Japan’s decision to invest $42 billion in India over the next five years could not have come at a more opportune moment. Japanese Prime Minster, Fumio Kishida, announced his government’s intentions at the 14th India-Japan Annual Summit, held after a gap of three-and-a-half years.
Kishida’s announcement comes at a time when global geopolitics is undergoing a transitional shift. The conflict in Ukraine has divided the global community and disrupted international trade as economic sanctions pursued by the United States and the Western world start to bite. The Chinese economy, in particular, has taken a hard knock, prompting officials to predict economic difficulties on the horizon.
This puts India in a unique position to take advantage of the developing situation. China’s economic slowdown will create new opportunities for India and the infusion of Japanese capital is a welcome boost. Although China has considerable investment overseas, Japan is still a leading contender when it comes to infrastructure in Southeast Asia.
The resurgence of COVID-19 in China has closed most of its industrial hubs, causing investors to seek alternatives. India is the perfect substitute for such companies seeking greener pastures. Several multinational companies already have a significant presence in India and a majority continue to rely on the IT capabilities of the Indian market.
Japan investment in India
Japan’s decision is a huge positive for India and reinforces its image as profitable market. In fact, Japan is the third largest investor in India, contributing $30.27 billion in cumulative FDI inflow between 2000 and 2019. The former Prime Minister, Shinzo Abe, had announced an investment target of 3.5 trillion yen during his 2014 visit which has already been achieved.
The new target exceeds the previous one and is expected to draw the two countries and take trade relations to the next level. Japanese capital will be utilized for both public and private projects of mutual interest, including connectivity projects, water supply and sewerage, healthcare, horticulture, and biodiversity conservation across India.
The latest investment target highlights the deepening regional cooperation between the two countries in the face of an assertive China. Japan is taking on an increasingly larger role in Southeast Asia and its strategic partnership with India is in the interest of both countries.