Countries and Regions

	Table of Contents
p. 20 of 20 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - India

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IX. Local Cost Financing

99. The investment requirements to redress existing bottlenecks and to meet prospective future demand in support of sustainable economic and social development in India are enormous. Although the Government's reform program has improved domestic resource mobilization, strengthened fiscal consolidation-notwithstanding recent renewed pressure-and lowered budget reliance on the financial system, and improved India's access to foreign financing, the competing demands on resources and the ongoing adjustment costs continue to strain the availability of local funds.

100. Consistent with ADB's operational strategy to support infrastructure needs and promote the Government's reform process, Bank support of local cost financing was provided in 1999 in the amount of $81 million for the Karnataka Urban Development and Coastal Environmental Improvement Project (loan size $175 million). This was considered justified in view of the high demonstration and catalytic value in decentralizing urban services and improving local urban governance in the context of constrained resource availability for urban infrastructure. Moreover, the Project will result in substantial environmental and social benefits, which in the present context of ADB lending could not be achieved by foreign currency lending alone. Sizable local cost financing has also been provided under the Rajasthan Urban Infrastructure Development Project (approved in 1998), supporting similar reforms as those under the Karnataka project, as well as for the Housing Finance Project (approved in 1997), for reforming the housing finance sector and its resource allocation to low income households. In addition, under the ongoing Private Sector Infrastructure Facility Project, loan funds can be used to finance local cost of up to 20 percent of ADB financing of subprojects in power and telecommunications and up to 70 percent of ADB financing of subprojects in roads and ports. With the exception of ADB's urban development and housing projects, the provision of local cost financing for ADB-supported projects has been low and, in the case of energy sector projects, has been non-existent. ADB will continue to determine the actual sharing of project costs and the level of local cost financing on a case-by-case basis in accordance with applicable ADB policy.

Back VIII. Economic and Sector Work Program	Country Assistance Plans - India