Country Context

India is undergoing a rapid economic transformation toward becoming an upper middle-income

country. Annual economic growth averaged 7.1% between the fiscal years (FYs) 2013 and 2017,
placing India among the world’s fastest growing large economies (ADB, 2018a).1

It is now the third-largest country worldwide (in purchasing power parity terms). This growth
has been accompanied by progressive reform measures to improve the country’s economic
competitiveness and achieve more inclusive and sustainable growth. These include simplifying
the tax structure through the introduction of a goods and services tax, improving the ease of
doing business, enhancing infrastructure investments, and increasing agricultural productivity.

The country has also achieved many of the Millennium Development Goals (MDGs). These
MDGs include halving the proportion of people living in poverty, eliminating gender disparity in
education, containing the spread of major diseases, and increasing access to safe drinking water
(Government of India [GOI], 2017a).

Despite these successes, several development challenges remain. India has a large number of
poor people; official surveys estimate nearly 270 million or 21.9% of the population were living
in poverty in FY2011 (GOI, 2013). With many youths entering the labor force every year and
nearly 47% of the workforce engaged in low-productivity agriculture, structural transformation
and job creation in modern sectors are urgently needed. India has also fallen short of achieving
MDGs related to improving maternal health, ensuring environmental sustainability, and
eradicating hunger.

India’s infrastructure deficit constrains economic competitiveness and job creation.2

Infrastructure bolsters inclusive growth by enhancing the efficiency of the production and
distribution of commodities, providing new economic opportunities, and improving human
capabilities.

The country also needs to improve service delivery in urban centers to respond to rapid
urbanization. Cities could be transformed into commercial and industrial hubs with improved
standards of living to also promote growth. To do this, cities must be more efficient in urban
planning, land-use governance, and floor area regulations. They should also improve revenue
potential through better taxation and cost recovery of investments.

1
The fiscal year (FY) begins on 1 April. FY before a calendar year denotes the year in which the fiscal year begins,
e.g., FY2017 begins on 1 April 2017 and ends on 31 March 2018.
2
According to the Government of India (GOI) (2018a), India needs a cumulative $4.5 trillion for infrastructure
investment up to 2040.
Environmental sustainability is another challenge faced by India due to air and water pollution,
forest degradation, water resource depletion, and the impact of climate change. Additionally, the
country needs to bridge income and growth disparities between advanced and low-income states
(LIS), so that LIS can significantly contribute to the country’s growth.

The government’s development strategy focuses on overcoming these challenges. Its key pillars
include (i) improving the living standards of citizens by doubling farmers’ incomes and creating
well-paid jobs in modern industrial sectors;

(ii) developing inclusive infrastructure in urban and rural areas;

(iii) ensuring equitable access to social services with substantial improvements in the quality of
delivery; (iv) enhancing governance and institutional capacity; and

(v) addressing environmental challenges.

The “Make in India” initiative promotes industrialization and generates employment in the
manufacturing sector by developing industrial corridors and manufacturing hubs, facilitating
business, and easing foreign investment caps.

The Bharatmala and Sagarmala initiatives will bridge gaps in the existing highways and port
infrastructure, significantly increase the efficiency of movement of passengers and freight, and
reduce logistics costs.

Other key initiatives such as “Skill India” will bolster the competitiveness of the manufacturing
sector by improving people’s skills to enhance their employability. The aim of the Smart Cities
and Atal Mission for Rejuvenation and Urban Transformation programs is to establish dynamic
urban hubs across the country to transform urban areas into livable cities that can drive rapid
growth in modern industries. “Digital India” is extending digital infrastructure providing a
platform for efficient public administration and service delivery.

The government also seeks to improve the livelihood of people in rural areas by providing power
to all households under the “Power for All” initiative and extending road connectivity to all
villages under the Prime Minister’s Rural Road Program (PMGSY) by 2019.

The country’s commitment to inclusive and sustainable growth is shown by ambitious targets for
the implementation of the Sustainable Development Goals (SDGs). Individual, national, and
state development agendas are aligned with the SDGs.

With decades of support to India, ADB has continuously aligned its assistance to country needs
and government priorities.
ADB Assistance to India
Although India is a founding member of ADB, the country started availing of assistance only in
1986. The India–ADB partnership has deepened and strengthened over the past 3 decades and
responded to the evolving development priorities and flagship initiatives of the government.
Operations of ADB are guided by the country partnership strategy, which aims to support India’s
development objectives and is prepared in close consultation with the government and other
stakeholders. ADB operations in the country now span six sectors: transport, energy, water and
urban services, finance and public sector management, agriculture and natural resources, and
human development (Table 1 and Figures 1–3).

ADB endeavors to integrate the key priority of inclusive economic growth. The bank’s support
for the development of state roads, expansion of rural connectivity, and promotion of tourism
facilitate inclusive growth by connecting poor people to markets and enhancing their access to
productive assets. Projects supporting skill acquisition, improved urban infrastructure, and
equitable access to quality health services help promote greater access to economic opportunities
by strengthening the capacities of the poor and vulnerable.

ADB operations also contribute to environmentally sustainable growth. Projects cover areas
including railways and mass rapid transit system; renewable energy and energy efficiency;
coastal protection, river bank strengthening, and river basin management; and urban
environmental management, including water management, sanitation, and sewerage and solid
waste management.

Assistance to India goes beyond physical investment. ADB leverages finance, partnerships, and
knowledge; fosters sharing and adoption of global and regional good practices; and includes
capacity development as an integral element of its operations.

ADB-supported operations also aim to leverage the access of women to resources and
opportunities that would enhance their involvement and participation to drive economic growth.

The ADB program extends across 25 states, including LIS where the technical and financial
assistance needs are greater. About 62% of ADB’s current portfolio in India is in LIS.

Another important area of ADB support covers the development of economic corridors using a
multi-sector and holistic approach. This could facilitate integration with global value chains,
while supporting India’s emerging role in regional cooperation.
ADB Contribution to Faster , More Inclusive, and Sustainable
Development
ADB has forged a strong partnership with India and contributed to improving the quality of life
of millions of people since it began operations in the country in 1986.

Projects have provided better road connectivity; electricity connections; and improved water
supply, sanitation, and solid waste management facilities. They have improved land through
irrigation, drainage, and flood management; and reduced vulnerability to floods. They have
created opportunities for education and skills development. Operations have contributed directly,
indirectly, and in a mutually reinforcing manner, to enhanced livelihood and job opportunities,
increased access to education and health services, better living conditions, and improved
economic and social indicators for many people in India.

ADB contributes to development initiatives in India through projects and technical assistance.
Table 2 presents the development results of ADB-supported initiatives during 2014–2017, giving
a snapshot of changes they have brought.
Transport: Gaining Momentum

There is a close relationship between economic growth and infrastructure, in which transport
infrastructure plays a significant role. Over time, roads have emerged as the predominant mode
of transport in terms of traffic share as well as their contribution to the national economy. Road
development received particular attention and has been prioritized under government programs
such as the National Highway Development Project (NHDP) launched in 1998 and the PMGSY
launched in 2000.3

India’s road network is large and has increased from about 3.37 million kilometers (km) in 2001
to over 5.6 million km in 2017. National and state highways and expressways account for around
5% of the road network, while district roads and village roads constitute the rest (GOI, 2018a).
For the road subsector, improving connectivity, maintenance, and safety are key priorities of the
government. In October 2017, the government launched Bharatmala Pariyojana, a new umbrella
program for highways that focuses on optimizing the efficiency of freight and passenger
movement across the country.

3
The PMGSY is a centrally sponsored program implemented in partnership with state governments to provide
good allweather road connectivity to unconnected villages and habitations.
Under Bharatmala, 53,000 km of national highways have been identified as requiring work to
improve national corridor efficiency. Of these, around 24,800 km are to be taken up by 2021 in
the first phase of implementation (GOI, 2018b).4 In addition, the first phase also includes 10,000
km of remaining road works from NHDP. In view of the large road network, the planning,
development, and funding for these roads need to be scaled up significantly, with increasing
mobilization of private capital.

In FY2014, 1,140 billion-passenger km and 682 billion net-ton km were transported by Indian
Railways (GOI, 2017b). Despite its extensive reach and scale, the share of railways in the total
surface freight carried is declining. Railways also suffer from low capacity, poor utilization of
existing capacity, safety issues, and lack of quality service delivery in the passenger segment.
The government has taken several initiatives to address these issues through the construction of
new dedicated freight corridors, capacity augmentation of existing corridors, modernization of

4
Bharatmala Pariyojana aims to bridge critical infrastructure gaps through interventions such as development of
economic corridors, intercorridor, and feeder routes, national corridor efficiency, border and international
connectivity routes, coastal and port connectivity roads, and greenfield expressways. (GOI, 2018b).
technology, tariff rationalization, development of high and semi-high-speed rail corridors, and
station redevelopment and modernization as well as the improvement of passenger amenities,
service delivery and efficiency, and safety.

Many cities in India, particularly metros, experience traffic congestion and air pollution.
Efficient and sustainable transport systems and mobility are critical to the smooth functioning of
the city economy and labor markets. To address these issues, measures are being taken to
provide public transport. Higher capacity rail-based mass transit systems (metro rail) have
emerged as one solution. Following the success of the Delhi Metro project, 15 cities have
implemented or are planning metro rail projects. Bus rapid transport systems are also being
implemented or planned.

Transport is the largest component of ADB’s sovereign portfolio in India, accounting for 41%—
with roads taking a 92% share. In line with government priorities, ADB supports investment in
national, state, district, and rural road connectivity, and institutional strengthening and capacity
building. Its focus is on LIS and important economic corridors. ADB supports state road
subsector projects, including rural roads, in 16 states. A subregional road connectivity project
that ADB supports also seeks to improve the connectivity of India with Nepal, Bhutan,
Bangladesh, and Myanmar. ADB’s value-addition involves promoting safe and environmentally
friendly practices, and elements of public–private partnership (PPP). Technical assistance has
been extended to strengthen institutions and build the capacity of state executing agencies. The
ADB transport portfolio also includes support for railways and a metro rail project in Jaipur.

ADB has supported the upgrade of state highways and major district roads for improving
connectivity and access to economic opportunities as well as social services, institutional
development, and capacity building (Box 2). Across states, ADB’s largest lending in roads has
been in Madhya Pradesh and Bihar. ADB has also provided support to the PMGSY since 2003.
Its ongoing assistance comprises $800 million for the Rural Connectivity Investment Program
(Box 1) and $250 million for tranche 1 of the Second Rural Connectivity Investment Program in
five states.
Agriculture and Natural Resources: Prosperity for Posterity

The Government of India aims to boost agricultural productivity and guarantee income security
for farmers by doubling their income between 2016 and 2022 (GOI, 2017c). The government
considers agriculture as an enterprise and wants to help farmers produce more from the same
land parcel at lesser cost and simultaneously realize higher prices for their produce (GOI, 2018c).
Key priorities of the government include boosting agricultural productivity with a focus on
irrigation, seeds, fertilizer, and technology, along with a shift to high-value farm products. It also
intends to reform the fragmented agricultural market.

Agriculture and natural resources constitute a small share (3%) of ADB’s ongoing portfolio in
India but support critical areas. These include adopting newer technologies of pressurized
distribution network to improve irrigation water use efficiencies, incorporating climate change
adaptation into project design, and modernizing irrigation and flood control structures for better
water management. Projects for agriculture and natural resources include the development of
infrastructure for irrigation, protection from floods and river and coastal erosion, and river basin
management.

 Saving Coasts, Protecting Lives: Sustainable Coastal Protection and Management

Investment Program, Tranche 1, Karnataka
The Sustainable Coastal Protection and Management Investment Program was
implemented between 2012 and 2017 with a loan of $41 million for the first tranche. The
project adopted a holistic approach, bringing offshore coastal protection structures to
contain erosion; using eco-friendly construction materials, such as geotextile bags;
increasing community participation in beach management; and building the capacity of
state agencies to meet the long-term needs of sustainable coastal protection and
management. The project has contributed to significant coastal protection and
management in India, and initiated a new approach of participatory planning and
integrated development of environmentally and socially appropriate coastal protection
solutions, with the transfer of knowledge to a wider community.
Ullal village, in the state of Karnataka on the southwest coast of India, has been slowly
eroding since the construction of two breakwaters in 1994. Coastal protection measures
adopted in 1996 included rock seawalls, gabions, and sand-filled plastic bags tested at
many places along the coast. But all these initial measures were destroyed by waves and,
a decade later, the waves touched the settlements. This led to several programs to identify
the causes and address the erosion at Ullal. Fish drying, a work primarily undertaken by
women was edged out due to lack of space. Families living along the coastline were
worried about their assets and livelihood.
Based on modern design approaches and participatory planning, the ADB-supported
shoreline protection project has contributed to stabilizing the coastline. The reefs that
were built are larger and further offshore than any previous offshore protection structures
in India. The innovative design has stabilized the coast over a distance much greater than
the reef length. The shoreline infrastructure proved resilient and minimized damage in the
region during Cyclone Ockhi, which hit southern India in December 2017. The project
exposed the State Port Department to new and effective technologies in sustainable
coastal erosion management, and enhanced its technical and managerial capacity for
similar future projects.
The project has checked the erosion and restored beaches in Ullal and Bengre villages.
Beach width has significantly increased from between 7 m and 10 m up to as much as 70
m in some areas. The communities living on the Ullal coastline are less vulnerable, and
more confident in the safety of their assets and livelihoods. In addition, as an incidental
benefit, reefs are serving as breeding grounds for marine animals, and fisherfolk around
the reef area note a significant increase in their catch per trip. Increased income from the
fish has also reduced their dependence on debt during leaner seasons.
The benefits of the project are not limited to fisherfolk. With the development of beaches,
tourists have started visiting Ullal in increasing numbers. This has encouraged the local
communities, including women, to start small shops along the beach to serve tourists and
to organize beach festivals.
THE FUTURE
ADB’s support to India is guided by the new country partnership strategy, 2018–2022, which is
closely aligned with government priorities and its flagship programs, including attaining the
SDGs and targets under the Intended Nationally Determined Contributions (ADB, 2017). The
strategy aims to accelerate economic transformation by building industrial competitiveness,
creating jobs, accelerating growth of LIS, and addressing environmental and climate change
challenges. The strategy focuses on six sectors: transport, energy, urban, public sector
management, agriculture and natural resources, and human development. These goals are also in
line with ADB’s Strategy 2030, which envisages responding effectively to the changing needs of
the developing member countries, and help achieve prosperous, inclusive, resilient, and
sustainable growth (ADB, 2018b). Annual lending is envisaged to increase to $4 billion,
including private operations, compared with an average of $2.6 billion per year during 2013–
2017. This includes annual investments of $1 billion each in economic corridor and in LIS. In
implementing the country partnership strategy, ADB programs will be (i) increasingly driven by
strategic studies that will help the government and ADB identify transformative investments;
(ii) involve synergistic and cross-sector approaches to drive transformative solutions across
public and private sectors; (iii) align with the government’s flagship programs, such as for urban
transformation, to “value add” and accelerate their implementation; (iv) actively engage in low
income states(LIS) by forging longterm partnerships, focusing on building capacities and
systems for development operations; and (v) continue to improve implementation performance
through systematic capacity building and cross learning, monitoring and troubleshooting, and
knowledge building and dissemination. ADB’s operations are also guided by its longer-term
vision, developed in close consultation with its member countries. ADB Board approved its
Strategy 2030 in July 2018, which expands its vision and builds on the learnings of the earlier
Strategy 2020. While the focus will continue to be on infrastructure investments—particularly
those that are green, sustainable, inclusive, and resilient, ADB also aims to strengthen operations
in social sectors, such as education, health, and social protection. Its support will focus on seven
operational priorities: (i) addressing remaining poverty and reducing inequalities; (ii)
accelerating progress in gender equality; (iii) tackling climate change, building climate and
disaster resilience, and enhancing environmental sustainability; (iv) making cities more livable;
(v) promoting rural development and food security; (vi) strengthening governance and
institutional capacity; and (vii) fostering regional cooperation and integration. ADB will continue
to leverage finance, knowledge, and partnerships to sustain its efforts. In this context, country-
focused approach will be taken by developing a custom tailored strategy and programs,
promoting the use of innovative technologies, and delivering integrated solutions that combine
sectors and themes through a mix of public and private sector operations.
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