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India, Japan sign $15-billion currency swap deal

Nayanima Basu  |  New Delhi 

Agree to conclude nuclear talks soon, boost bilateral trade; aid for Indian infra development announced.

Manmohan SinghIndia and Japan on Wednesday signed a dollar swap agreement of $15 billion (Rs 79,330 crore), whose immediate effect would to strengthen this country in handling the tumbling rupee.

Both also agreed to take forward the talks on an Agreement for Cooperation in Peaceful Use of Nuclear Energy and seek early conclusion. And, to boost bilateral trade to $25 bn (Rs 1.3 lakh crore) by 2014 from the present $15 bn.

The currency swap would take place between the Reserve Bank of India and its counterpart in Tokyo, the Bank of Japan. The two central banks would give each other dollars to stabilise their currencies, in case of need. The rupee has fallen 16 per cent this financial year. Ironically, it rose on Wednesday by five paise, to 52.97/98 from 53.02/03 yesterday.

* Currency swap deal enhanced from $3 billion to $15 billion 
* Agreement on expediting cooperation on civilian nuclear deal
* Launch of the India-Japan-US trilateral dialogue
* Conclusion of the Social Security Agreement soon
* Launch of high-speed trains between Delhi and Mumbai with Japanese assistance
* Early realisation of the Western Dedicated Freight Corridor, which runs through the Delhi-Mumbai Industrial Corridor, with Japan's support
* Infrastructure development in the areas between Chennai and Bangalore 
* Development of expressways in India
* 5th meeting of the India-Japan Energy Dialogue to be held in 2012

According to the joint statement issued after the meeting of Prime Minister Manmohan sIngh with his visiting counterpart, Yoshihiko Noda, “This enhancement (of the currency swap) will further strengthen financial cooperation, contribute to ensuring financial market stability and further develop growing economic and trade ties between the two countries.” Both countries earlier had a currency arrangement for $3 bn since 2008, that expired this June.

D K Joshi, chief economist, Crisil India, said: “This is a kind of insurance. It only comes in handy when there is a problem. This kind of mutual cooperation is common in the world. This is definitely useful. In case of a worst- case scenario, this will help us tremendously. In today’s volatile age, one never knows what is required and when. These deals cannot insulate us from the global crisis but it will surely help in mitigating the problems.”


On civilian nuclear cooperation, both PMs directed their respective negotiators to “exert further efforts towards a conclusion of the Agreement, having due regard to each side’s relevant interests, including nuclear safety”.

Three rounds of formal negotiations have taken place on this issue. Talks got suspended after the earthquake and tsunami that adversely affected the Fukushima Daiichi Nuclear Power Station, that led to widespread criticism of the Japanese government’s efforts at atomic power safety.

PM Noda also asked India to adhere to the Comprehensive Nuclear Test Ban Treaty as soon as possible, something Indian foreign policy has been resolutely opposing for decades. Singh replied that India was committed to a unilateral and voluntary moratorium on nuclear explosive testing.

Both countries would enhance cooperation in nuclear disarmament and non-proliferation through dialogue, bilaterally and at non-proliferation meetings, as well as at the Conference on Disarmament.

There was no indication of any official date for the next round of negotiations. Both said they condemned the clandestine encouragement of some countries on nuclear armaments. They said they’d also decided to be meaningful partners at the Nuclear Security Summit at Seoul in March 2012.

Other issues
The 10-page joint statement has 35 items. It also highlighted the need to conclude a social security arrangement between India and Japan to promote economic activities by private sectors of both countries.

Japan also extended support for India’s bid to become a permanent member of the Nations Security Council.

Prime Minister Noda also announced Japanese assistance in some gigantic infrastructure projects to be undertaken in India. Japan would help India establish high-speed trains on the Delhi-Mumbai route, part of the intended Golden Rail Corridor. The final report on this will be ready by February. Also, Japan has decided to extend loans totaling ¥134.3 bn to two projects – phase III of the Delhi Mass Rapid Transport System and the West Bengal Forest and Biodiversity Conservation Project.

For development of the second phase of the Delhi Mumbai Industrial Corridor, the Japanese PM announced assistance of $4.5 bn (Rs 23,800 crore) over the next five years.

The PMs hoped the India-Japan Ministerial Business-Government Policy Dialogue between the minister of commerce and industry here and his Tokyo counterpart would be held in 2012, said the statement.

Earlier, external affairs minister S M Krishna said bilateral relations had “acquired relevance for maintaining regional and global peace, security and well-being”. And, that Japanese overseas development assistance had become a model for India for similar cooperation with other countries.

While addressing the three business chambers of Ficci, CII and Assocham, Noda called for greater economic relations through increased bilateral trade.

A cultural extravaganza to mark 60 years of diplomatic ties between India and Japan is set to be held in India early next year. The three-month ‘Passage to the next generation’ beginning January 2012 would include performing art events, exhibitions, symposiums, film screenings and more.

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First Published: Thu, December 29 2011. 00:28 IST