In the next two years, the Asian Development Bank (ADB) is planning to increase its annual spending in India to $2.5 billion from the present $1.5 bn (Rs 6,600 crore). While its core focus would continue to be infrastructure development, the Manila-based lender is looking at spreading its wings to other sectors and regions as well, says Managing Director-General Rajat M Nag, in an interaction with Nayanima Basu. Edited excerpts:
How much do you plan to ramp up your lending to India in the next few years?
Our operations in India had been growing steadily. Over 2003-2006, our annual lending average was just over $1 billion. In 2007-2009, we ramped it up to $1.5-1.6 bn, on average. In 2010, we expect to invest roughly $1.7 bn and over 2011-2013, we will try to increase it to around $2.5 bn. It will be almost doubling in 10 years, a very considerable increase, reflecting our deep involvement with India and that our portfolio performance here is among the best. Our disbursement ratio in India is about 24 per cent, compared to a bank average of 20 per cent.
What are the primary sectors you are looking at and what is the main reason for increasing the lending?
We have primarily focused on infrastructure, such as power, transport, which will continue to be so. We are increasing in other areas such as financial inclusion, sustainable livelihoods, coastal management and integrated water resource management. So, keeping the core focus on infrastructure, we are expanding into other areas as well and also geographically. We are now working in Assam, Bihar, J&K, Chhattisgarh, Jharkhand, Orissa, Uttarakhand and the northeast.
What impact do you foresee of a slow recovery on the emerging countries at large and their focus on developmental plans?
India and other Asia countries have come out quite robustly and we are back on the growth path, if not at the pre-crisis level. We forecast in India the growth to be 8.5 per cent this fiscal and 8.7 per cent next year. So, the recovery has been very pronounced but the economic crisis has been a major one and it has impacted people below the poverty level. Our assessment is that probably as much as 60 million people remained stuck in poverty who would have otherwise come out of it, in social indicators. Similarly, child mortality, maternal mortality, nutrition of children, all have taken a hit due to the crisis, which had a significant social impact. The recovery of the US, Western Europe and Japan has not been that robust, so there is always a risk. Even though we do not see a double dip taking place, it is a risk to consider.
What is your growth forecast for Asia, particularly China?
For China, our forecast is 9.6 per cent for this fiscal and 9.1 per cent for the next. Asia, we believe, would grow by 8.2 per cent in 2010 and 7.3 per cent in 2011, because the effects of the stimulus programme would be gradually withdrawn by the next financial year. So, there would be a bit of tempering of growth with the stimulus withdrawal.
Do you see the sentiment or the urge to invest in social sectors coming down with the financial crisis? What sort of a scenario is emerging?
It is extremely important to continue to invest in the social sectors, because both China and India must have inclusive growth. Post crisis, we see social investments going up again. In India’s case, it needs to be particularly increased in areas such as health and education. In these sectors, the focus should be more on quality than quantity, where more and more opportunities for public-private partnerships need to be explored. We cannot afford to have two faces of India. We have to give everyone access to all opportunities in the growth process. India’s growth story is not preordained but it is certainly very plausible.
What regional integration can you see happening in a post-crisis world?
It is in India’s interest and in our neighbours’ interest that we should be more integrated. To have more trade within the region is going to be good for all and greater cross-connectivity. East Asia trades about 55 per cent within its region, compared to only five per cent in South Asia. So, we need to reap more benefit from increasing trade.
