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India will sail through the Covid-19 storm on the back of the government’s ongoing focus on robust public health measures, timely treatment of the infected persons, sound macroeconomic management and strong macro-fundamentals, said Finance Minister Nirmala Sitharaman at the 54th annual meeting of the Asian Development Bank (ADB) on Wednesday.
In her address before the Board of Governors at the ADB, Sitharaman, who is the India Governor at the multilateral bank, said that the vaccine production capacity in India is being ramped up and more vaccine candidates are on the verge of entering the commercial chain. “We are confident that with expected adequate access to critical raw materials, we would not only be able to meet our domestic needs but will soon be back to meet the critical vaccine needs of the world,” Sitharaman said.
While thanking the international community for their support to India in this hour of need, Sitharaman also highlighted that the multilateral institutions such as the ADB are now needed more than ever to support developing member countries of the bank and prevent the health crisis from cascading into a full blown economic crisis.
‘Strengthen equity capital’
Commenting on the ADB’s capital position, Sitharaman said that it is time, the ADB works on strengthening its equity capital, through another round of general capital increase, to be able to expand its lending outreach, commensurate with the sustainable absorptive capacities of its members.
India has the absorptive capacity to receive about $4 billion a year from sovereign operations, and about $1.5 billion annually from the private sector financing window. This should be viewed in the backdrop that, on an average in the last five years, the net sovereign inflows (excluding Covid-19 Pandemic Response Option loan) into India have been less $700 million and the net non-sovereign lending has been negative.
On pricing of the sovereign loans, Sitharaman noted that the ADB has already introduced the differential pricing beginning 2021. However, the ADB’s favourable sovereign loan pricing should not be further raised just because it happens to be lower than those of other MDB’s. “The sovereign loan pricing is based on the cost recovery principle and if the bank is able to recover its costs, there is no case for tinkering with it,” she added.
Sitharaman urged the ADB to open a branch office in Mumbai for more committed operational activities in the private sector.
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