What does Japan’s $42 billion investment mean for India?

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During his first visit to India, Japanese Prime Minister Fumio Kishida pledged to invest $42 billion over the next five years. So, what are the specificities of this new investment? let us discover

Topics
Japan | foreign investment | JICA


When the prime ministers of India and Japan met in Delhi last week, the talks also turned to China. Prime Minister Fumio Kishida was in India to attend the 14th annual India-Japan Summit, which was held after a hiatus of three and a half years. Prime Minister Narendra Modi briefed Prime Minister Kishida on the situation on the Line of Actual Control (LAC) with China. And he also insisted on the PLA’s attempts at “multiple transgressions” on the LAC. Foreign Secretary Harsh Shringla also said any normalcy in India-China relations will depend on the de-escalation of the LAC. While Chinese outward investment has attracted enormous attention, Japan remains the infrastructure leader in Southeast Asia. According to Fitch Solutions, as of August 2021, Japan had invested $259 billion in unfinished projects in Malaysia, the Philippines, Indonesia, Thailand and Vietnam, compared to $157 billion in China. Japan is also playing an increasingly important role in South Asia, a region where China’s influence has grown rapidly. Apart from India, Japan also focuses on countries like Bangladesh and Nepal. As The Diplomat reported, Japan already enjoys a positive image in Bangladesh thanks to millions of dollars in direct investment. The deep water port of Matarbari in Bangladesh is also being developed by a Japanese consortium.

As of January 2019, Japan was Bangladesh’s largest donor, providing nearly $1.8 billion in loans in 2018.

Japan is the third largest investor in the Indian economy with cumulative FDI inflows of $30.27 billion between 2000 and 2019”. The country contributed 7.2% to India’s total FDI inflows during the same period. Meanwhile, last week’s summit is sure to take India-Japan trade relations to the next level. After the summit, Prime Minister Modi announced that the two countries had set an investment target of five trillion yen, or about $42 billion, over the next five years. The two leaders acknowledged that the investment target of 3.5 trillion Japanese yen, announced in 2014, has been achieved. Public and private investment and financing from Japan to India over the next five years, which will amount to 5 trillion Japanese yen, will be used to finance public and private projects of mutual benefit. The new target follows and exceeds the 3.5 trillion yen in investment and financing that then Japanese Prime Minister Shinzo Abe announced for the five years between 2014 and 2019 during his visit to India in 2014. The agreements and MoUs signed at the 14th India-Japan Annual Summit include seven JICA loans amounting to Rs. 20,400. These are earmarked for connectivity, water supply and sanitation, healthcare, horticulture and biodiversity conservation projects in various states across India. JICA, or Japan International Cooperation Agency, is involved in at least 27 recent and ongoing activities in India. These projects extend to sectors such as health and medical care, transport, electricity and energy, management of the urban environment and agricultural and rural development, among others. In particular, the transport projects include Delhi Mass Rapid Transport System Phase 2 Project, Hyderabad Outer Ring Road Project, Visakhapatnam Port Expansion Project and Dedicated Cargo Corridor Project. On March 16, a financial daily reported that JICA plans to fund $3 billion worth of projects in India in 2022-23. JICA also funds other major infrastructure projects such as the Mumbai-Ahmadabad High Speed ​​Rail and the Mumbai Trans Harbor Link. Other announcements at the summit included the Clean Energy Partnership and the Sustainable Development Initiative for India’s North East Region. Japan’s new investment target reaffirms the special strategic partnership between India and Japan. The latest meeting between the Prime Ministers of the two countries marks a new step towards deepening regional cooperation within an increasingly assertive China.

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First published: Tuesday, March 22, 2022. 08:15 IST

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