The Hindu Business Line : ADB to assist States weak in infrastructure

Asian Development Bank (ADB) is looking to extend financial and technical support for infrastructure development in States that have greater infrastructure deficit and consequent weak performance on this front, Managing Director-General, Mr Rajat M. Nag, has said.

As part of this strategy, the Manila-based regional development bank might go into Bihar, Orissa and Jharkhand in the coming days. Plans are also afoot to consolidate its existing operations in Assam, Chhattisgarh, Jammu & Kashmir, Uttarakhand and North East.

Needy States

“We are looking at States that are performing weakly and need more help. In the future we might even be going into Bihar, Orissa and Jharkhand. Basically going into States where there is a greater deficit and a greater need and where we have not gone before,” Mr Nag told Business Line in an interview.

ADB is looking to ramp up its operations in India and expects to increase it to $3 billion a year in the next three years, of which 70 per cent would be in infrastructure. ADB’s exposure to India was only about $2 billion three years ago.

Mr Nag said that ADB would also respond to private sector needs and might even join some public private partnerships (PPP). However, there are no plans to enter new sectors.

Prioritise

“No matter how much we increase our operations in India, it will still be a fraction of what is needed. So we will have to prioritise. So our priority is on infrastructure development. Transport, energy and urban sector is our core. In addition to that we will look at rural finance, rural roads and improve water resource management. Our core operations are in infrastructure. I don’t think we will get into new sectors. We need to make sure that we don’t spread our resources too thinly,” he said.

Stating that infrastructure deficit in India was huge and the most pressing constraint to the country sustaining economic growth of nine per cent, Mr Nag noted that there was no alternative but to invest heavily in infrastructure.

“The resources have to come from both the public and private sector, which will also provide managerial skills,” he said.

Spending

Although the 11th Plan anticipates huge increase in infrastructure spending from the current five per cent of gross domestic product (GDP) to almost nine per cent by the end of the Plan period, Mr Nag said that by ADB estimates the infrastructure spend by India needs to be considerably higher.

“By our estimates India should look at spending 11 to 12.5 per cent of GDP including 2.5 per cent for maintenance during the 11th Plan”, he said. Mr Nag said that PPPs are desirable, necessary and possible, but quickly added that this would be possible only when right political leadership and commitment was there.

PPP model

“It is mismatched expectations (between public and private sector) that leads to disappointment.

“Frustration on PPP is not because the policy was wrong or policy framework was inadequate. In fact, the policy is quite robust.

“We need emphasis on implementation. I am optimistic about PPPs, partly because we have no choice,” he said.

On whether there was a case for a separate regulator, Mr Nag felt that public sector could be the regulator and promoter at the same time.

“At the moment, the binding constraint is not dual relationship,” he said.

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