India will be a developed nation soon: Kuroda
Hyderabad, May 6: ADB President Haruhiko Kuroda today expressed confidence that India would be in the league of Developed Nations, in not too distant a future, and said that the Indian government's views on several issues, including shifting the Bank's lending from the public sector to Public-Private Partnerships (PPP), were synchronous with the funding institution.
"We will take on board, the suggestions made by Finance Minister P Chidambaram, on making the ADB a more effective instrument of development, while finalising our Medium-Term Strategy (MTS)", Mr Kuroda said in his press conference here, at the conclusion of the four-day 39th Annual Meet of the Board of Governors of the ADB.
The Finance Minister, while addressing the business session this morning, made a number of suggestions for enhancing the relevance of ADB as a lending institution, including lowering reliance on funding public infrastructure projects and shifting focus to the PPP model, evolving a consensus on monetary and financial cooperation and Regional integration and lowering loan charges.
While agreeing with Mr Chidambaram on the need for evolving a consensus approach for the development of reional institutions, Mr Kuroda did not think that lending charges need to be lowered further as they were minimal, taking into account that such funds are for periods of lending for more than two decades.
Mr Kuroda said that lending by the ADB involved an interest rate of 'Libor plus 10 per cent,' which was low by any international reckoning. He then went on to explain how the charges were so low.
Mr Kuroda said the financial parameters of the Bank have been robust for quite some time now, enabling the Bank to keep such charges low.
Besides, because of its high financial integrity it was easy for the Bank to borrow large amounts from the capital markets. The Bank has also been involved in internal reforms which has brought down the cost of administering loans.
Mr Kuroda said the Bank will pro-actively support any initiatives for strengthening Regional co-operation for the development of the bond markets and outlined steps that the Bank has already taken in this regard.
Mr Kuroda said that there was no doubt that India would join the league of industrialised nations in not too distant a future. The growth rate of the Indian economy had stepped up in recent years and was accelerating year after year. For the past years, it has ranged between 6.5 per cent to 7 per cent.
The Indian economy was well poised to move over to a trajectory of 8-10 per cent growth per annum. For this, right policies would need to be pursued, such as larger investment for the development of infrastructure and maintaining a policy profile, which was conducive to growth.
''If the economy grows at an average of 7 per cent, the size of GDP woud double in a decades's time. If, however, it grows by 10 per cent, the size of GDP would double in 7 years,'' Mr Kuroda said.
These remarks from the ADB Chief came in response to a question as to whether he agreed with the perception of Mr Chidambaram, that in less than a decade-and-a-half, India would be a developed nation.
While ruling out a financial crisis which the South Asian nations experienced in 1997-98, Mr Kuroda said Prime Minister Manmohan Singh's views on the lessons that need to be learnt from the meltdown were well taken, including multi-lateral funding agencies to stave off a crisis before it has taken place rather than act after the pot is boiling.
Mr Kuroda said South Asian nations have built huge reserves, put in place sound macroeconomic policies, strengthened their banking systems and developed safety nets and mechanism for absorbing shocks.
A 75 billion dollar fund has been created by some Asian nations for taking care of such eventuality, and an IMF was considering allocating additional quotas to vulnerable countries. Thus, neither an Asian financial crisis nor a global crisis of the kind witnessed in the past were possible.
Mr Kuroda said that a key challenge facing the Asian community was the eradication of poverty, as nearly 1.9 billion people in the region were poor, living on less than two dollars a day.
''As the region grows more prosperous, the widening gap between the rich and the poor becomes less tolerable for all of us,'' he added.