ADB loan to provide the stimulus required for Infra Development

The Indian government’s persevered efforts to provide a boost for investment in infrastructure has received a much needed impetus with the Asian Development Bank (ADB) giving its approval for sanctioning loans amounting to $700 million. As per statistics received by the ADB, poor infrastructure is one of the biggest drawbacks for growth and development in our country. Moreover, there is a huge investment funding gap of about $113 billion as per the 12th Five Year Plan for 2012-2017. The ADB loans will go a long way in reducing this gap to a large extend.

Assistance to IIFCL a shot in the arm for infra financing:

On the proposed assistance to India’s Infrastructure Finance Company Ltd (IIFCL), the lead finance specialist in the South Asian department of ADB commented that this initiative by the Asian banking major based in Philippines would provide a shot in the arm for infrastructure financing in India, thereby instilling greater confidence in private sector players to play a bigger role in infrastructure development. Incidentally, IIFCL, which was established in 2006, is a wholly government owned firm, and its borrowing program offers the cushion of a government guarantee.

Private sector banks to play a major role:

According to the government’s current five-year development plan, it is estimated that about $1 trillion would be needed as infrastructure investment so as to achieve an economic growth rate of 8.4%. It is expected that nearly half of this amount will be financed by the private sector. Private sector banks, which were considered as the primary source of infrastructure finance will find it more difficult to do so in future as they have already committed to many major infrastructure companies and have exhausted their current resources.

ADB aid to be deployed in diverse projects:

Funds to be released by ADB will be provided in the form of two loans to be sanctioned under a multi tranche financing facility. The funds thus released will be employed to provide direct loans for project developers. It would also act as a substitute for bank loans thereby allowing banks to free up sufficient funds that can be employed to provide credit in other critical and greenfield ventures . There are many important and development-oriented ventures in the pipeline that are awaiting financial assistance from the ADB. These include 31 projects in sectors like roads, railways, airport, urban infrastructure and energy, which includes renewable energy as well. The ADB aid will ensure that all these projects are executed in an effective and time-bound manner, thereby providing a much needed stimulus for the infrastructure development of our country.