Bhumish Khudkhudia asked: What are India's stakes in the 'Partnership for Quality Infrastructure' initiated by Japan? Will it be more beneficial than China's ‘One Belt, One Road’?

Titli Basu replies:To pursue Japan’s ‘Free and Open Indo-Pacific Strategy’, Prime Minister Shinzo Abe designed his signature initiative — Partnership for Quality Infrastructure (PQI) in May 2015, later upgraded as Expanded Partnership for Quality Infrastructure (EPQI) in May 2016, to finance infrastructure projects of approximately US$ 200 billion across the Indo-Pacific over the next five years (2017-21). EPQI has the twin aim of elevating Japan’s regional influence and strengthening strategic network, on one hand, and creating new engines for Japan’s economic development by exploring new frontiers of growth in the international infrastructure market, on the other. EPQI is a win–win concept for India-Japan relations as Prime Minister Narendra Modi’s ‘Make in India’ initiative, that seeks to enable India as an international manufacturing hub by building world-class infrastructure and facilitating industrial networks and regional value chains, intersects with Abe’s EPQI.

Japan has played a critical role in redefining Indian infrastructure – high speed rail, industrial corridors, and urban mass rapid transport systems - through its Official Development Assistance (ODA) loans granted at favourable rates of interest. For instance, India is pursuing the Mumbai-Ahmedabad High Speed Rail (HSR) Project in cooperation with Japan at an interest rate of 0.1 per cent to be repaid over the next 50 years, with a principal payment moratorium of 15 years. Compare this with the Jakarta-Bandung HSR Project, financed by the China Development Bank (CDB), which comes at higher interest rates with a 40 year loan repayment and a grace period of 10 years. Considered as part of China’s Belt and Road Initiative (BRI), 60 per cent of the loan paid in US dollars is at 2 per cent interest rate while the balance 40 per cent in Chinese yuan is at 3.4 percent interest rate.

The World Economic Outlook, published by the International Monetary Fund (IMF), projected that the Indian economy is expected to grow by 7.8 per cent in 2019, making it one of the fastest-growing economies in the world. To sustain such economic dynamism, India urgently needs to upgrade its infrastructure. According to the Twelfth Five-Year Plan (2012-17), India requires investment of approximately $1 trillion in the infrastructure sector. As India garners resources to achieve its developmental objectives, Japan’s EPQI could play an important part in augmenting its infrastructure.

For more on the subject, please refer to my following publications:

“Mapping India in Japan’s infrastructure agenda”, East Asia Forum, April 29, 2016.

“Japan in Prime Minister Modi’s Vision for India”, Asia Pacific Bulletin, Number 337, March 30, 2016.

Posted on March 07, 2018