Abe's $35-bn promise to Modi has riders

Money to come only after Delhi improves biz environment & fast-tracks work

The Japanese government’s promise of investing $35 billion (3.5 trillion yen) into infrastructure projects in India comes with conditions.

The promise was made by Japan’s prime minister, Shinzo Abe, to his Indian counterpart Narendra Modi during the latter’s recent visit. However, the money will come only after Japanese investors find a better business environment, with projects coming up.

The announcement of $35-billion investment into India’s infrastructure over five years was the only substantial outcome of Modi’s visit to Japan on August 30-September 2.

The disbursement will be based on projects thrown up by the Indian government. It will be a mix of public and private money from Japan. The investment will be channelised through their agencies such as Japan Bank for International Cooperation, Japan International Cooperation Agency and Japan External Trade Organization.

Sources said the government had to abide by what was promised in terms of the creation of a special mechanism, a Japan Fast Track Channel, exclusively for Japanese investors.

“The money will be disbursed only when Japanese investors are assured that their money will be properly channelised and utilised. If the promises made by PM Modi are not kept, not a portion of the $35 billion can be expected to enter India,” an official, who did not want to be identified, told Business Standard.

The broad contours of the fast-track mechanism are being  worked out by both governments. According to a declaration issued by both sides: “Prime Minister Modi underlined his determination to further improve the business environment in India, including through tax, administrative and financial regulations, in order to boost investment. The two prime ministers decided to further deepen bilateral economic and financial cooperation.”

The money can be also put in some of the ongoing projects such as the Delhi-Mumbai Industrial Corridor and the Chennai Bangalore Industrial Corridor. Apart from public and private investments, this amount would include Japanese Overseas Development Assistance at a concessional rate, sources said.

The Japanese government, it seems, has identified some infrastructure projects where it intends to put some portion of the money in the next couple of years. Still, this money will be released only when it gets an assurance from India regarding work on the commitments made by the Modi government to improve the country’s business and investment environment.

According to the declaration, Japan is keen to invest in next-generation infrastructure, connectivity, transport systems, smart cities, rejuvenation of the Ganga and other rivers, manufacturing, clean energy, skill development, water security, food processing and agro industry, agricultural cold chain and rural development.