Why in News?

The Asian Development Bank (ADB) upgrades India’s gross domestic product (GDP) growth forecast for fiscal year (FY) 2024 from 6.7% to 7% and 7.2% in FY2025.

What’s in Today’s Article?

• About ADB (History, Functions, Members, Control, etc.)
• News Summary

Asian Development Bank:

• The Asian Development Bank (ADB) is a regional development bank established in December 1966.
• Its primary mission is to "foster economic growth and cooperation" among countries in the Asia-Pacific Region.
• Functions:
  • ADB assists members and partners by providing loans, technical assistance, grants, and equity investments to promote social and economic development.
  • It also provides financing to certain private sector projects as well as public-private partnerships.
  • The ADB regularly facilitates policy dialogues and provides advisory services.
  • They also use co-financing operations that tap official, commercial, and export credit sources while providing assistance.
• Headquarters: Manila, Philippines
• Members:
  • From 31 members at its establishment in 1966, ADB has grown to encompass 68 members.
  • Of this, 49 are from within Asia and the Pacific and 19 outside.
• Control / Composition of ADB:
  • ADB is run by a board of governors, which represents the member countries of the ADB. 
  • The ADB was modelled closely on the World Bankand has a similar weighted voting system where votes are distributed in proportion to members' capital subscriptions.
  • As of 2022, ADB's five largest shareholders are:
    • Japan and the United States (each with 15.6% of total shares),
    • People's Republic of China (6.4%),
    • India (6.3%), and
    • Australia (5.8%).
  • Source of Funding:
    • It relies on member contributions, retained earnings from lending, and the repayment of loansfor the funding of the organization.

India & ADB:

• India is a founding member of ADB and the bank’s fourth largest shareholder.
• Since commencing operations in 1986, ADB has aligned its operations in the country to the government’s developing priorities.
• This approach will be pursued through the forthcoming country partnership strategy, 2023–2027.
• To date, ADB has committed 605 public sector loans, grants, and technical assistance totaling $52.6 billion to India.
• Cumulative loan and grant disbursements to India amount to $40.71 billion. These were financed by regular ordinary capital resources, and other special funds.
• In 2022, ADB committed over $1.8 billion in sovereign loans to India.
• The bank continued to support India’s metro network expansion through a $350-million loan to improve connectivity in the city of Chennai.
• ADB committed a $350-million loan to help develop Maharashtra’s Road network in 10 lagging districts.
• ADB operations in India cover more than 20 states.

Key highlights of the ADB Report:

Image Caption: ADB's Growth Forecast for India

• Driven by robust public and private investment and strong services sector, the ADB has upgraded India’s GDP growth forecast for fiscal year (FY) 2024 from 6.7% to 7% and 7.2% in FY2025.
• The forecast is part of the latest edition of ADB’s flagship economic publication, Asian Development Outlook (ADO) April 2024.
• The key factors that will trigger growth in FY2024 are:
  • Higher capital expenditure on infrastructure development both by central and state governments,
  • Rise in private corporate investment,
  • Strong service sector performance and
  • Improved consumer confidence.
• Growth momentum will pick up in FY2025 backed by improved goods exports and an increase in manufacturing productivity and agricultural output.
• Foreign direct investment will be affected in the near term due to tight global financial conditions.
• However, it will pick up in FY2025 with higher industry and infrastructure investment.
• Goods exports will also be affected by lower growth in advanced economies but pick up in FY2025 as global growth improves.