ADB Current Affairs - 2019

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ADB to finance Railways Track Electrification Project in India

The Asian Development Bank (ADB) has signed an agreement to electrify railway tracks in India under Railways Track Electrification Project. As per agreement ADB will provide $750 million (equivalent in Indian Rupee) long-term financing to Indian Railway Finance Corporation (IRFC).

About ADB Loan Agreement

  • It is the largest single non-sovereign loan ever committed by ADB to a member country.
  • The proceeds of loan amount will be utilized by Indian Railway Finance Corporation (IRFC) to fund Railways Track Electrification Project.
  • About Project: It was launched as part of Railways broad modernization program which will help India’s railway sector to shift from dependence on fossil fuels towards electric power.
  • The electrification assets will be leased to Indian Railways (country’s national railway system) under a long-term lease agreement.
  • IRFC will use loaned amount to install electric traction equipment along 3,378 km of existing railway lines, so as to enable migration of passenger and freight traffic from diesel to electric traction.
  • Significance: This is a flagship project to demonstrate ADB’s strategy of supporting the key state-owned enterprises in strategic sectors and also reflects a major push by ADB’s private sector operations into transport infrastructure, and particularly railways.

About Indian Railway Finance Corporation (IRFC)

  • It is financing arm of Indian Railways that was set up in 1986.
  • It works toward mobilizing funds from domestic and international capital markets.
  • It is complete government owned entity and is registered as Non-Banking Finance Company (NBFC).

About Asian Development Bank (ADB)

  • It is regional development bank and multilateral lending agency. It was established on 19 December 1966 and is headquartered in Manila, Philippines.
  • It is an official United Nations (UN) Observer.
  • Objective: It envisions inclusive, resilient, prosperous, and sustainable Asia and Pacific, and aims towards sustaining efforts to eradicate extreme poverty in region.
  • Members: In 1966 ADB was started with 31 member countries. At present there are 68 member nation which includes 49 from Asia-Pacific region (including India) and 19 from outside. It is collectively owned by its members.
  • Members Votes: It is closely modeled on World Bank (WB) and has similar weighted voting system to it, like votes are distributed in proportion with member’s capital subscriptions to bank. As of 2016 United States and Japan hold largest proportion of shares.

Function:

  • To promote social and economic development by financially assisting its members and partners by providing loans, technical assistance, grants and equity investments
  • Finance: It gives finance assistance to both sovereign countries and to private entities. It also provides soft loans to poorer countries and hard loans to middle-income countries.
  • Its lending is mostly concentrated in five operational areas namely finance sector development, environment, climate Change and disaster management, education, regional cooperation integration and private sector lending.

Month: Categories: Business, Economy & Banking

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ADB cuts India growth forecast to 7.2% for 2019-20

The Asian Development Bank (ADB) in the recent Asian Development Outlook report has made the following observations in the forecast for the financial year 2019-20:

  • India’s growth forecast was lowered for 2019-20 to 7.2% from 7.6% estimated earlier due to moderation in global demand and likely shortfall in revenue on the domestic front.
  • Despite the downgrade in growth rate, India will remain the fastest growing economy, as China is projected to grow at 6.3% in 2019.
  • ADB has cut the growth estimate to 7% from 7.3% projected in December last year for the just-concluded fiscal (2018-19).
  • Growth is expected to rebound to 7.2% in 2019-20 and 7.3% in 2020-21 as policy rates are cut and farmers receive income support, bolstering domestic demand.
  • This growth turn around will reverse two years of the declining trend as reforms to improve the business and investment climate take effect.
  • The growth forecast for India has some downside risks such as moderation in global demand as financial conditions tighten, uncertainty arising out of global trade tensions, and the weak economic outlook in industrial countries.
  • The growth could suffer if tax revenue falls short or any disruption affects the ongoing resolution of the twin balance sheet problem of bank and corporate balance sheets.

Since India will remain one of the fastest-growing major economy in the world, it has a golden opportunity to cement recent economic gains by becoming more integrated in global value chains, and the young workforce, improving business climate, renewed focus on export expansion.

Month: Categories: Business, Economy & Banking

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