AIIB approves $329m loan for India’s rural roads

The debt facility aims to help the state of Gujarat improve connectivity through a $1.5bn infrastructure programme.

The Asian Infrastructure Investment Bank has approved a $329 million loan to fund road construction in rural areas of India.  

Financed on a standalone basis, the project is a part of the first phase of the state government’s $1.5 billion “Chief Minister’s Rural Roads Programme”, which is estimated to cost about $632 million. 

The scheme aims to improve the rural road network linking about 4,000 villages in all 33 districts of Gujarat, one of the most industrialised states in the country. Located on the western coast of India, Gujarat accounts for 7.5 percent of the country’s GDP and 19 percent of exports, with just 5 percent of India’s population and 6 percent of its land mass. 

The programme aims to add to India’s 90,000km rural road network, by building “non-plan roads” and missing links to tribal areas in the state and providing state-wide, all-weather connectivity to habitations with less than 500 people. It is expected that 20 million people will benefit from the scheme, which is led by the Roads & Buildings Department of the state government. 

“Insufficient road connectivity into these villages limits their ability to access healthcare services, bring their goods to market and access transportation for their children to attend school,” said the AIIB.

“By integrating isolated and poor rural populations with the rest of the state, and improving their access to critical social services, such as healthcare and education, we can have a positive impact on the economic and social outcomes of these local communities,” said DJ Pandian, a vice-president and chief investment officer of the Beijing-based multilateral lender. 

Last month, the AIIB also agreed to commit $150 million to a $750 million India-focused infrastructure fund managed by an unnamed GP, following the bank’s first loan of $160 million to the country in May. The latter is meant to fund a power efficiency improvement scheme in the state of Andhra Pradesh.