Asian Development Bank (ADB) to Invest ₹86,000 Crore in India

Asian Development Bank (ADB) to Invest ₹86,000 Crore in India

Asian Development Bank (ADB) to Invest ₹86,000 Crore in India

Why in News? 

The Asian Development Bank (ADB) has recently introduced a fresh initiative aimed at boosting urban growth across India. Under this plan, an investment of ₹86,000 crore will be made in India over the next five years. 

Key Points of the Asian Development Bank’s (ADB) 5-Year Investment Plan

• To upgrade India’s city infrastructure, ADB plans a long-term strategic investment spanning half a decade. Under this plan, $10 billion (approximately ₹86,000 crore) will be invested in major urban projects in India. 
• This plan aligns with India’s policy to create facilities for the urban population by 2030.
• Sectors: This investment plan focuses on metro rail expansion, Regional Rapid Transit System (RRTS), clean water supply, sanitation, housing schemes, and smart city services.
• Source: The funding mix will include government-backed loans, private sector participation, and capital from external sources. This model will promote partnership between the government and the private sector. 
  • Additionally, this capital will be channeled to cities across the country through the Urban Challenge Fund (UCF).
• Technical Assistance: ADB will also provide $3 million (approximately ₹26 crore) for technical assistance under this plan. The objective is to assist local bodies in planning and improve project design.

Overview of Asian Development Bank (ADB) and India’s Development Partnership

• • Active Investments: 
    • ADB is currently working on 27 active loan projects in India worth over $5.15 billion. These projects are spread across 22 states and more than 110 cities. 
      • These projects primarily prioritize important sectors such as urban water supply, sewerage systems, solid waste management, and affordable housing development.
    • By April 2025, India had already received $59.5 billion in government-linked loans and $9.1 billion via private channels from ADB. Currently, 81 loan projects worth $16.5 billion are active.

• Key Investment Areas:

• Urban Infrastructure: Areas include essential urban needs such as clean water, sanitation systems, waste disposal, and affordable housing.
• Energy Sector: Investments in renewable energy, energy efficiency, and power distribution.
• Logistics and Transport: Highway, railway, and port development.
• Social Sector: Education, healthcare services, and social security schemes.
• Climate: Green energy, water resource management, and disaster management plans.

• Collaboration: 
  • Over the last decade, ADB has invested approximately $4 billion in metro rail and Regional Rapid Transit System (RRTS) projects. As a result, an urban rail network over 300 kilometers long has been developed in eight cities, including Delhi, Chennai, Nagpur, Bengaluru, and Mumbai.
  • ADB has also supported India’s National Industrial Corridor Development Program. Special assistance has been provided to the Visakhapatnam-Chennai Industrial Corridor.

• Delhi-Meerut RRTS Corridor: This corridor connecting Delhi and Meerut is being constructed with ADB’s financial assistance, promoting fast and pollution-free travel.
• Renewable Energy Projects: ADB has invested in solar and wind energy projects in Gujarat, Rajasthan, and Tamil Nadu.

• Goals: 

• ADB has formulated a strategic plan for India from 2023 to 2027, under which India will be provided with financial support of up to an average of $5 billion annually. 
  • Out of this amount, approximately $1 billion will be a non-sovereign loan for the private sector. 
• ADB’s projects are striving to implement plans in line with the Sustainable Development Goals (SDG).

Asian Development Bank (ADB) Loan and Assistance Terms and Types

• Criteria (Conditions):

• • • Developing Country Status: ADB’s support is reserved for nations that fall under the developing category, in line with its core mandate. Countries facing poverty, unemployment, and lack of infrastructure are prioritized by ADB. The aim of this assistance is to accelerate economic growth and improve living standards.
    • Repayment Capacity (Creditworthiness): Before providing a loan, ADB ensures that the concerned country is capable of repayment. This assessment is based on the country’s financial stability, fiscal management, and quality of development policy. If a country’s economy is unstable or its payment reliability is low, ADB invests limitedly in its projects.
    • Environmental and Social Sensitivity: The impact of projects on the environment and society is also an important criterion. ADB invests only in schemes that are environmentally friendly, socially beneficial, and respect human rights. 
    • Regional Cooperation and Integration: ADB promotes schemes that encourage regional development and mutual cooperation. Examples include multi-country transport corridors, energy grids, and trade-related infrastructure. This benefits not just one country but the entire region economically.

• Types of Assistance:

• • • Loans: Loans are ADB’s most common form of assistance. These loans are provided for public projects such as roads, railways, health, and education. They include both hard loans (at general rates) and soft loans (at concessional rates).
    • Technical Assistance: ADB provides technical assistance to countries that lack expertise in policy reforms or project planning. This allows development plans to be better prepared and implemented.
    • Grants: ADB also provides grants to countries affected by poverty or disaster. This assistance is given without repayment and is typically used in social welfare, rehabilitation, and climate adaptation projects.
    • Equity Investment: ADB is not limited to government projects; it also invests in the private sector. The objective is to promote entrepreneurship in developing countries and make the business structure more efficient. Such investments create local employment opportunities.

• Loan Structure:

• • OCR (Ordinary Capital Resources): OCR is ADB’s main financial source used for providing loans (hard loans) under general terms. This capital includes funds contributed by member countries and funds raised from international markets through government guarantees.
  • ADF (Asian Development Fund): ADF is used for providing loans at concessional rates (soft loans), specifically designated for countries with weaker economies. This fund provides financial assistance on flexible terms to highly impoverished countries.