AIIB injects US$455 million to improve India’s rural roads

Huge economic and social benefits should accrue from a major upgrade to India's rural roads, with the Asian Infrastructure Investment Bank providing a multi-million dollar loan

The Asian Infrastructure Investment Bank (AIIB) and the Government of India (GoI) have signed a US$455 million loan to finance a rural roads project in India's southern state of Andhra Pradesh, according to a statement from the Indian Ministry of Finance.

According to the project documentation, despite India’s strong economic growth, around 21% of its population lives below the poverty threshold of US$1.90 per day, and 80% of India’s poor live in rural areas.

The lack of rural infrastructure plays a part in constraining growth and the perpetuation of ongoing rural poverty. An estimated 35% of inhabited areas in India are without all-weather road access, a situation which has long been an obstacle to economic growth in the rural areas. Consequently, this prevents the rural population from being fully integrated into the economy and from accessing essential services including education and health care.

Development of a rural roads network, therefore, is one of the key priorities of the GoI. To address this problem, in 2000, GoI established the Prime Minister’s national-level Rural Roads Program to provide all-weather road connectivity to unserved villages in rural areas.

The AIIB-supported project plans to construct rural roads to provide connectivity, construct cross drainage works and bridges to complete missing links and structures, provide approaches to educational institutions and health care centres, construct rural roads passing through tribal areas, and upgrade earthen and gravel roads to asphalt-based roads.

Total project cost is US$666 million, with US$211 million coming from the Government of Andhra Pradesh, and US$455 million in debt from the AIIB.   

This was the third major project signed by the AIIB in Andhra Pradesh, the other two being in the power and water sectors.

India has not signed up to the Belt & Road initiative, and has often been very critical of China's growing influence in the region. However, the AIIB operates as a multilateral development bank - albeit one with very close ties to its home country - and China and India are able to co-operate on projects via the AIIB. India is the second-largest shareholder in the AIIB, and its largest borrower.

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