ADB tells India to cut red-tape to spur growth - Livemint

Nakao forecast growth of 5.5% for India for the current financial year to March and 6.3% the following year. Photo: Reuters

New Delhi: The Narendra Modi government should try change the perception of foreign investors about India and start delivering results sooner than later given the high expectations of the new administration, Asian Development Bank (ADB) president Takehiko Nakao said on Wednesday.

“Foreign direct investment is important for India’s development. However, sometimes they (investors) face difficulties such as in acquiring land. Foreign investment inflows can have dramatic impact on growth of Indian economy. Hence, it is important to change the perception about India,” Nakao told reporters after meeting Prime Minister Modi.

“Given his track record in Gujarat, there is high expectation from the Modi government. That is why it is important to start showing results sooner than later,” Nakao said.

Modi, former chief minister of Gujarat, led the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) to a spectacular win in the April-May general election on the plank of boosting economic growth that has languished at sub-5% levels for two years on the trot.

The Prime Minister’s Office said in a statement that Modi wanted ADB to give priority to regional connectivity projects that will help the whole region.

“He also said that this assistance should be additional to current levels of assistance. The Prime Minister wanted ADB to pick up large demonstration projects and demonstrate breakthroughs which then can be rapidly copied. President, ADB, said that they are very keen on partnering in the East Coast Industrial Corridor and supporting Smart Cities,” it said.

ADB is investing around $2 billion a year in India and Nakao said over the next three years, the bank will maintain a high level of lending, amounting to $7-9 billion. ADB will also provide around $30 million for technical assistance grants, especially for building institutions and capacity at the state and local levels.

Nakao praised the government for presenting a growth-oriented budget while committing to a path of fiscal consolidation. “Going forward, it is essential to increase capital expenditures as a ratio to GDP (gross domestic product), enhance tax revenues through tax reforms such as the introduction of Goods and Services Tax and stronger tax collections, and streamline subsidies by better targeting,” he added.

ADB has projected the economy to grow at 5.5% in 2014-15 and 6.3% in 2015-16.

Nakao said that to get back to a high growth path of 8-9%, it is crucial for India to implement investment-friendly reforms. “Easing the regulatory burden on industry by eliminating red tape and promoting inter-agency coordination, enabling single-window clearance mechanisms, and reviewing land acquisition procedures should be part of the national strategy to attract local and foreign investors,” he said.

Modi said the ADB president should visit India in a year’s time by when “doing business” indicators would have certainly improved.

To finance rupee denominated lending in private sector projects, ADB last week issued its first offshore Indian rupee-linked bonds and raised Rs.300 crore. “This is a part of ADB’s $500 million offshore rupee-linked bond programme and is expected to help deepen India’s capital markets,” a statement from ADB said.

India is the largest borrower from ADB. Between 1986, when ADB started its lending operations in India, and June 2014, ADB approved sovereign loans totalling $29.8 billion apart from $3.2 billion non-sovereign loans to mostly private companies.