PTIAsian Development Bank (ADB) president Masato Kanda has unveiled a $10 billion five-year initiative to transform urban infrastructure across India. The amount includes third-party capital and will be used for metro extensions, new regional rapid transit system corridors, and urban infrastructure and services. India is one of the strongest economies because of a strong domestic market and ongoing reforms, Kanda, who was in New Delhi last week, tells Deepshikha Sikarwar. Edited Excerpts:
How do you see Asian economies navigating the current turbulence? What is your prescription for policymakers in the region?
It is a difficult and unprecedented situation. There is tremendous uncertainty which impacts the Asian region, particularly economies exposed to external shocks because of their integration with the global markets. But, compared to the past, Asia is relatively strong because of sound macroeconomic policies and regional integration. Last year, developing Asia achieved 5% growth. If we continue to push the right policies, backed by sound macroeconomic interventions and structural reforms, while opening our economies, there's a high chance we can navigate the current situation effectively and emerge stronger.
The Indian economy is seen as the fastest growing by various global agencies. What is your assessment of the new geopolitical challenges confronting the country?
I agree with global agencies’ assessment. I do believe that India is one of the strongest, most robust economies because of a strong domestic market and ongoing reforms. The ADB expects India’s GDP at 6.7% this year (FY2025-2026) and 6.8% next year (FY2026-2027). This is 2 percentage points higher than the developing Asian economies. India can continue to be one of the fastest growing economies in the world by pushing ahead with reforms and sound economic policy.
I appreciate and also support the ongoing reform efforts of the Indian government. Measures have been taken to increase the competitiveness, particularly of the manufacturing sector, such as emphasis on skills development. We are very much proud of our contributions to upgrade the national industrial training institutes. India's commitment to engage with the global market is really good and it should continue this open policy.
In this really turbulent situation, I believe it is important to support private sector development because the private sector can bring about innovation, job creation and diversification in the economy through market mechanisms.
Would you like to suggest any specific policy interventions, especially to further strengthen the private sector to navigate the current turbulence?
There are many elements and some of them India is already implementing. We are encouraging India to accelerate those. For instance, in trade, I appreciate the free trade agreement with the UK, which is a very good trade export opportunity for India. It is also negotiating trade agreements with the European Union and the United States. Diversifying the industry as well as trading partners is important, which is a kind of insurance and also provides great opportunities for growth. There is big room to increase competitiveness, particularly in the manufacturing sector. We can support the upgrade of infrastructure, which will make the industry much more efficient. Human capital development is most important if India needs to reap a demographic dividend, which is probably one of the most important aspects of the Indian future. Because if they can't find good employment, it can cause social instability.
The US tariffs seek to reset the global manufacturing order and supply chains. How do you see things panning out?
This could have an enormous impact on the whole global economy, or even the geopolitical order. First is the direct negative demand shock. Trade will decrease and the trade uncertainty will stop or at least delay capital investment, which will decrease the aggregate demand. The supply chain disruption of trade will be quite a concern. The spill-over impact this uncertainty will create in the financial and capital markets, including the foreign exchange market, is really worrying. This uncertainty will dampen investor confidence, bring in risk aversion, which will create the risk of capital outflow, as well as foreign exchange depreciation. But at the same time, it is a great opportunity to transform ourselves to be more resilient and stronger as a region.
For Asia, this is probably the moment to transform their economies and to diversify. Two things: One is to diversify their own economies, industrial structures, trade partners and supply chains. Second is more integration, particularly regional and sub-regional integration, to create regional resilience against external shocks. This turnaround could lead to the emergence of more diversified, multiple and more robust supply chains.
What will be ADB’s support for India over the next few years?
At the moment, India is not just the largest borrower in terms of volume, but also in terms of quality in covering all sectors, including cutting-edge and frontier hi-tech.
Going forward, the ADB has committed over $5 billion in annual lending. Our strategy is completely aligned with your national strategy of becoming a developed country by 2047. We are very much proud to be supporting this ambitious programme. The over $5 billion will include $4.5 billion annual lending to sovereign and $1 billion to non-sovereign, including private sector.
We are focusing on sectors such as skills development, including the upgrade of the national skilling institute. The other area is urban development, including transportation — the metro and the rapid regional transit system. Our ambition is to increase our lending to India's urban development to $10 billion over five years, including third-party capital. This is really ambitious and quite a new commitment. To implement this, we have set aside $3 million in technical assistance to build this pipeline. We are committed to strongly supporting the Urban Challenge Fund, to mobilise, particularly for the states, private capital and introduce market knowledge. So, the ADB's partnership with India will be definitely enhanced and increased.
How do you see the green transition progressing in view of countries abandoning mandates? How does the ADB see its role going ahead?
I have received many requests to help countries facing, for instance, extreme heat, and more frequent typhoons, cyclones, drought and floods. We have to protect them from this changing climate. The other aspect is efficient, affordable, clean transportation, which is important to cut emissions and not to choke cities and create the potential for further development. My ambition is to try and help the countries, people, solve these complex problems, including climate, together. For India, for instance, there is an enormous need for green and affordable energy, which is very much important for the green transition, and to power the economy. We are very much committed to supporting it, particularly through private sector capital mobilisation.
How is the ADB transforming itself in view of the emphasis on multilateral development bank (MDB) reforms following a report by the NK Singh and Larry Summers committee?
I admire the success of the Indian G20 presidency. I attended the summit and meetings of the finance ministers and the central governors. MDB reform is definitely one of the most successful achievements of the G20 process. We are implementing the G20 evolution roadmap. The ADB is the best example in making our operations more and more agile, timely, speedy, and most importantly more impactful, to deliver tangible results on the ground in the most efficient and effective manner. We are financially prudent with minimum administrative costs. For example, we have not asked for a general capital increase since 2009 but have increased lending capacity through capital management innovation to $100 billion over 10 years. This has enabled us to increase our lending capacity by 50% from $24 billion to $36 billion in annual lending. Our guarantee mechanism can leverage your money by 4.5 times. Our administrative cost vis-à-vis disbursements is the least among the MDBs, the most efficient. We will continue this effort to demonstrate how the ADB is the institution you can trust and entrust important resources.
Artificial intelligence is seen as a major disruptor. What is the bank's thinking on preparing the economies of the region to deal with it?
It quite depends on how humanity can deal with this unprecedented challenge, because it is challenging humanity itself. There is, of course, some risk for humanity if it is controlled by machines or dictators, or complete confusion. But, if we can utilise it in a very prudent way, we can open a completely new era for human evolution, broadening the capacity of human activities. Particularly, my interest is to help disabled people to more actively contribute to society and have a happier life. The pros and cons are enormous. As far as the economic impact is concerned, will it lead to the augmentation or replacement of the labour force? Universal thinking has probably more negative impact on labour. This means we have to upgrade the skills of the labour force and there is a potential need for more income distribution among citizens. And the issue is energy. AI consumes quite a lot of energy because of data collection and processing. This might have an implication for the increase in affordable energy, including nuclear power.
What is your view on regulation of AI? Should there be a global framework?
It depends. Innovation can’t be controlled but sometimes it should be controlled, like in the case of nuclear energy. We need to open the space for greater innovation for humanity to utilise it but at the same time some guardrails or safeguards are needed. More importantly, regulation needs international coordination and consensus among countries. Without consensus, there will be a regulatory loophole if countries are competing with each other. We need to discuss this for the future of humanity as risks could be existential and opportunity could be pretty much exponential.
How do you see Asian economies navigating the current turbulence? What is your prescription for policymakers in the region?
It is a difficult and unprecedented situation. There is tremendous uncertainty which impacts the Asian region, particularly economies exposed to external shocks because of their integration with the global markets. But, compared to the past, Asia is relatively strong because of sound macroeconomic policies and regional integration. Last year, developing Asia achieved 5% growth. If we continue to push the right policies, backed by sound macroeconomic interventions and structural reforms, while opening our economies, there's a high chance we can navigate the current situation effectively and emerge stronger.
The Indian economy is seen as the fastest growing by various global agencies. What is your assessment of the new geopolitical challenges confronting the country?
I agree with global agencies’ assessment. I do believe that India is one of the strongest, most robust economies because of a strong domestic market and ongoing reforms. The ADB expects India’s GDP at 6.7% this year (FY2025-2026) and 6.8% next year (FY2026-2027). This is 2 percentage points higher than the developing Asian economies. India can continue to be one of the fastest growing economies in the world by pushing ahead with reforms and sound economic policy.
I appreciate and also support the ongoing reform efforts of the Indian government. Measures have been taken to increase the competitiveness, particularly of the manufacturing sector, such as emphasis on skills development. We are very much proud of our contributions to upgrade the national industrial training institutes. India's commitment to engage with the global market is really good and it should continue this open policy.
In this really turbulent situation, I believe it is important to support private sector development because the private sector can bring about innovation, job creation and diversification in the economy through market mechanisms.
Would you like to suggest any specific policy interventions, especially to further strengthen the private sector to navigate the current turbulence?
There are many elements and some of them India is already implementing. We are encouraging India to accelerate those. For instance, in trade, I appreciate the free trade agreement with the UK, which is a very good trade export opportunity for India. It is also negotiating trade agreements with the European Union and the United States. Diversifying the industry as well as trading partners is important, which is a kind of insurance and also provides great opportunities for growth. There is big room to increase competitiveness, particularly in the manufacturing sector. We can support the upgrade of infrastructure, which will make the industry much more efficient. Human capital development is most important if India needs to reap a demographic dividend, which is probably one of the most important aspects of the Indian future. Because if they can't find good employment, it can cause social instability.
The US tariffs seek to reset the global manufacturing order and supply chains. How do you see things panning out?
This could have an enormous impact on the whole global economy, or even the geopolitical order. First is the direct negative demand shock. Trade will decrease and the trade uncertainty will stop or at least delay capital investment, which will decrease the aggregate demand. The supply chain disruption of trade will be quite a concern. The spill-over impact this uncertainty will create in the financial and capital markets, including the foreign exchange market, is really worrying. This uncertainty will dampen investor confidence, bring in risk aversion, which will create the risk of capital outflow, as well as foreign exchange depreciation. But at the same time, it is a great opportunity to transform ourselves to be more resilient and stronger as a region.
For Asia, this is probably the moment to transform their economies and to diversify. Two things: One is to diversify their own economies, industrial structures, trade partners and supply chains. Second is more integration, particularly regional and sub-regional integration, to create regional resilience against external shocks. This turnaround could lead to the emergence of more diversified, multiple and more robust supply chains.
What will be ADB’s support for India over the next few years?
At the moment, India is not just the largest borrower in terms of volume, but also in terms of quality in covering all sectors, including cutting-edge and frontier hi-tech.
Going forward, the ADB has committed over $5 billion in annual lending. Our strategy is completely aligned with your national strategy of becoming a developed country by 2047. We are very much proud to be supporting this ambitious programme. The over $5 billion will include $4.5 billion annual lending to sovereign and $1 billion to non-sovereign, including private sector.
We are focusing on sectors such as skills development, including the upgrade of the national skilling institute. The other area is urban development, including transportation — the metro and the rapid regional transit system. Our ambition is to increase our lending to India's urban development to $10 billion over five years, including third-party capital. This is really ambitious and quite a new commitment. To implement this, we have set aside $3 million in technical assistance to build this pipeline. We are committed to strongly supporting the Urban Challenge Fund, to mobilise, particularly for the states, private capital and introduce market knowledge. So, the ADB's partnership with India will be definitely enhanced and increased.
How do you see the green transition progressing in view of countries abandoning mandates? How does the ADB see its role going ahead?
I have received many requests to help countries facing, for instance, extreme heat, and more frequent typhoons, cyclones, drought and floods. We have to protect them from this changing climate. The other aspect is efficient, affordable, clean transportation, which is important to cut emissions and not to choke cities and create the potential for further development. My ambition is to try and help the countries, people, solve these complex problems, including climate, together. For India, for instance, there is an enormous need for green and affordable energy, which is very much important for the green transition, and to power the economy. We are very much committed to supporting it, particularly through private sector capital mobilisation.
How is the ADB transforming itself in view of the emphasis on multilateral development bank (MDB) reforms following a report by the NK Singh and Larry Summers committee?
I admire the success of the Indian G20 presidency. I attended the summit and meetings of the finance ministers and the central governors. MDB reform is definitely one of the most successful achievements of the G20 process. We are implementing the G20 evolution roadmap. The ADB is the best example in making our operations more and more agile, timely, speedy, and most importantly more impactful, to deliver tangible results on the ground in the most efficient and effective manner. We are financially prudent with minimum administrative costs. For example, we have not asked for a general capital increase since 2009 but have increased lending capacity through capital management innovation to $100 billion over 10 years. This has enabled us to increase our lending capacity by 50% from $24 billion to $36 billion in annual lending. Our guarantee mechanism can leverage your money by 4.5 times. Our administrative cost vis-à-vis disbursements is the least among the MDBs, the most efficient. We will continue this effort to demonstrate how the ADB is the institution you can trust and entrust important resources.
Artificial intelligence is seen as a major disruptor. What is the bank's thinking on preparing the economies of the region to deal with it?
It quite depends on how humanity can deal with this unprecedented challenge, because it is challenging humanity itself. There is, of course, some risk for humanity if it is controlled by machines or dictators, or complete confusion. But, if we can utilise it in a very prudent way, we can open a completely new era for human evolution, broadening the capacity of human activities. Particularly, my interest is to help disabled people to more actively contribute to society and have a happier life. The pros and cons are enormous. As far as the economic impact is concerned, will it lead to the augmentation or replacement of the labour force? Universal thinking has probably more negative impact on labour. This means we have to upgrade the skills of the labour force and there is a potential need for more income distribution among citizens. And the issue is energy. AI consumes quite a lot of energy because of data collection and processing. This might have an implication for the increase in affordable energy, including nuclear power.
What is your view on regulation of AI? Should there be a global framework?
It depends. Innovation can’t be controlled but sometimes it should be controlled, like in the case of nuclear energy. We need to open the space for greater innovation for humanity to utilise it but at the same time some guardrails or safeguards are needed. More importantly, regulation needs international coordination and consensus among countries. Without consensus, there will be a regulatory loophole if countries are competing with each other. We need to discuss this for the future of humanity as risks could be existential and opportunity could be pretty much exponential.
(Catch all the Business News, Breaking News, Budget 2025 Events and Latest News Updates on The Economic Times.)
Subscribe to The Economic Times Prime and read the ET ePaper online.
Read More News on
(Catch all the Business News, Breaking News, Budget 2025 Events and Latest News Updates on The Economic Times.)
Subscribe to The Economic Times Prime and read the ET ePaper online.
