In light of the ongoing Covid-19 crisis, India and Japan have entered into a loan agreement amounting up to 50 billion yen (Rs. 3,550 crore approx). This financial aid aims to bolster India’s economic support initiatives targeting those who are poor and most vulnerable due to the pandemic.
Details About the Loan
The loan forms an integral part of Japan’s Official Development Assistance (ODA) loan. ODA is typically described as government aid, specifically structured to hasten the economic development and enhance the welfare aspect of developing countries. Notably, this explicitly excludes loans and credits used for military purposes.
The terms of the loan comprise an interest rate of 0.65% per annum and a repayment period of 15 years inclusive of a five-year grace period.
Implications of the Financial Support
This monetary loan aims to reinforce the Indian government’s schemes such as the Pradhan Mantri Garib Kalyan Yojana (PMGKY). PMGKY primarily strives to alleviate socio-economic impacts and fortify socio-economic institutions. This encompasses mechanisms for distributing food grains to the underprivileged, provision of aid and support to construction workers, and rolling out special insurance for health care professionals leading the fight against Covid-19.
The funds assigned are expected to facilitate the execution of health and medical policy by the Government of India. This is likely to result in the development of hospitals armed with Intensive Care Units (ICUs) and infection prevention and control facilities.
There is also an anticipation of enhanced telemedicine services utilizing digital technology, impacting numerous villages across India.
Japan’s Previous Support to India
Japan has previously shown support by providing budgetary assistance of 50 billion yen alongside grant assistance worth one billion yen. This was aimed at backing the Indian government’s efforts to combat the Covid-19 crisis. The cumulative assistance extended by Japan to India currently stands at approximately Rs. 5,800 crores.
India-Japan Economic Relations
India and Japan share a rich history of bilateral development cooperation spanning from 1958. Over the past couple of years, their economic cooperation has solidified and evolved into a strategic partnership.
In the fiscal year 2019, Japan emerged as the 4th largest investor in India. Over the past few decades, India has been the largest beneficiary of the Japanese ODA Loan. The Delhi Metro project serves as one of the most prominent examples of this cooperation facilitated through the Japanese ODA.
Further, Japan continues to support strategic connectivity linking South Asia to Southeast Asia. This is achieved through the synergy between the ”Act East” policy and the ”Partnership for Quality Infrastructure.”
