Japan pledges $35b to Indian infra

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Japanese nominees to be co-opted in PMO to facilitate investments

Japan pledges $35b to Indian infra
In signs of greater economic engagement, Japan will double its direct investments in India to a whopping $35 billion in the next five years.

These will include investments in the Mumbai-Ahmedabad bullet train, and manufacturing facilities in Delhi-Mumbai and Chennai-Bengaluru industrial corridors.

Clearly, Tokyo is set to play an increasingly important role in India's economic transformation and development. Japanese prime minister Shinzo Abe has announced his intention to commit 3.5 trillion yen (roughly Rs 2,10,000 crore) of public and private investment.

Addressing Japanese industrialists, Modi proposed to co-opt two Japanese nominees in the decisionmaking team under the prime minister's office (PMO) to speed up clearances. This novel initiative is being proposed perhaps for the first time in the country to facilitate foreign investment.

"I understand well the importance of coordination between government and industry," Modi told the Japanese businessmen adding, "I have decided a Japan-plus special management team directly under the PMO to facilitate proposals from Japan. I also propose that you nominate two people from Japan who would be made part of a team which looks into business proposals and who can be permanently part of our decision-making."

Such involvement, that too of foreign nationals, is unprecedentd.

As part of this aid, boosting infrastructure development and manufacturing to provide employment to one million people entering the workforce every month will get top priority of the government, which has already committed to invest over $1 trillion on infrastructure and build 100 new smart cities.

Japan too is keen to make India a major investment destination, with opportunities slowing down in China for manufacturing. It is looking at setting up Japan industrial townships with investment incentives for its companies.

Japan is also keen to set up electronics industrial parks in India. India’s electronics imports are next only to its oil and gold imports. Pegged at around $40 billion annually, they are expected go up substantially in coming years Investment of $400 billion is projected in electronics and hardware manufacturing in the next decade.

The Modi government has already liberalised FDI in railways while the FDI cap in defence and insurance sectors have been hiked to 49 per cent by this year-end through legislative action. FDI liberalisation has followed in several other sectors, including pharma and multi-brand retail.

At a luncheon hosted by Nippon Kiedanren, the Japanese chambers of commerce and industry and Japan-India business cooperation committee, Modi said good governance is his top priority, signalling that policy paralysis and corruption with which the previous UPA government was associated with, is a thing of the past.

Single window-clearances will be encouraged as Modi has realised the importance of ease of doing business, simplifying procedures, quickening processes and using technology.

During their meeting, the two prime ministers welcomed the progress in the ongoing flagship projects of India-Japan economic partnership such as the western dedicated freight corridor (DFC), Delhi-Mumbai industrial corridor (DMIC) and Chennai-Bengaluru industrial corridor (CBIC), which are being funded by Japan’s international cooperation agency (JICA).

The joint statement issued at the conclusion of the bilateral meeting said Japan also promised to help India build high-speed railway ‘Shinkansen system’ for the Ahmedabad-Mumbai route. “Prime minister Abe expressed his readiness to provide financial, technical and operational support to introduce Shinkansen system, for which prime minister Modi expressed his appreciation,” the statement said.

The $35 billion Japanese investment in the next five years includes public and private investment and financing from Japan’s overseas development assistance.

The statement said the leaders affirmed the commitment of both countries to actively engage in the regional comprehensive economic partnership (RCEP) negotiations.

The two prime ministers directed their officials to work out an appropriate mix of financing mechanisms, including PPP, and terms for utilisation of public funds, taking into account factors like nature of the projects, developmental priorities, and procurement policies.

Modi on his part promised to improve the business environment in India through tax, administrative and financial regulations, in order to boost investment, which has shown signs of improvement after his government came to power three months ago.

Japanese Mizuho Bank has been approved to set up a branch in Ahmedabad to facilitate Japanese investment.

Though several Japanese companies are already operating in India, they account for only 1.2 per cent of Japan’s total outward foreign direct investment. Lately, there are more Japanese companies operating from India but their numbers remain small — 1,000 Japanese companies have investments in India as against 30,000 in China.

In his opening remarks, Modi said Japan would play an increasingly important role in India’s economic transformation and development. “Today, prime minister Abe has pledged a qualitatively new level of Japanese support and partnership for India's inclusive development, including transformation of India’s manufacturing and infrastructure sectors.”

Modi promised to introduce special mechanisms like a fast-track channel for Japanese investors in India. “Today’s agreements – in health, roads, clean energy and women’s development and the Kyoto-Varanasi partnership agreement – also demonstrate the diversity and depth of our relationship and its human dimension,” he said, adding, “it also recognises the ancient foundations of our modern partnership, the long history of cultural links and the unwavering goodwill and affection between our people. No relationship in India commands the level of public consensus as our relations with Japan does.’’

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