The global economy has shown signs of strengthening over the past few months and the emerging markets like India need to increase investments, especially in infrastructure, to revive growth, Finance Minister P Chidambaram said on Sunday.
Speaking at the first business session of the 47th Annual Meeting of ADB Board of Governors in Astana (Kazakhstan), Mr. Chidambaram also stressed upon the need to increase resources of the Asian Development Bank for lending, an official statement said.
“Policies to revive growth in most emerging markets, including India, will have to be rooted in increasing investments, particularly in infrastructure. As most emerging markets are resource constrained, it would be necessary to have recourse to foreign savings for investment,” he said.
There is, however a need to ensure that the flows to emerging markets are broadly stable, he said, adding that the best option would be investment flows with a preference for FDI, followed by a hierarchy of other sources weighed against the cost of such dependence.
“The world economy is a little better placed now than a year ago. Global recovery appears to have strengthened in the recent months. However, we are yet to reach a stage where we can make a medium term forecast of a moderate growth,” Mr. Chidambaram said.
According to him, in the emerging markets that have large net exports, the slowing of growth is due to weakness in advanced economies and there is a need in these markets to rebalance to domestic sources of growth.
In economies not so dependent on exports, there are various other factors, some local, other global, which require more deft handling and international cooperation, he added.
On increasing lending resources of ADB, Mr. Chidambaram said: “We firmly believe that the fundamental solution for enhancing sustainable level of lending (SLL) to a more meaningful level lies in increasing the capital stock of the bank.
“We appreciate that in a multilateral institution consensus building for major initiatives are necessary. I urge the management to make serious and sincere efforts to augment capital of the bank.”
Of late, ADB has been confronting challenges of portfolio performance and declining disbursements, and 2013 witnessed decline in disbursements under OCR, particularly under sovereign operations, he added.
“Net resource transfer, which is our net financial support to members declined to its lowest level in at least last five years to just over $ 100 million,” the Finance Minister said.
On the issue of revival of growth, Mr. Chidambaram said ADB being the bank of the region must “respond to these growing expectations”.
“It is only natural that we feel closest to ADB and are most comfortable partnering with them. Our vision and aims converge. A healthy and growing ADB is in the best interest of the region and its people,” he added.
He said the banks’ midterm review of Strategy 2020 is trying to “rightly” shift the focus on implementation and disbursements. Average delay in completion of successful projects is 2.3 years with one-sixth of projects getting delayed by over 4 years.
“This underscores the need for internal reforms, re-engineering of business processes and delegation and decentralisation,” Mr. Chidambaram added.
Procurement reforms are the most needed, he said, adding that there must be focus on deploying staff resources with authority to regional departments and Resident Missions, increased delegation of authority to country offices, progressively higher use of e-procurement, post review of small contracts, robust oversight and well defined timelines for end-to-end processed.
On ABD’s role in India, he said: “While contribution of ADB to India remains small, it nevertheless is quite important.”
Mr. Chidambaram further said: “I am happy to note that as agreed in the South Asia Sub-regional Economic Cooperation (SASEC) platform we negotiated $500 million assistance from ADB for building roads in North-eastern states for regional connectivity.”
ADB is also assisting India in developing the East Coast Corridor from Chennai to Kolkata, he added.
The Minister said India has decided to become a contributor to the Asian Development Fund (ADF) and will contribute $30 million towards ADF-11 in agreed instalments beginning October 2014.