India needs to make infrastructure investments to the tune of $646 billion over the next five years, Union Finance, Defence and Corporate Affairs Minister Arun Jaitley said on Saturday as he sought investments for projects worth $2 billion from the New Development Bank (NDB), backed by the BRICS nations.
“India has a huge unmet need for investment in infrastructure, estimated to the tune of ₹43 lakh crore over the next five years…70% of this will be required in the power, roads and urban infrastructure sectors,” Mr. Jaitley in his address as India’s governor at the Bank’s annual meeting being held in the capital.
Opportunity for NDB
Terming this as an opportunity for the NDB, whose core mandate is sustainable infrastructure development, the finance minister said the bank now has its first footprint in India with the signing of a pact on Thursday to fund major district roads in Madhya Pradesh.
“We have proposed projects worth about $2 billion for NDB funding, which I hope will be taken up by the Board expeditiously. We shall work with the NDB to develop a strong shelf of projects in specific areas such as Smart Cities, renewable energy, urban transport, including Metro Railways, clean coal technology, solid waste management and urban water supply,” the minister said.
When asked about India’s request for lending to the $2 billion infrastructure projects, NDB president K.V. Kamath said it was likely to be done over the next two months, once the pipeline of projects being proposed was complete.
As per IMF’s assessment in January 2017, India’s growth in 2016 would be 6.6% and is projected to grow at 7.2% and 7.7% in 2017 and 2018, Mr. Jaitley said.
Faster appraisals
Being leaner than other multilateral lenders, the NDB should be expected to not only pursue faster appraisals of loans, but also provide loans at cheaper rates to influence established development banks to ‘revisit their high cost model,’ he said. The Bank should also offer different financing instruments, including local currency finance and be ‘nimble footed to meet the expectations of its clients.’
“The estimated unmet demand for infrastructure investment in emerging markets and developing economies is gargantuan, estimated at above $1 trillion a year by the World Bank.
The established multilateral development banks are now capital constrained, and with their overemphasis on processes, are unable to meet this financing challenge,” the Finance Minister said.
He added that it is important to make such investments in a sustainable manner in line with the NDB’s approach.
Growth recovery
Though global economic growth appears to be recovering, it is still an uneven story, the finance minister pointed out, as demand remains stagnant due to debt overhangs, high level of non-performing loans and uncertainty over future growth in some economies.
“The news from BRICS countries is generally encouraging. Chinese economy is holding firm amidst a major rebalancing. India continues to grow at a robust rate. Russia and Brazil, who were in the negative growth territory in 2016, are expected to turn to positive growth in 2017 and 2018,” he said, but warned about new challenges that have emerged such as protectionism.
These challenges include ‘a sharper than expected tightening in global financial conditions that could interact with balance sheet weaknesses in parts of the Euro area and increased geopolitical tensions, including unpredictable economic policy of USA,’ the minister said.
