Om Pratap Singh asked: Why Japan provides her maximum Overseas Development Assistance (ODA) to India?

Shamshad Ahmad Khan replies First of all let us understand what the Official Development Assistance (ODA) is. It is a low-interest and a long-term loan offered by Japan to developing nations including India. Japan claims that it is a tool to maintain good relations with other countries. To begin with, Japan extended large amount of soft loans to Southeast Asian and East Asian countries including its erstwhile colonies to achieve twin purposes: gaining their goodwill and maintaining presence in their market through Japanese-funded projects. However, the fact that it is driven by Japan’s entrepreneurial interest cannot be negated as ODA was mostly a “tied aid” under which the recipient countries had to buy technical equipments for Japanese funded projects from the Japanese companies. Later, post-1990s, Japan left the option open for the recipient countries to buy technical equipments through open biddings.

India was one of the first countries to receive Japanese ODA loan in 1958. In 2007, India became the largest recipient of Japanese ODA loan when Japan had to cut the ODA loan to China owing to people’s demand. Japan’s ODA Charter stipulates that the country will halt its ODA loan to countries that violate human rights, do not promote democracy, invest hugely in defence, or are involved in proliferation of weapons of mass destruction.

Major portion of Japanese loan to India goes to infrastructure development projects. Japan wants to lower its presence in China in view of growing tension between the two countries over disputed territories in the East China Sea. Also, studies suggest that China will become an ageing society in the next 20 to 30 years (if it does not ease its one-child policy), and in that scenario the consumption of Japanese manufacturing products will decrease. So they want to shift their productions to India which still has a large youth population and a growing middle class. But since the infrastructure in India remains poor, they believe that it will hamper the flow of their goods from one corner of India to another. This explains why Japan has been extending loans for infrastructure development projects in India, including road and railway corridors. Japan also wants to make India its export hub to reach out to the West Asian economies and to minimize the shipping costs.