India and the Asian Development Bank Explained

India and the Asian Development Bank (ADB) share a partnership in which India, a founding member of the Manila-based regional lender, has become one of its largest borrowers and one of its most influential shareholders. The ADB was established in 1966 to promote growth and reduce poverty in Asia and the Pacific, and in India it finances roads, railways, power, water supply, cities and the financial sector, and also provides technical assistance.

India and the Asian Development Bank cooperate through loans to the Government of India and to state governments, non-sovereign financing for private companies, grants for studies and capacity building, and policy dialogue. India is both a borrower and a shareholder with a seat at the table where the bank’s strategy is decided, which makes the relationship different from that of an ordinary aid recipient.

Key Takeaways

• The Asian Development Bank was established in 1966 and is headquartered in Manila, Philippines, and India is one of its founding members.
• India is among the largest shareholders of the Asian Development Bank, and its voting power is based on its subscription to the bank’s capital.
• India began borrowing from the Asian Development Bank in the mid-1980s and has since become one of the bank’s largest borrowers, using mainly non-concessional ordinary capital resources.
• The Asian Development Bank funds Indian projects in transport, energy, urban infrastructure, water, skills and the financial sector, through both sovereign and non-sovereign operations.
• The Department of Economic Affairs in the Ministry of Finance is India’s main point of contact for the Asian Development Bank, and the Finance Minister is traditionally India’s Governor on the bank’s Board of Governors.
• Besides loans, the Asian Development Bank provides technical assistance, policy advice and knowledge products such as the Asian Development Outlook to India.

What is the Asian Development Bank?

The Asian Development Bank (ADB) is a regional multilateral development bank that lends and provides technical help to developing member countries in Asia and the Pacific. It was founded in 1966, has its headquarters in Manila in the Philippines, and is owned by its member governments.

The bank came out of a regional push in the early 1960s to create an Asian counterpart to institutions such as the World Bank. The United Nations Economic Commission for Asia and the Far East (later ESCAP) played a part in the early planning, and Japan was a driving force. Membership has grown from about 30 founding members to nearly 70, with both regional members from Asia and the Pacific and non-regional members from Europe and North America.

The ADB raises money mainly by borrowing in international capital markets using the backing of its shareholders’ capital, and it lends on terms that reflect its own cost of funds. It also manages grant funds and trust funds contributed by donors. Its stated mission is a prosperous, inclusive, resilient and sustainable Asia and the Pacific, and it has a long-term strategy, Strategy 2030, that sets priorities such as reducing poverty, gender equality, climate action and regional cooperation.

What is India’s role in the Asian Development Bank?

India is a founding member, a major shareholder and one of the largest borrowers of the Asian Development Bank. India has been part of the institution since it began, and it takes part in its governance as well as using its financing.

A member’s say in the ADB depends on its capital subscription, which determines its voting power. Japan and the United States hold the largest shares, followed by China, and India is among the next largest shareholders. India’s Finance Minister is normally the country’s Governor on the Board of Governors, the bank’s highest decision-making body, which meets at the annual meeting. India also participates in the 12-member Board of Directors, which approves loans and policies, through its constituency on the board.

The relationship has changed over time. In the bank’s early years, India did not borrow from it. From the mid-1980s the ADB started lending to India, and the volume rose steadily as India’s economy grew and as the country’s infrastructure needs became larger. India does not receive loans from the bank’s concessional fund because of its income level, so its borrowing comes from the ordinary capital resources.

How does the Asian Development Bank lend to India?

The Asian Development Bank lends to India through sovereign loans to the central or state governments and through non-sovereign financing to private or public companies without a sovereign guarantee. Both types of operations are used, but sovereign lending forms the larger part of the portfolio.

Sovereign loans

Sovereign loans go to the Government of India or to state governments and are guaranteed by the Government of India. The Department of Economic Affairs handles the proposals, and the project is usually implemented by a ministry, a state department or a public agency, such as a state road authority, a power transmission company or an urban development body. These loans fund projects directly, or they can be policy-based loans that support reforms with a flexible budget-support element.

Non-sovereign operations

Non-sovereign financing goes to private companies, banks, non-banking financial companies and public-sector entities that do not need a government guarantee. It includes loans, equity investments, guarantees and credit lines. Examples of the sectors covered are renewable energy, financial institutions that lend to small businesses and infrastructure developers.

Technical assistance and grants

Technical assistance consists of smaller grants or loans for feasibility studies, project preparation, policy research, training and institutional strengthening. It is often used to prepare larger loans, to test new approaches, or to build the skills of state agencies.

How does a project become an Asian Development Bank loan in India?

A project becomes an Asian Development Bank loan in India after being proposed by the Government of India, appraised by the bank and approved by its Board of Directors. The process follows a standard project cycle that helps ensure the financing meets technical, financial and safeguard requirements.

• Country partnership strategy: The ADB and the Government of India agree on priority sectors and the kinds of support to be offered over a multi-year period.
• Project identification: A ministry or state government, working through the Department of Economic Affairs, proposes a project and the bank assesses fit.
• Preparation and appraisal: Technical, financial, economic, social and environmental studies are carried out, often with technical assistance support.
• Negotiation and approval: Loan terms are negotiated with the borrower and the guarantor, and the Board of Directors approves the loan.
• Implementation and monitoring: The executing agency carries out the project with procurement under ADB rules, and the bank supervises progress.
• Completion and evaluation: A completion report is prepared, and the bank’s independent evaluation function may review the results.

Which sectors does the Asian Development Bank fund in India?

The Asian Development Bank funds India’s transport, energy, urban development, water supply and sanitation, agriculture, skills and financial sectors. Transport and energy have historically received a large share of the bank’s loans.

The geographic spread has covered many states, including projects in the Northeast, where the ADB has supported roads, power and urban services, and in states such as Madhya Pradesh, Rajasthan, Himachal Pradesh, Uttarakhand and Tamil Nadu. Projects are often co-financed with other lenders, such as the World Bank, the Japan International Cooperation Agency (JICA) and the Asian Infrastructure Investment Bank (AIIB).

How does the Asian Development Bank support Indian states and cities?

The Asian Development Bank supports Indian states and cities through loans to state governments that are guaranteed by the central government, and through programmes that include reforms and capacity building. State-level projects are a major part of the bank’s work in India.

In practice, a state might receive a loan to improve its roads, reform its power distribution or build water and sanitation systems in towns. Programmatic approaches combine a project loan with policy reforms, such as improving tariff collection or planning, and the bank offers technical assistance to help state agencies manage the projects. In urban areas the focus has included water supply, sewerage, solid waste and public transport, where the bank can bring experience from other Asian cities.

The bank also supports regional connectivity programmes that connect India to its neighbours, such as those under the South Asia Subregional Economic Cooperation (SASEC) programme, which links India with Bangladesh, Bhutan, Nepal and other neighbours on transport, trade facilitation and energy.

What themes shape current India-ADB cooperation?

Current India-ADB cooperation is shaped by infrastructure, climate action, private-sector investment, urbanisation and social inclusion. These themes reflect both the bank’s Strategy 2030 and India’s own development priorities.

• Infrastructure and connectivity: Transport corridors, logistics and urban mobility remain core areas, supporting India’s national infrastructure plans.
• Clean energy and climate: The bank backs renewable energy, grid modernisation, energy efficiency and climate resilience, including adaptation in cities and coastal areas.
• Private-sector development: Non-sovereign operations aim to bring private capital into infrastructure, finance and manufacturing.
• Urban and social services: Water, sanitation, health and skills development support quality of life and productivity.
• Financial inclusion and reforms: Support for financial institutions, small businesses and public financial management.
• Disaster and crisis response: The bank has provided emergency financing and policy-based support, including during the COVID-19 pandemic when it supported India’s health and social protection response.

How does the Asian Development Bank compare with other lenders in India?

The Asian Development Bank is one of several multilateral and bilateral partners that finance Indian development, and it differs from others in its regional focus and its mix of sovereign and private operations. India deals with each partner under its own priorities.

India’s role as a large borrower and a shareholder gives it a say in how multilateral development banks work, and it has taken part in discussions about increasing their lending capacity and reforming their funding models.

Why does the Asian Development Bank matter for India?

The Asian Development Bank matters for India because it provides long-term finance, technical expertise and a platform for regional cooperation without the conditions of a purely commercial loan. Its funding helps India fill infrastructure gaps and supports reform at the state level.

For India, the benefits are several. Multilateral loans can be cheaper and longer in duration than commercial borrowing. The bank’s procurement, environmental and social safeguards and monitoring improve project standards. Its technical assistance brings international experience to Indian agencies. Its private-sector arm can mobilise investment for sectors where public funds are limited, and its research and conferences support policy debate.

There are also limits. ADB loans are a small share of India’s total infrastructure spending and public borrowing, so the bank’s role is more about demonstration, standards and catalysing reform than about covering the whole financing need. Loans must be repaid, and projects have sometimes been delayed by land acquisition, clearances or procurement issues.

Bottom Line

India and the Asian Development Bank have a partnership that dates to the bank’s founding in 1966 and that grew from India’s early role as a shareholder into large-scale borrowing. The bank’s loans, private-sector financing and technical help support Indian infrastructure, cities, energy and finance, while India’s position as a major shareholder gives it a voice in how the institution is run.

Frequently Asked Questions

Is India a founding member of the Asian Development Bank?

Yes, India is a founding member of the Asian Development Bank, which was established in 1966. India has been involved in the bank since its start and is among its larger shareholders. It later became one of the bank’s biggest borrowers.

Where is the Asian Development Bank headquartered?

The Asian Development Bank is headquartered in Mandaluyong City, part of Metro Manila in the Philippines. It also has resident missions and offices in member countries, including the India Resident Mission in New Delhi.

What kinds of projects does the Asian Development Bank fund in India?

The Asian Development Bank funds projects in transport, energy, urban infrastructure, water, agriculture, skills and the financial sector in India. These include roads, power transmission, renewable energy, city water and sanitation systems and credit lines for lenders. Many projects are carried out by state governments and are co-financed with other lenders.

How does the Asian Development Bank lend to India?

The Asian Development Bank lends to India through sovereign loans to the central or state governments, guaranteed by the Government of India, and through non-sovereign financing to private or public companies without a sovereign guarantee. It also gives technical assistance grants. The Department of Economic Affairs in the Ministry of Finance coordinates the process.

Does India get concessional loans from the Asian Development Bank?

No, India does not receive concessional lending from the Asian Development Bank’s concessional fund because of its income level. Its borrowing comes from the bank’s ordinary capital resources, which are priced on terms reflecting the bank’s own cost of funds. These terms are still usually longer and cheaper than many commercial loans.

How does India take part in running the Asian Development Bank?

India takes part through the Board of Governors, where its Finance Minister is traditionally the Governor, and through representation on the 12-member Board of Directors. Voting power depends on India’s capital subscription, which is among the larger ones. India also takes part in the bank’s annual meetings and policy discussions.

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