Asian Development Bank to increase India lending by 50% to $12 billion by 2018

NEW DELHI: Asian Development Bank plans to step up lending to India as it expects the Narendra Modi government’s proactive role in pushing key reforms to improve business climate and boost economic growth. The Philippinesbased bank’s president Takehiko Nakao said the multilateral lender aims to increase its lending from $7-9 billion in 2015-17 to $10-12 billion in 2016-18. "So our lending may increase as much as 50 per cent and will be around $3 billion per annum, which can extend to $4 billion annually," he said on Tuesday.

Nakao, who met finance minister Arun Jaitley earlier in the day, said the strong growth outlook for India is backed by good macroeconomic indicators such as a decline in inflation and the current account deficit, and reforms to further open up certain sectors for foreign direct investment and reduce fuel subsidies. "For increased lending we will have to identify the projects before the approval for lending because in India implementation is more challenging than sanctioning," said Nakao.

India is ADB’s largest borrower and it can take advantage of the increased lending capacity of the institution to borrow more if required, he said. ADB’s annual lending capacity is expected to increase to $20 billion a year from $13 billion on the basis of the merger of its Asian Development Fund lending operations with its Ordinary Capital Resources balance sheet.

"India has never missed any repayment, its fiscal condition is good and efforts to expedite clearances for key infrastructure projects will also sustain growth momentum," said Nakao.

The bank will review in July its forecast of 7.8 per cent GDP growth for India in the current fiscal, he said. When asked whether there is a case for more rate cuts in India, the ADB president said if inflation rate is low, then interest rates can also be brought down. "Interest rate can and should be adjusted to inflation rate, and 7.25 per cent is not exceedingly low," he said.