ADB sees India grow by 8.2%; offers $6.47 bn

Expecting India to sustain a high 8.2 per cent GDP growth in next three years, Asian Development Bank on Thursday offered up to $6.47 billion assistance during 2005-07 with special emphasis on agriculture and poor states.

Though appreciative of India's growth potential, ADB's Country Specific Strategy and Programme update pointed to 'large inter-regional disparities and persistent social exclusion.'

"The Indian economy, which registered growth of 8.2 per cent in FY 2003 as a result of nearly 15 years of reforms, is now one of the world's fastest growing economies. This high growth is likely to sustain over next three years, unless there are major shocks," the Manila-based bank said.

In view of the high growth, ADB has decided to offer $6.47 billion during 2005-07 or $2.1 billion annually as part of its three-year CSP.

ADB said the core strategy for poverty reduction could be through infrastructure led growth, supported by social development and good governance.

"Since three-quarter of India's poorest citizens are in the rural sector, agriculture and rural development can have an immediate impact on poverty reduction," ADB Country Director, Louis de Jonghe said.

In view of this, ADB lauded the government for giving highest priority to social sectors.

Concerned over the growing inter-regional disparity, ADB said, "assistance to help contain this through diversification of ADB's state-level operations to poorer states, including north-eastern states, have been requested."

Of the total $6.47 billion assistance to India, as much as 37.8 per cent would go for transport, 15.5 per cent each for urban infrastructure and energy, 12.4 per cent for financial sector, 11.5 per cent for agriculture and water management and 7.3 per cent for governance and public resource management, it said.

There are 29 firm loans programmed for the three year period with three to four standby projects each year, it said.

"Keeping in view the size and scale of India's needs, this is an appropriate level of assistance necessary for ADB to play an effective and meaningful role in helping India attain the Millennium Development Goals," it said.

The proposed scale of assistance would be justified by India's continued progress in reform and strong economic performance in the last fiscal year, ADB said.

To support lending programme, technical assistance grants of $27.85 million (excluding sub-regional projects) were planned for the period, it added.

About 70 per cent of this would be used for project preparation with the rest of advisory and capacity building.

As on December 2003, ADB's portfolio in India included 27 ongoing loans worth $5.2 billion, with $2.4 billion in the transport sector, $1.1 billion in urban infrastructure, $1.0 billion in energy sector and $700,000 in multi-sector loans, it said.