loan projects are to be approved in the 2002-05 period. Besides, the bank would provide Rs 100 crore worth of grants for technical assistance over the same period.
Mr Mundle observed that despite the low growth of the recent past, the bank expects a strong economic recovery over the medium-term if there is sustained fiscal consolidation in the Centre and the States.
He said the return to railways sector for loan is to ensure that the system is run on commercial lines and be user-friendly.
Asked how the bank is justified in lending massively to infrastructure programme, which has a long gestation projects when its avowed objective is to make a direct attack on poverty, Mr Mundle said some components of the loan assistance would directly address poverty reduction in rural and urban areas through projects in rural roads, rural electrification, rural credit as well as improved urban social services such as water supply and sewerage.
Mr Frank Poleman, Country Director, said that this quantum leap in ADB's programme for India was a challenge to the Bank as well as the Government and all executing agencies that would be involved in implementing the projects.
To a specific query as to India's access to the Bank's soft lending window, Asian Development Fund (ADF), the Bank officials clarified that with all the Bank's assistance now tagged to Libor, the members have the menu of option in getting their loans in dollar or yen, which are preferable to the soft loan from ADF that have ``stringent performance criteria''.
In any case, they said the difference between the Libor-based rate and the ADF interest rate was only one per cent.
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