NEW DELHI, INDIA – Asian Development Bank (ADB) President Takehiko Nakao today met India’s Finance Minister, Arun Jaitley, and praised India’s strong economic performance in the face of weak global growth and turmoil in commodity and financial markets.
“I believe India is likely to remain the fastest-growing large economy this year given the prudent macroeconomic management and the government’s efforts to improve the investment climate,” said Mr. Nakao. “The recent budget also balances the urgent requirements for infrastructure investments with the need to reduce the fiscal deficit.” ADB expects India’s economic growth will continue to exceed 7% in fiscal year 2016–17 (starting April 2016) and the following year.
Mr. Nakao commended the success of the country’s reform measures, including the liberalization of foreign direct investment rules, cuts in subsidies, and the “Make in India” campaign. At the same time, he emphasized the importance of continuing reforms to boost the long-term growth potential of the Indian economy, noting the government’s efforts to unify the tax regime, make closing businesses easier, improve labor laws, and strengthen public sector banks.
To support the government’s commitment to build more infrastructure, Mr. Nakao said ADB will increase its lending to $10 billion to $12 billion for the 3 calendar years 2016 through 2018. ADB will support flagship government projects such as solar parks and solar rooftops, energy efficiency using LED lighting, smart cities, metro lines, railway modernization, irrigation system expansion, economic corridors, and major ports.
On 8 March, Mr. Nakao met the Governor of the Reserve Bank of India (RBI), Raghuram Rajan, and commended the RBI for its prudent monetary policy which has contributed to strengthening external resilience. Consumer price inflation averaged less than 5% through most of 2015–16. The current account deficit declined to 1.4% of GDP in the first half of 2015–16, compared with 1.8% in the first half of 2014–15.
Mr. Nakao said that the phased recapitalization of public sector banks, while simultaneously improving their governance structures, will help consolidate the financial sector. Together with the central government’s higher public investment, which grew by more than 20% in 2015–16, such measures will enhance private sector investment.
While in India, the ADB President visited Mumbai and Bengaluru. In Mumbai, he met Chief Minister of Maharashtra, Devendra Fadnavis, and Metropolitan Commissioner of Mumbai Metropolitan Region Development Authority, Urinder Pal Singh Madan, together with senior officials, and discussed the potential ADB assistance for metro lines, expressways, urban development, energy and tourism. In Bengaluru, he met Chief Minister of Karnataka, K. Siddaramaiah, and discussed ADB’s ongoing and future assistance in transport, urban development, and water resource management. While in Bengaluru, he also visited the Infosys campus and met Infosys Chairman, Emeritus N.R. Narayana Murthy, and discussed opportunities for business process management in India and possible cooperation between Infosys and ADB.
Tomorrow, Mr. Nakao will speak at the high-level conference, Advancing Asia: Investing for the Future, co-hosted by the Government of India and the International Monetary Fund. In his address, he will emphasize the need to make Asia’s growth low-carbon and sustainable, while building resilience to rising climate risks. ADB is supporting its developing member countries in strengthening their climate resilience by ensuring that all ADB-financed projects are screened for climate risks, and that appropriate and cost-effective adaptation and resilience measures are incorporated in project design.
In 2015, ADB’s loans to India amounted to close to $3 billion, including non-sovereign lending of $841 million. India is ADB’s largest borrower. Since 1986 when ADB started lending operations in India, ADB has approved 197 sovereign loans totaling $33.1 billion. As of 31 December 2015, the portfolio included 84 ongoing sovereign loans amounting to $11.4 billion.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region.