ADB ANNOUNCES 10 BN USD FUNDING FOR INDIA’S URBAN PROJECTS
Context:
- Recently, The Asian Development Bank (ADB) has announced a significant 5 -year initiative to boost urban infrastructure development across India.
- This plan involves an estimated investment of $10 billion, signalling strong international support for India’s urban growth and its potential as an economic engine.
KEY ANNOUNCEMENTS
- Who: Masato Kanda, President of the Asian Development Bank (ADB).
- What: Announced a five-year initiative for urban infrastructure transformation in India.
- Investment: Estimated investment of $10 billion.
- Funding Sources: This support includes:
- Sovereign loans (loans to the Indian government).
- Private sector financing.
- Third-party capital (investment from other sources).
- Purpose: To transform urban infrastructure, including:
- Metro extensions.
- New Regional Rapid Transit System (RRTS) corridors.
- General urban infrastructure and services.
- Rationale: Kanda emphasized that “Cities are engines of growth.”
Anchoring Initiatives and Support Mechanisms
- Urban Challenge Fund (UCF): The initiative is anchored by India’s flagship Urban Challenge Fund (UCF).
- ADB is supporting the UCF to attract private investment for urban infrastructure projects.
- Groundwork for the UCF is being laid through completed analytical work on growth hubs, creative city redevelopment, and water and sanitation upgrades in 100 cities across India.
- Technical Assistance: ADB has committed $3 million in technical assistance. This aid will help:
- Design “bankable projects” (projects attractive to investors).
- Enhance the institutional capacity of states and urban local bodies.
Meetings with Indian Officials
During his visit, ADB President Masato Kanda held important discussions with key Indian ministers:
- Finance Minister Nirmala Sitharaman: Discussions covered:
- Expanding metro networks, including transit-oriented development (TOD).
- Supporting rural prosperity.
- Scaling rooftop solar capacity.
- Operationalizing the Urban Challenge Fund (UCF).
- Housing and Urban Affairs Minister Manohar Lal: Talks focused on:
- Mobilizing private capital for urban projects.
- Replicating successful ADB-backed urban transport models.
- Creating new Transit-Oriented Development (TOD) opportunities.
India’s Urban Landscape and ADB’s Past Contributions
- Projected Urban Population: India’s towns and cities are projected to house more than 40% of the population by 2030.
- ADB’s Existing Urban Portfolio:
- ADB has worked with over 110 cities across 22 states on projects related to water supply, sanitation, housing, and solid-waste management.
- The active urban portfolio currently comprises 27 loans worth $5.15 billion.
- Urban Transport Commitments (Past Decade):
- ADB has committed $4 billion for metro projects and RRTS.
- This covers 300 kilometers in eight cities, including:
- Delhi–Meerut RRTS
- Mumbai Metro
- Nagpur Metro
- Chennai Metro
- Bengaluru Metro
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- These projects aim to cut congestion and emissions while improving access for vulnerable populations, including people with disabilities.
Additional Investment: Skills Development
- National Industrial Training Institute Upgradation Program: ADB will also invest in skills development through this program.
- Objective: To boost India’s manufacturing sector, catalyze private sector growth, and create quality jobs, especially for the youth.
Significance of the Funding
- This substantial commitment from ADB underscores the critical role of urban development in India’s economic growth trajectory.
- By focusing on sustainable infrastructure, private sector engagement, and skills development, the initiative aims to make India’s cities more livable, economically vibrant, and inclusive.
ABOUT ADB
- Establishment: Established on December 19, 1966.
- Nature: It is a multilateral development bank.
- Primary Role: The principal international development finance institution for the Asia-Pacific region.
- Vision: Aims for a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while actively working to eradicate extreme poverty in the region.
- Headquarters: Manila, Philippines.
KEY FOCUS AREAS
The ADB provides comprehensive assistance to its developing member countries:
- Financial Assistance: Offers grants, loans, technical assistance, and equity investments to promote social and economic development. This assistance extends to the private sector and public-private partnerships.
- Development Impact Maximization:
- Facilitates policy dialogues.
- Provides advisory services.
- Mobilizes financial resources through cofinancing operations, drawing from official, commercial, and export credit sources.
- Key Focus Areas: The Bank aligns its efforts with the UN’s Sustainable Development Goals (SDGs), focusing on 6 key sectors:
- Education
- Health
- Transport
- Energy
- Finance
- Climate Change
- Partnerships: Works collaboratively with NGOs and private companies to enhance capital markets and improve the business environment in developing countries within the region.
ADB MEMBERSHIP
- Open Membership: Open to members and associate members of the United Nations Economic Commission for Asia and the Far East. Also open to other regional and non-regional developed countries that are UN members or members of its specialized agencies.
- Growth: Started with 31 members in 1966 and has grown to 69 members
- Regional Members: 49 from Asia and the Pacific (e.g., India, China, Japan, South Korea, Australia).
- Non-Regional Members: 20 from Europe, North America, and other regions.
ADB GOVERNANCE
- Board of Governors: The highest decision-making body, composed of one representative from each member state.
- Board of Directors: The Board of Governors elects 12 members to serve as the Board of Directors.
- Eight directors are from Asia and the Pacific region.
- Four directors are from non-regional members.
- President: The Board of Governors also elects a President who serves a five-year term.
- The President chairs the Board of Directors and is responsible for the bank’s day-to-day operations.
- Historically, every single President of the ADB has been from Japan, as Japan was a founding member and remains the largest shareholder.
ADB VOTING POWER & FUNDING
- Weighted Voting System: The ADB is modelled on the World Bank and employs a weighted voting system, where votes are distributed in proportion to members’ capital subscriptions.
- Largest Shareholders:
- Japan (15.6% of total shares)
- United States (15.6%)
- People’s Republic of China (6.4%)
- India (6.3%) – India ranks first in terms of financial commitments received from the bank (14% of total), followed by China, Bangladesh, the Philippines, and Pakistan.
- Australia (5.8%)
- Sources of Funding:
- Regularly raises capital through the international bond markets.
- Relies on member contributions.
- Uses retained earnings from its lending operations.
- Reinvestment of loan repayments.
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