India and ADB: A Broad Partnership Sets Priorities for the New Millennium | Asian Development Bank

India and ADB: A Broad Partnership Sets Priorities for the New Millennium

Project Result / Case Study | 3 August 2017

Since its first loan to India in 1986, ADB has contributed to the country’s transformation through support in areas including infrastructure development, finance sector reform, agriculture and clean energy.

In July 1991, the Indian economy was in crisis. The country’s leaders undertook a series of structural reforms to modernize the economy and encourage foreign investment. The results have been remarkable.

Economic growth rates soared and poverty levels fell from 45% in 1984 to 28% in 2005.

Financial reform and infrastructure development

Asian Development Bank (ADB) projects played a role in this transformation. India was a founding member of ADB and is now the fourth-largest shareholder, but operations in the country only began in 1986, when India opted to become a borrowing member.

While ADB’s financial assistance may have been small relative to the size of public investment in a large middle-income economy like India, ADB support has made a remarkable contribution to the country’s development process.

ADB’s work in the 1980s and 1990s mainly supported the government’s program of industrialization, helping to restructure the country’s finance sector, and supporting infrastructure development. As part of this effort, ADB financed roads, railways, ports, and power facilities.

Access to finance and technology

The very first loan to the country, which was approved in 1986, was a $100 million loan to the Industrial Credit and Investment Corporation of India. The program helped to expand and modernize medium-sized industries, and supported the introduction of new technologies.

“India has been closely associated with ADB since its establishment. We have always extended an unequivocal support to ADB and will continue to do so in future… India and ADB share a productive and beneficial relationship.”

Arun Jaitley, Minister of Finance, India

India’s balance-of-payments crisis, which hit in 1991, precipitated deep structural reforms. ADB’s $300 million Financial Sector Program Loan to India in 1992 infused money into the crippled banking sector and financed wide-ranging reforms that helped develop the finance sector.

Financing development at state level

ADB has also sought to assist state governments directly, helping to deepen and spread the reform process across the country.

Reform-oriented Gujarat was the first state to negotiate a loan directly from ADB. The $250 million loan, approved in 1996 for the Gujarat Public Sector Resource Management Program, was the first program loan provided by a multilateral development bank to a subnational government in any ADB developing member country.

The project, designed in conjunction with Gujarat state government officials, directly supported state reforms that aimed to restore fiscal stability, reform public enterprises, and create an enabling environment for public–private partnerships.

Urban development in Karnataka, Rajasthan

The state government of the southwest India state of Karnataka developed and implemented the first ADB-supported urban sector project in India. The slum area of Indiranagar in Karnataka used to have a network of open drains with few toilets and little clean water. Today, the 3,000 residents of the area enjoy electricity, a regulated water supply, low-cost sanitation, underground drains, and wide roads.

"Since the toilets came, there is not just general cleanliness in the slum, the women have a sense of privacy," says Khizar Pasha, a resident of Indiranagar.

In Rajasthan state, the ADB-supported Rajasthan Urban Infrastructure Development Project, approved in 1998, provided 7 million residents with improved water supply and 3.5 million with upgraded wastewater management facilities.

Transport, energy, water, agriculture

In the 2000s, the government identified an urgent need to upgrade infrastructure, so ADB increased the share of transport, urban, and energy projects in its portfolio correspondingly. While most of ADB’s financial support went to infrastructure, the wide-ranging portfolio also included agriculture, water resources management, public resource management and governance, private and finance sector development, education, and health.

The ADB-supported Rural Roads Sector II Investment Program, which has improved roads in the countryside, is one example.

“Lives are being saved. Ambulances can now reach the villages where there was no road in the past.”

Prakash Chand Mahate

Roads built or improved under the project are helping more people get to a community hospital in Chandanpur, in eastern India. Safe, paved roads that can be used in all weather conditions mean that people who once suffered at home, or died in transit, can now reach modern medical care.

"More and more pregnant women prefer to visit the hospital now to deliver their babies," says Prakash Chand Mahate, a doctor who works at the center. "This has reduced the maternal and infant mortality rates by up to 25% in the region."

The 16-bed hospital is doubling in size to handle the influx of new patients. More than 100 patients come to the hospital each day, twice the number in previous years.

"Lives are being saved," says Prakash. "Ambulances can now reach the villages where there was no road in the past."

Clean energy for inclusive growth

ADB has been active in the power sector at both the national and state levels. India was ADB’s largest borrower for energy projects from 2007 to 2015, accounting for 25% of ADB’s total investments in energy projects in Asia and the Pacific.

ADB has supported the expansion and modernization of the national electric transmission system to reduce losses, increase connections, and even out supply and demand mismatches across states and regions. The work has also provided electricity meters to consumers, and helped implement power sector reforms at the state level.

More recently, ADB has increased its funding for low-carbon solutions, renewable energy, and energy efficiency. The $1 billion Green Energy Corridor and Grid Strengthening Project is installing the latest high-voltage direct current transmission systems technologies to improve efficiency and reduce losses.

Private sector opportunities

ADB’s support for solar power programs is also helping break down barriers to more private sector investment, including foreign direct investment, in clean energy infrastructure. 

ADB loans of up to $100 million to Acme Group, India’s pioneering private sector solar power developer, will support 200 megawatts of new solar power, much of it in Jodhpur district of Rajasthan state, where solar irradiance levels are among the highest in the country.  

ADB’s diverse work in India is also supporting energy, transport, and urban development, capital market enhancements, as well as investment reform and jobs for youth. It is addressing vital issues such as climate change, pollution, internet connectivity, and vocational training. Together, ADB and India will work to find effective solutions that deliver sustainable development.

Learn more about ADB’s work in India.

This article is from a special edition of Together We Deliver, highlighting 50 stories about how ADB works with government, civil society, the private sector and other development partners to meet new and emerging challenges in Asia and the Pacific.