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Much before Japanese premier Shinzo Abe's visit to India, Japanese investment into India has been on steady rise especially in the infrastructure sector. The growing India-Japan economic cooperation, in fact, is increasingly been seen as a strategic alternative to the 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 paragraphs were devoted to cooperation in the field energy and infrastructure. In fact, this sector along with defence cooperation was the most important plank of bilateral talks between the two countries. "If one takes a close look at the joint statement, this one is much more explicit with several hints at the China factor compared to what it was in 2007 (when Abe last came to India). The very fact that the joint statement emphasized on ‘taking into consideration the strategic environment’ is proof enough 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 to 50 billion that came into effect from this month, Japanese official development assistance of over 200 billion yen was negotiated. The two sides agreed that 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 (STEP) should be explored on mutually beneficial terms.
According to JICA, Japanese cumulative commitment of ODA loans to India stood at 3,781 billion Japanese Yen (Rs 2,29,100 crore approximately) as of March 2013. JICA has signed around 230 ODA loan agreements with India in various fields ranging from road, metro projects, water supply and sanitation, environment conservation, power and several other infrastructure sectors.
Kondapalli said in terms of 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 NE region cannot be de-linked from the strategic moves they are taking. Abe came here just before the Diet session. This is enough proof for anyone to understand that Japan is serious about India."
After the Delhi metro, the Western Dedicated Freight Corridor (DFC) is an important part of cooperation. The start of Phase-1 construction of the corridor in August 2013, which utilizes Japanese technologies was reviewed during the recent talks. Nine projects financed by the DMIC trust have already been approved.
The progress on western corridor, however, has been slow to start with compared to the World Bank-funded eastern corridor. But JICA does not agree to this viewpoint. “We don’t think that 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 example of the first phase of Delhi Metro covering 65 kms system got completed in 2005, two years and nine months ahead of the schedule. Similarly, the second phase has also been completed not only within the estimated cost but well within the scheduled time period by adding another 125 kms in 2011. “This has been viewed as a miraculous milestone achievement especially in the infrastructure sector in India,” he said.
In the railway sector, another major achievement is the commencement of the joint feasibility study and the issuance of the inception report for the high speed railway system on the Mumbai-Ahmedabad route. They agreed that the joint feasibility study should be completed by July 2015.
In energy space, the government-controlled largest power generator NTPC Ltd also signed agreement for two loans totalling to $430 million (Rs 2,650 crore) for its Kudgi and Auraiya projects. Besides, Japanese are also financing scheme for the two smart community projects, the model project for micro-grid system using large scale PV power generation at Neemrana and the Sea Water Desalination project at Dahej.
India is the biggest receiver of ODA and Indian companies are also the second biggest receiver of assistance from JBIC after Chinese. The overall Indo-Japanese cooperation is heavily directed towards long-term participation in infrastructure sector, much of which comes from the demand for infrastructure which is enormous. Japanese investment is geared up to tap this bonanza.
