ADB to step up aid for infrastructure projects

Rajat

New Delhi: The Asian Development Bank will step up its financing assistance for infrastructure projects in India to fill the resource gap that may arise due to decline in appetite for investment in infrastructure projects by the private sector.

“In the context of the financial turmoil, it is reasonable to expect that the private sector will, for a while, be a bit reticent in providing funds for infrastructure projects. You will probably see a decline in private sector appetite to provide the financing that was envisaged. We will certainly step in with additional assistance,” Rajat M. Nag, Managing Director-General, ADB, told Business Line in an interview here.

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Additional support

He highlighted that there may be limits to the extent to which the Government could provide additional financing as it was already faced with a difficult overall fiscal situation.

“We have now said to our member countries that we will be as responsible to the situation demands,” he said.

Nag, however, noted that additional support from ADB was linked to its own capital situation. ADB was discussing with its shareholders a general capital increase that would in turn help leverage its borrowings, he noted.

“We are very hopeful of a successful general capital increase so that we can borrow more from the international markets, so that we can lend more. It is of course for the shareholders to decide, but we expect capital raising to happen in next few months,” Nag said.

‘RBI steps not enough’

The senior ADB official pointed out that infrastructure has been a constraint to India’s growth and that the country needs to make sure that the infrastructure deficit was reduced.

He pointed out that the economics of infrastructure projects have become even more attractive now that there has been a decline in prices of steel, cement and international crude oil.

“ADB will need to make sure that we not only maintain support (for India’s infrastructure needs), but also see what extent we can increase to pick up the slack in the investment side both on the physical and social infrastructure,” Nag said.

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During times (economic slowdown and financial turmoil) such as this, ADB would be both financiers as well as knowledge partners to the governments of member countries, he said.

Nag also felt that inflation management has to be less of a priority than growth. “Growth has to be of higher concern than inflation. We support the Government’s view that emphasis on growth now is more important than inflation. The inflation trend is anyway downward,” he said.

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