US$ 250 m from ADB to India to turn tourism into growth, jobs driver

Manila, Philippines: The Asian Development Bank (ADB) is extending up to $250 million to help India develop its tourism sector into a driver of sustainable and inclusive economic growth.

ADB’s Board of Directors approved a multitranche financing facility for the Infrastructure Development Investment Program for Tourism, which will upgrade tourist infrastructure and services, and support policy reforms in the states of Himachal Pradesh, Punjab, Tamil Nadu, and Uttarakhand.

The investment program is part of a broad tourism development plan for the four states, drawn up previously by the Government of India and ADB, which will cost almost $1.7 billion to implement.

India is, potentially, one of the most promising tourist destinations in the world with rich and varied attractions ranging from cultural, religious, ecological, medical, adventure and relaxation. Visitor numbers, both foreign and domestic, have been booming in recent years but the sector still makes only modest contributions to gross domestic product and employment, with variable quality in infrastructure and services undermining further development.

“Urban and rural communities will benefit from investments that expand tourism-related business opportunities and employment, and this can help mitigate urban and rural unemployment and poverty,” said Hafeez Rahman, Director General of ADB’s South Asia Department.

The program will fund basic infrastructure around natural and cultural heritage sites, and improvements of last-mile connectivity to make them more convenient and safe for visitors. It will also support policy reforms to make the sector more attractive to private investors. Another key element will be increasing the involvement of local communities in tourism-related activities, to provide new livelihoods and incomes, particularly for poor, rural dwellers.

“Improving infrastructure and services to international standards will raise the Indian tourism sector’s attractiveness, efficiency and competitiveness against other destinations, and create significant opportunities for inclusive economic growth and livelihood generation,” said Keiichi Tamaki, Senior Urban Development Specialist in ADB’s South Asia Department.

The loans under the multitranche financing facility will come from ADB’s ordinary capital resources, and will likely be provided in five tranches. The first tranche loan of $43.4 million, for initial sub-project activities in Himachal Pradesh and Punjab, has a 25-year term, with a grace period of 5-years, and an annual interest determined in accordance with ADB’s LIBOR-based lending facility. The Government of India and the four participating state governments will make counterpart contributions of $107.1 million, for a total investment cost of $357.1 million.

The Department of Tourism in each participating state will execute the project, which is due for completion by June 2020.