It is generally acknowledged that India needs substantial investments in its infrastructure sector for achieving growth that is not only high, but also inclusive. Developing world class infrastructure will add to India’s existing strengths in having a young labor force, robust institutions and dynamic entrepreneurs. Building new airports, roads, power plants, ports and other infrastructure is key to spurring economic activity and unlocking opportunities in urban and rural regions across the country. 

The government’s focus on infrastructure-led growth is, indeed, encouraging. The government is moving fast to streamline policies and processes to boost infrastructure sector through a projected $1 trillion investment by 2017. Some of the government’s recent measures have clearly boosted the investment climate as well as ease of doing business in India that will ultimately have direct positive impact on infrastructure sector. 

These measures include scrapping obsolete regulations, moving towards self-certifications, implementing online environment and forest clearances, and introducing single web portal for online registration of manufacturing units and reporting of inspections. These steps have helped India gain 16 ranks to 55 among 140 countries in the World Economic Forum’s Global Competitiveness Index. 

The government has also taken steps to “debottleneck” infrastructure projects that could not move forward. The Project Monitoring Group has, since its inception in mid-2013, resolved issues in 197 projects worth $105 billion, or about 5% of India’s GDP. 

Another important step by the government is the recent inauguration of the National Infrastructure Investment Fund that will attract the interest of foreign institutional investors such as pension and sovereign wealth funds. My understanding is that it will present investors many options to invest in infrastructure projects, especially as India will remain one of the fastest growing  economies.

The seriousness of the government in boosting infrastructure sector is reflected in a spike of 30.8% in public investment during April to November 2015, a major part of which has gone into roads, rural and urban development. 

These are very positive indications, indeed. However, several challenges remain for addressing the infrastructure deficit in India. 

Firstly, there is a need to ensure adequate financing of infrastructure projects. This would require developing a corporate debt market, introducing innovative mechanisms such as “take-out” financing and credit guarantees, tapping pension and insurance funds for resources, improving efficiency of tax collection, and increasing the revenue base through tariffs and user charges. 

Secondly, more work is needed to ease the regulatory and institutional impediments affecting infrastructure investment. These include hastening environmental and forest clearances, and streamlining approvals of projects by improving coordination between different agencies – both at the central and the state level.

Finally, there is a need to increase the planning and the implementation capacity of the executing agencies, and invest more in detailed project reports, to ensure optimal outcomes.

Through our operations in India, ADB has been working closely with the Government of India, to help address some of these challenges to infrastructure development.  

Since commencing its operations in India in 1986, ADB has approved 197 sovereign loans amounting to $33.1 billion, and 57 nonsovereign sector transactions of $4.62 billion. The bulk of the portfolio is concentrated in transport, energy, and urban sectors, with support, to a lesser extent, to the public financial management and agriculture sectors.

ADB has performed the role of a catalyst for private sector financing in the infrastructure sector. In order to catalyze private sector financing in the infrastructure sector, ADB has provided, since 2007, multitranche financing facilities to India Infrastructure Finance Company Limited (IIFCL) with total loans of $1.9 billion. The loans have helped fund 65 public-private partnership (PPP) projects, including the Delhi and Mumbai international airports and takeout financing of the Hyderabad International Airport.                                           

In order to tap domestic savings, an innovative financing modality has been introduced under which ADB and IIFCL will issue partial credit guarantees in support of rupee-denominated bonds to finance select infrastructure projects. This would boost the credit rating of bonds issued by infrastructure developers, making the bonds eligible instruments for insurance firms and pension funds to invest in.

Another initiative has been the support provided to the Government of India’s public-private partnership (PPP) program since 2006 through the PPP initiative comprising 9 technical assistance projects. PPP cells staffed by experts have been operationalized and institutionalized to enable states and central ministries towards PPP projects.

ADB has supported India’s infrastructure connectivity projects with the neighboring countries, which included cross-border roads, transmission lines, ADB also supported the trade facilitation initiatives, such as Bangladesh-Bhutan-India-Nepal (BBIN) cross border motor vehicles agreement to develop trade corridors. Recently, ADB has partnered with the Government of India for developing the East Coast Economic Corridor (ECEC), India’s first coastal corridor that will link India’s coastal states to global production networks and value chains. ECEC will involve an ambitious infrastructure program, skills development initiatives and regulatory reform in industry and urbanization. ADB has already developed the conceptual development plan of the Phase I of ECEC, which is the Vizag-Chennai Industrial Corridor (VCIC) that focuses on Andhra Pradesh, and key industries have been identified. The approach to VCIC presents a new model for ADB’s engagement in middle-income countries. In particular, ADB is bringing together national and international experts on infrastructure, industrial development, and urbanization to work closely with state government agencies. The objective is to understand the key infrastructure and regulatory bottlenecks to industrial development and urbanization, and then design a program of infrastructure investments, skills development initiatives and necessary regulatory changes that will enable the VCIC to reach its full potential. ADB will be looking to replicate and apply this approach to select cities in India.

This is consistent with the Government of India’s flagship “Make in India” program that emphasizes the importance of integrated planning in infrastructure development. We, at ADB, feel that integrated planning for transforming manufacturing and promoting urbanization is important to infrastructure development. Economic corridors are a step in this direction. 

Earlier, I made a mention of the need to develop capacity of executing agencies as a crucial element of infrastructure development. I am happy to mention that ADB’s India Resident Mission has pioneered the establishment of a Capacity Development Resource Center that has been conducting capacity development programs for executing agencies for ADB-funded projects since 2008. Over 4,000 executing agency staff have been trained in programs including project management, contract management, procurement procedures, safeguards, and impact evaluation etc.

Going forward, ADB plans to scale-up the level of its assistance to India. In addition, we look to increase our support to private sector development, including PPPs, in catalyzing investments for infrastructure projects. ADB currently offers transaction advisory services over entire range of activities associated with development and implementation of PPP projects. These include screening and identification of bankable projects, advice on commercial and financial structures, conducting due diligence and preparation of bidding documents etc. 

With advances in technology, ADB in its role as a knowledge partner of the Government of India, will be looking to disseminate knowledge and provide knowledge solutions to its development needs. Knowledge solutions are important driver of change, essential for ensuring that ADB’s lending activities have large and positive development impact on its developing member countries (DMCs). We will continue to support the Government of India’s “Innovation Impulse with Investment” approach to the financial assistance from multilateral development agencies. The approach calls for projects to have systemic positive impacts on the business processes, introduce innovations and advanced technology, and pilot new approaches. ADB will continue to support the policy reforms, institutional strengthening, and add value under the projects.

In conclusion, I would like to say that a fast growing economy like India needs to scale up efforts at removing infrastructure deficit. It is good to see that the government is already moving towards this direction by prioritizing infrastructure development. 

Concerted and sustained efforts by both the public and private sectors towards infrastructure development will ensure that India substantially contribute to global growth in the coming years. India’s prospects look bright as the investment climate and ease of doing business steadily improves.

We, at ADB, are happy to continue to work with the Government of India to enhance the reach and effectiveness of our program by bringing in partnership, international experience and best practices to support infrastructure development in the country.