How Shinzo Abe boosted Japanese investment in India

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At nine years in office, Shinzo Abe was Japan’s longest-serving prime minister – from 2006-07 and again from 2012-20. His second term as Prime Minister was marked by increasing cooperation with India in several areas. And while the world is shocked by the attack on Abe, here’s how he crafted a new innings with New Delhi.

Narendra Modi visited Japan in September 2014 – just a few months after becoming prime minister. Modi and Abe agreed to upgrade the bilateral relationship to a “special strategic and global partnership.” The new relationship covered a wide range of topics – from civil nuclear energy to maritime security, from high-speed trains to high-quality infrastructure, from Act East policy to the Indo-Pacific strategy.

The two countries signed a nuclear deal in 2016 that proved crucial to India’s dealings with US and French nuclear firms that are either owned or held by Japanese firms. It was largely successful because Abe ignored opposition in Japan to sign the accord with a non-NPT member.

India and Japan also have an agreement that allows their navies to use each other’s ports. The two countries, along with Australia, have also pledged to strengthen Indo-Pacific supply chains, a move widely seen as protection from China.

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On the economic side, Japan spent a record 522.4 billion yen ($4.9 billion) on India’s development projects in 2018-19, including the high-speed rail link between Mumbai and Ahmedabad; and industrial corridors between Delhi and Mumbai and Chennai and Bengaluru.

Japan is financing 80 per cent of the Mumbai-Ahmedabad high-speed rail project through a Rs 79,000 crore soft loan at an interest rate of 0.1 per cent with a term of over 50 years and a moratorium of 15 years.

The Delhi-Mumbai Industrial Corridor project attracts US$4.5 billion in investments from Japan International Cooperation Agency (JICA) and Japan Bank for International Cooperation (JBIC). This investment was made in the first phase of the project and Japan has a 26 percent stake in it.

Japan has also invested US$2 billion to improve infrastructure in northeastern India. Among others, Japan is involved in the Guwahati Water Supply Project, the Guwahati Wastewater Project, the Northeastern Road Network Connectivity Improvement Project, the Umiam-Umtru Stage III Hydroelectric Power Plant Renovation and Upgrade Project (Meghalaya), the Sustainable River Basin Forest Management Project (Tripura) and Capacity Expansion Project for Sustainable Agriculture and Irrigation Development (Mizoram).

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Japan has a five trillion yen investment target in India over the next five years – the main areas being manufacturing, climate change and infrastructure.

Japan is the fifth largest investor in India with cumulative FDI inflows of US$36 billion in April 2000 and March 2022, contributing 6.28 percent to India’s total FDI inflows over the period. There are currently around 1,455 Japanese companies operating in India.

India’s total trade with Japan has grown to US$15.3 billion in 2020-21, with exports worth US$4.4 billion and imports worth US$10.9 billion, making it the 13th largest trading partner India’s power.

India’s imports from Japan have grown nearly 73 percent in just 13 years, reaching US$10.9 billion in 2020-21 compared to US$6.3 billion in 2007-08. Major imports from Japan include nuclear reactors, electrical machinery and equipment, copper, plastics, inorganic chemicals, rare earth metals and precious metal compounds.

India’s exports grew 14.2 percent in 13 years, reaching US$4.4 billion in 2020-21 compared to US$3.85 billion in 2007-08. Major exports to Japan include mineral fuels and oils, organic chemicals, fish and other aquatic invertebrates, and natural or cultured pearls.

As the fifth-largest investor, Japan has made US$36.2 billion in cumulative investments since 2000, particularly in automobiles, electronic systems design and manufacture (ESDM), medical devices, consumer products, textiles, food processing and chemicals. Some prominent Japanese companies in India are Maruti, Toyota, Mitsubishi, Honda, Hitachi, Sony and Panasonic employing thousands of Indian youth.

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