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Why Is Japan Continuously Investing in India Despite the Latter's Economic Slowdown?

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I am the business consultant at Bada Business Pvt Ltd. I work with many clients to help them find their niche and grow their businesses.

India’s population is young, growing, and English-speaking - which makes it an attractive destination for Japanese investors. The country also offers a lower cost of living than in Japan or other Asian countries like Singapore - making it easier for Japanese firms to do business there.

Japan heavily investing in India

Japan heavily investing in India

India, one of the fastest-growing countries in the entire world has received the largest overseas development aid from Japan.

From 2003 to 2017, the amount of aid has increasingly grown. Although not consistently on a year-to-year basis, they still have been the largest recipient of the program.

The accumulated commitment of Japanese aid from 2019 to 2020 has amounted to over 6.2 trillion Japanese yen! A massive amount of money going inside India’s economy!

Transportation is the largest sector to receive the aid. Japan as you all know is excellent in this field.

They have handed their expertise and railway knowledge for several metro and rail projects, some notable are the likes of Delhi Metro, Mumbai Metro, Bangalore Metro and so much more.

So why is Japan placing a majority of their overseas development aid cash into India? Why not its neighboring countries which may need it more? And will these f

Well to know that we must first go back to 1958, the year Japan’s overseas development aid first reached out to the world.

On an adventure to find countries that would need loans, they have stumbled upon the country of India which then became the first country to receive these loans, and since then India has become the oldest recipient and largest of these aids. These then led to several opportunities for strengthening Japan-India relations, the most notable ones are in the early 1990s when the country of India was facing a major financial crisis, it was a time when no other country would offer to help India only but one, which was Japan which ultimately became the biggest turning point in their bilateral relationship.

Since then the two countries have established economic partnerships one after the other, one of the biggest was in 2014 when the two countries established one of the strongest economic partnerships in the entire world.

It was called the Japan-India special strategic and global partnership which is an initiative that aims to double Japan’s foreign direct investment in the country every five years and double the number of Japanese companies working in the country every five years.

Such strong partnerships would lead to strong economic outputs for both countries.

But is it really just the partnership that’s pushing these beyond?

Well, I believe that there is more to it, one that a paper written in 2017 argued that “Japan’s involvement in India is a politico-strategic utility which is a signal to the world that Japan is strengthening this relationship to gain leverage in the continent.”

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And I believe that Japan is doing these is because it suffered from the so-called “Lost Decades” where its economy has not experienced any growth from 1991 to 2021.

These partnerships may be in a form where Japan would help India now and in return they would help them back in the future, this help could already be happening now as well. Some of the help is the likes of human capital.

Japan’s population is slowly going down and to help keep economic activity going the need for human capital is the most important factor in doing so.

Although some have argued that foreign aids are a form of one’s country’s interest, it has in fact benefited both countries in many ways. In India, the help and expertise of Japan’s quality-driven management have introduced strong and resilient projects.

One of these excellent infrastructure pipelines is the upcoming Mumbai-Ahmedabad high-speed railway which is expected to use Japan’s Shinkansen technology.

Another form of advantage of these is that Japan is helping fast-tracked the overall development of India. These developments could be the likes of pushing innovation further, poverty alleviation, disaster prevention, and most importantly the utilization of Japan’s tech expertise.

These have all contributed to the path of strong and sustainable development of India.

And lastly, will Japan still continue to support India’s economic growth?

Well, the current prime minister of Japan, Fumio Kishida who recently became the country’s leader in October of 2021 has special ties to India.

These are traced to when the prime minister visited the country in 2015 and said that he has chosen India as the first destination of a visit because the two countries' relationship will determine the direction of Asia in the 21st century.

Anyway, what do you think about Japan and India’s bilateral partnership?

Share with me, your thoughts in the comments below, don’t forget to leave me a like and follow me for more amazing articles.

Thanks for reading!

I’m Sourabh

© 2022 Sourabh

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