India-Japan summit: Infra clearly a growing story

Long-term aid and financing commitments show Tokyo serious on a deeper set of economic ties

Much before Japanese premier Shinzo Abe's visit to India, Japanese investment into India was on a steady rise, especially in the infrastructure sector. The growing India-Japan economic cooperation, in fact, is increasingly been seen as a strategic alternative to Chinese influence in the South Asian region.

Of the 51-paragraph joint statement issued on the first day of Abe’s three-day visit, some half a dozen were devoted to cooperation in energy and infrastructure. These and defence cooperation were the most important plank of bilateral talks.

"If one takes a close look at the statement, this one is much more explicit with several hints at the China factor, compared to what it was in 2007 (when Abe earlier came to India). The very fact that the statement emphasized on ‘taking into consideration the strategic environment’ is proof that the China factor loomed large on the visit,” said Srikanth Kondapalli, chairperson, Centre for East Asian Studies (School of International Studies) in Jawaharlal Nehru University.

On economic relations, though the highlight was expansion of  bilateral currency swap arrangement from $15 billion to $50 bn that came into effect from this month, Japanese official development assistance (ODA) of a little over ¥200 billion was also negotiated. The two sides agreed all instruments of funding of the Japan Bank for International Cooperation (JBIC) and the Japan International Cooperation Agency (JICA), including the Special Term for Economic Partnership, should be explored.

According to JICA, the Japanese cumulative commitment of ODA loans to India stood at ¥3,781 bn (Rs 229,100 crore) as of March 2013. JICA has signed around 230 ODA loan agreements with India in various fields -- roads, metro projects, water supply and sanitation, environment conservation, power and several other infrastructure sectors.

Kondapalli said in infrastructure development, while the Japanese have been making bold announcements, actual work and progress on the ground has to be seen. “While the intention is there, India has to put its own house into order -- we have to tackle our environment laws, labour laws, etc. We are very slow. Also, their assistance for developing the northeast region cannot be delinked from the strategic moves they are taking. Abe came here just before the Diet (Japanese legislature) session. This is enough proof for anyone to understand that Japan is serious about India."

After the Delhi Metro rail, the Western Dedicated Freight Corridor is an important part of the cooperation. The start of Phase-1 construction of the corridor in August 2013, which utilises Japanese technologies, was reviewed during the talks. Nine projects financed by the DMIC trust have already been approved.

Progress on the western corridor, however, has been slow to start with, compared to the World Bank-funded eastern corridor. But JICA does not agree. “We don’t think Japanese-funded projects are slower in implementation. Many of the projects being implemented with JICA’s assistance have also been completed ahead of the time schedule,” said Shinya Ejima, JICA chief in India. He cited the first phase of the Delhi Metro, covering 65 km, completed in 2005, two years and nine months ahead of schedule. The second phase, too, was completed within the estimated cost and well within the scheduled time, adding another 125 km, in 2011. “This has been viewed as a miraculous milestone achievement,” he said.

In the railway sector, another major achievement is the commencement of a joint feasibility study and issuance of the inception report for a high speed railway system on the Mumbai-Ahmedabad route. They agreed the joint study should be completed by July 2015.

In energy, government-controlled NTPC, the country’s largest power generator, signed an agreement for two loans totalling $430 million (Rs 2,650 crore) for its Kudgi and Auraiya projects. Besides, the Japanese are financing a scheme for two smart community projects, a model project for a micro-grid system using large scale photo-voltaic power generation at Neemrana and a seawate desalination project at Dahej.

India is the biggest receiver of Japanese ODA and Indian companies the second biggest receiver of assistance from JBIC after China’s. Overall Indo-Jap cooperation is heavily directed towards long-term participation in infrastructure, much of which comes from the enormous demand. Japanese investment is geared to tap this.

INDO-JAPANESE INFRA DEALS

* Delhi mass rapid transport system project (Phase 3 (II)): ¥148.887 billion (At current exchange rate ¥1 = Rs 0.61)

* New and renewable energy development project (Phase 2): ¥30 billion

* Micro, small and medium enterprises energy saving project (Phase 3): ¥30 billion

* Western dedicated freight corridor (DFC):  Smart community projects

* Model project for micro-grid system using large scale PV power generation at Neemrana

* Joint feasibility study for High Speed Railway

* Enhancing connectivity and regional integration between India and its neighboring countries

* Delhi-Mumbai Industrial Corridor (DMIC)

* Chennai-Bengaluru Industrial Corridor (CBIC)

* Supply and service to NTPC's Kudgi power plant $350 million

* Modernisation of Auraiya plant ¥8 billion