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Regions and Countries Country Partnership Strategy Document
Country Strategy and Program Update 2005-2007: India
IV. Country Performance and Assistance LevelA. Proposed Lending Level26. This CSPU has programmed total loan assistance of $6.47 billion for the period 2005– 2007 (excluding subregional projects), amounting to average annual lending of over $2.1 billion.15 Of this, 37.8% is for the transport sector, 15.5% each for energy and urban infrastructure, 12.4% for the financial sector, 11.5% for agriculture and water management, and 7.3% for governance and public resource management. For the CSP period 2003–2006 the updated program lending amount is about $7.4 billion which is within the CSP ceiling of $7.5 billion. As noted in the 2003 CSP, this is an appropriate level of assistance necessary, keeping in view the size and scale of India’s needs, for ADB to play an effective and meaningful role in helping India attain the MDGs.16 There has been significant progress on all the relevant MDG indicators in recent years, although progress is slow in some cases ( Chapter II, Section A) implying that efforts to accomplish the MDGs in India should be stepped up. The 10th Plan has accordingly recommended an enhancement of almost 80% in public social expenditure. This effort needs to be supported by the development community, including ADB, since achieving the global MDGs by 2015 will depend significantly on outcomes in India. The proposed scale of assistance is also justified by India’s strong economic and reforms performance, summarized in Chapter I. Portfolio performance was also quite satisfactory in 2003, as explained in Chapter III. Finally, with a current account surplus of 1.4% of GDP, large foreign exchange reserves of more than $107 billion, a prudent debt: GDP ratio of 17.8%, and a debt: service ratio of only 10.4%, India’s capacity to absorb external assistance is not an issue. India’s outstanding debt to ADB (including public and private sector loans) was $2.3 billion on 31 May 2004, which is 10% of ADB’s total debt outstanding. As per current projections, the programmed level of assistance will raise ADB’s India exposure to about 18% by 2007, which is well within acceptable exposure limits. However, it should be emphasized that the proposed program size is only an indicative ceiling. Actual assistance will depend on performance at the country, sector and project levels as well as the readiness of projects. In 2003, for example, actual assistance was $1.46 billion as against the programmed assistance of $1.67 billion. 27. In addition to the firm-lending pipeline described above, the 2005–2007 program has also provided for a strong pipeline of at least 3 to 4 “standby projects” each year. The large cushion of standby projects will allow postponement of any project that is not fully prepared, without excessive volatility in the level of ADB’s assistance to India. Furthermore, “standby” projects could be submitted for Board consideration early the following year, and this should help mitigate the bunching problem. B. Nonlending Program28. The lending program will be supported by nonlending assistance amounting to $27.85 million (excluding subregional) over the period 2005–2007 (concept papers for 2005 TA projects are in Appendix 3). ADB will provide $15.75 million of this; the rest will be through cofinancing. Grant projects will also be funded under the Japan Fund for Poverty Reduction. Project preparatory technical assistance will amount to 70% of the total, and advisory or capacity building technical assistance will account for the balance 30%. The latter will complement the loan program by supporting policy reforms and building institutional capacity. C. Summary of Changes to Lending and Nonlending Program29. Appendix A4.1 gives the 2004 Assistance Program for Lending Products, and Appendix A4.2 gives the 2004 Assistance Program for Non-lending Products and Services. There are several changes in the CSP program for 2004–2006 due to adjustment of the strategy in the 2004 CSPU, especially the increased focus on agriculture and irrigation loans, and the enhanced shift of state-level operations to poorer states. Other changes are either due to updated assessments of project costs, or a reassessment of the Government’s priorities and preparedness to receive the loans. The TA pipeline has been adjusted accordingly. Most of these changes are bunched in 2006, the terminal year of the CSP, for which the picture was relatively uncertain when the CSP was finalized in April 2003. Appendix 5 gives the details. __________________________
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