India's growth crossroads

The Asian Development Bank is working on innovative mechanisms to finance infrastructure, such as the recent partial credit guarantee facility set up by India Infrastructure Finance Company Limited in collaboration with the ADB. By boosting the credit ratings of infrastructure projects via credit enhancements, this facility will allow pension funds and insurers to invest in infrastructure projects.

A large share of ADB assistance is focused on India's lagging states, making its work strongly inclusive. Moreover, the ADB's support includes skills development, particularly to foster skills required by the infrastructure sectors, and strengthening skills design and delivery systems.

The ADB is also exploring possibilities for focusing a subset of its operations around a few high-priority economic corridors, which leads naturally to the issue of regional cooperation and integration. With India playing a major role, the benefits of cooperation are immense, both within South Asia and across the continent more broadly. Greater regional cooperation can help South Asia to achieve shared prosperity that is both inclusive and sustainable.

Indeed, only 5.4 percent of South Asia's current trade flows are intra-regional, compared to 51 percent in East Asia. Major hurdles include poor transport connectivity and stifling non-tariff barriers, which impede growth and undermine welfare in Nepal, Bhutan, Bangladesh, and north-eastern India.

With strong support from India, the South Asia Subregional Economic Cooperation Program, known as SASEC, has achieved much success in prioritizing trade facilitation; developing regional road and rail projects in Nepal, Bhutan, Bangladesh, and India; and agreeing on a time-bound investment program, including investment in the Siliguri corridor connecting India's north-eastern states with the rest of the country. Improved connectivity and trade will not only boost growth, but also promises an economic lifeline for millions of poor people.

India is expected to continue to benefit from its so-called demographic dividend and to lead global growth in the coming decades. Everybody sees the country's enormous potential. Timely reforms on key issues will open the door to a bright future for its people.

Project Syndicate

The author is president of the Manila-based Asian Development Bank.

(China Daily 02/21/2013 page9)