Investments in infrastructure can revive growth: FM

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SME Times News Bureau | 05 May, 2014
Union Finance Minister, P. Chidambaram Sunday said that the global economy has shown signs of strengthening over the past few months and the emerging markets like India need to increase investments, especially in infrastructure, to revive growth.

"The world economy is a little better placed now than a year ago. Global recovery appears to have strengthened in the recent months. However, we are yet to reach a stage where we can make a medium term forecast of a moderate growth," said Chidambaram while speaking at the first business session of the 47th annual meeting of ADB Board of Governors in Astana (Kazakhstan).

He said, "In the EMEs (emerging market economies) that have large net exports, slowing of growth is due to weakness in advanced economies and the need in these EMEs to re-balance to domestic sources of growth. In economies not so dependent on exports, there are various other factors, some local, other global, which require more deft handling and international cooperation."

"Policies to revive growth in most EMEs, including in India, will have to be rooted in increasing investments, particularly in infrastructure. As most EMEs are resource constrained, it would be necessary to have recourse to foreign savings for investment."

"There is, however, a need to ensure that the flows to EMEs are broadly stable. The best option would be investment flows with a preference for FDI, followed by a hierarchy of other sources weighed against the costs of such dependence," he added.

Chidambaram also asked the Asian Development Bank (ADB) to double its lending capacity to USD 20 billion a year in 20 years to help emerging market and poor economies. He flayed ADB for raising loan charges, despite opposition from most countries.

"Over the last 5 years, since the last General Capital Increase, annual lending capacity of ADB under Ordinary Capital Resources has been USD 10 to 11 billion. The developmental needs of our members are quite large and are rowing."

He said, "As the main developmental Bank of the region, we need to have a sufficiently resourced ADB to support the growing needs of the members, lest ADB's capacity to assist its members to address serious challenges such as fighting poverty or developing much needed infrastructure is greatly diminished."

"In this context, we should aim to have ADB double its lending capacity over the next 10 years," he added.