The Hindu Business Line : India will further deepen reforms: Chidambaram

The Union Finance Minister, Mr P. Chidambaram, has said India will further deepen its economic reforms process to put the country on a trend growth rate of 8-10 per cent for eliminating poverty and achieving the Millennium Development Goals by 2015.

Addressing the Board of Governors of Asian Development Bank here on Saturday, he said the country achieved an average growth of nearly 8 per cent in the last three years, which he termed as `a robust demonstration of its nascent strengths.' He attributed this growth to the economic reforms over the past 15 years, the strong role played by the private sector and rising domestic consumption.

Optimistic of growth

While acknowledging the downside risks, possibility of higher energy prices and the possibility of sharp adjustments in exchange and interest rates induced by widening global payment imbalances, the Finance Minister, however, said he is "optimistic on the outlook for growth in Asia and a healthy demand for Asian output in the next few years."

Stating that the investment rate in India, which is around 30 per cent of GDP, has been largely funded by domestic savings, he said, as the country moves to a higher growth path, there would be need to supplement domestic resources with foreign investments. "The catalytic role of international institutions like the Asian Development Bank will be through investments in public sector infrastructure and also through support for private sector activities in the developing member countries (DMCs)."

Maintaining growth

Commending ADB for its forward-looking medium term strategy to assist DMCs in their development endeavour, Mr Chidambaram said the emerging Asia faces the challenge of maintaining high and inclusive growth leading to sustainable development.

Re-adjusting lending strategy

The Finance Minister has asked the ADB "to re-adjust its focus from that of focusing largely on public sector lending to that of a more fleet-footed financial intermediary and knowledge bank that helps DMCs attract more private sector investment through intermediation. The multiplier effect of ADB's assistance through a public-private-partnership model would be much higher than the current approach of reliance on mostly public infrastructure projects."

Loan charges

Mr Chidambaram, who is the ADB Governor of India, said ADB's loan charges as compared to the cost of funds from other sources are critical for growth of the Bank's business.

Stating that the financial parameters of the ADB were robust for four consecutive years now, he said, "Loan charges should be restored to the lower levels prevailing before the year 2000. The commitment fee should not be treated as a source of income and it should be possible either to eliminate or substantially reduce the commitment fee through improvements in operations and internal efficiency of the bank."