The government of India and the Asian Development Bank (ADB) signed a $350 million policy-based loan pact to strengthen and modernise the country’s logistics sector and achieve increased economic competitiveness under the second sub-programme of Strengthening Multimodal and Integrated Logistics Ecosystem (SMILE).

SMILE Programme and its significance

• The development of India’s logistics sector is pivotal in enhancing the competitiveness of its manufacturing sector. Through strategic policy reforms, infrastructural improvements, and digital integration, the government’s ongoing programmes are set to transform the logistics landscape. 

• This transformation will not only reduce costs and improve efficiency, but also create employment opportunities and promote gender inclusion — driving sustainable economic growth.

• From 2000 to 2022, India’s goods export increased from $48.5 billion to $467.5 billion while industrial exports grew from $39.6 billion to $317.4 billion. 

• The government aims to reach $2 trillion in exports of goods and services by 2030. 

• Strengthening Multimodal and Integrated Logistics Ecosystem (SMILE) is a policy-based loan (PBL) programme to support the government in undertaking wide-ranging reforms in the logistics sector in India.

• The programme is helping India achieve this target by enhancing productivity and transfer of goods and reducing logistics cost while contributing to the reduction of greenhouse gas emissions. 

• The loan will finance the second sub-programme of the SMILE. 

The programme establishes and operationalises a comprehensive policy framework to enhance logistics efficiency through:

i) Strengthening the institutional bases for multimodal logistics infrastructure development at the national, state, and city levels.

ii) Standardising warehousing and other logistics assets to strengthen supply chains and incentivise greater private sector investment.

iii) Improving efficiencies in external trade logistics.

iv) Adopting smart systems for efficient and low-emission logistics.

• This builds on reforms introduced during the first sub-programme by institutionalising policies to strengthen interagency coordination as well as standardising processes to encourage private sector investment and improve operational efficiency.

• The logistics sector reforms are also expected to create substantial employment opportunities, both in urban and rural areas. The increased demand for skilled logistics workers, driven by private sector investments and process efficiency, will contribute to job creation.

Asian Development Bank

• The Asian Development Bank (ADB) envisions a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty in the region.

• From 31 members at its establishment in 1966, ADB has grown to encompass 68 members — of which 49 are from within Asia and the Pacific and 19 outside.

• ADB assists its members, and partners, by providing loans, technical assistance, grants, and equity investments to promote social and economic development.

• ADB maximises the development impact of its assistance by facilitating policy dialogues, providing advisory services, and mobilising financial resources through co-financing operations that tap official, commercial, and export credit sources.

• Committed to pursue a differentiated approach for states at different stages of development, ADB prioritises projects on basic services, critical infrastructure and services, institutional strength, and private sector development through sovereign operations in low-income states.

• Support for more developed states focuses on transformational programmes with policy and knowledge advice, combined with non-sovereign operations.

History of ADB

• ADB was conceived in the early 1960s as a financial institution that would be Asian in character and foster economic growth and cooperation in one of the poorest regions in the world.

• A resolution passed at the first Ministerial Conference on Asian Economic Cooperation held by the United Nations Economic Commission for Asia and the Far East in 1963 set that vision on the way to becoming reality.

• The Philippines capital of Manila was chosen to host the new institution, which opened on December 19, 1966, with 31 members that came together to serve a predominantly agricultural region. Takeshi Watanabe from Japan was ADB’s first president.

ADB and India

• India was a founding member of ADB in 1966 and fourth largest shareholder.

• ADB started operations in India in 1986.

• As of December 31, 2023, ADB has committed 623 public sector loans, grants, and technical assistance totaling $55.3 billion to India. ADB’s current sovereign portfolio in India includes 67 loans worth $14.15 billion.

• Cumulative sovereign and non-sovereign loan and grant disbursements to India amount to $43.45 billion. These were financed by regular ordinary capital resources and other special funds.

• ADB has said that it will continue to focus on projects and programmes that accelerate India’s structural transformation, create jobs, address infrastructure gaps, promote green growth, and foster social and economic inclusiveness while deploying smart technologies and innovations.

• In 2023, ADB approved additional funding to support India’s national industrial corridor development programme to enhance its manufacturing competitiveness along with a loan for Visakhapatnam-Chennai Industrial Corridor Development.

• Two policy-based loans were committed to support the government’s urban reforms agenda at the state level and power sector reforms to facilitate the shift to renewable energy.

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