How former Japan PM Shinzo Abe boosted Japanese investments in India

With nine years in office, Shinzo Abe was the longest-serving Prime Minister of Japan – from 2006-07 and again from 2012-20. His second stint as PM was marked by increasing cooperation with India in several fields. And as the world is left shocked by the attack on Abe, here’s a look at how he shaped a new inning with New Delhi.

Narendra Modi visited Japan in September 2014 – just a couple of months after becoming PM. Modi and Abe agreed to upgrade the bilateral relationship to a “Special Strategic and Global Partnership”. The new relationship encompassed a wide range of issues – from civilian nuclear energy to maritime security, bullet trains to quality infrastructure, Act East policy to Indo-Pacific strategy.

The two countries signed a nuclear deal in 2016 that turned out to be key to India’s deals with the US and French nuclear firms, which were either owned by or had stakes in Japanese firms. It was largely successful because of Abe who ignored opposition within Japan to sign the deal 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 boost supply chains in the Indo-Pacific, in a move widely seen as guarding against China.

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

Japan is funding 80 percent of the Mumbai-Ahmedabad bullet train project through a soft loan of Rs 79,000 crore at an interest rate of 0.1 percent, with a tenure stretching over 50 years and a moratorium period of 15 years.

The Delhi-Mumbai Industrial corridor project attracts $4.5bn worth of investment from the Japan International Cooperation Agency (JICA) and the Japan Bank for International Cooperation (JBIC). This investment has been made in the first phase of the project and Japan holds a 26 percent stake in the same.

Japan has also invested $2 billion in improving infrastructure in India’s Northeast. Among others, Japan is involved in the Guwahati Water Supply Project, Guwahati Sewage Project, North-East Road Network Connectivity Improvement Project, Project for Renovation and Modernisation of Umiam-Umtru Stage III Hydroelectric Power Station (Meghalaya), Sustainable Catchment Forest Management Project (Tripura), and Project on Capacity Enhancement for Sustainable Agriculture and Irrigation Development (Mizoram).

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

Japan is the fifth largest investor in India with cumulative FDI inflows of $36bn between April 2000 and March 2022, contributing 6.28 percent to India’s total FDI inflows in this period. At present, some 1,455 Japanese companies are operating in India.

India’s total trade with Japan has increased to $15.3bn in 2020-21 with exports valued at $4.4bn and imports at $10.9bn, making it India’s 13th largest trade partner. 

India’s imports from Japan showed a growth of almost 73 percent in just 13 years, reaching $10.9bn in 2020-21 from $6.3bn in 2007-08. Key imports from Japan include nuclear reactors, electrical machinery and equipment, copper, plastic, inorganic chemicals, rare earth metals, and compounds of precious metals.

India’s exports showed a growth of 14.2 percent in 13 years, reaching $4.4bn in 2020-21 from $3.85bn in 2007-08. Key exports to Japan include mineral fuels and mineral oils, organic chemicals, fish and other aquatic invertebrates, and natural or cultured pearls.

As the 5th largest investor, Japan has contributed $36.2bn in cumulative investments since 2000, especially in automobiles, Electronics System Design & Manufacturing (ESDM), medical devices, consumer goods, textiles, food processing, and chemicals. Some prominent Japanese firms in India include Maruti, Toyota, Mitsubishi, Honda, Hitachi, Sony, and Panasonic, which employ lakhs of Indian youths.

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