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Japan Bank offers soft loans

Govind D. Belgaumkar

10 agreements to provide a loan to the tune of Rs. 6,254 crore


  • Japan sees India as a promising market for trade and foreign investments
  • The bank's survey rated India as the second most promising country after China
  • Further strengthening of diplomatic ties between the two countries likely

    BANGALORE: The Japan Bank for International Cooperation (JBIC) on Friday signed 10 loan agreements to provide soft loans of 155.46 billion yen (Rs. 6,254 crore) in its bid to support poverty eradication, economic development and environmental conservation in India.

    JBIC sources in New Delhi told The Hindu that JBIC Governor Kyosuke Shinozawa signed the agreement with the representatives of the Union Government.

    Nine ODA loans

    The package includes nine ODA loans (Official Development Assistance) for nine projects totalling 134.83 billion yen (Rs. 5,415 crore) and another loan of 20.63 billion yen (Rs. 829 crore) for Rural Electrification Corporation (REC). The REC aims at supplying electricity to 27.9 crore households and benefits as many as about 1.5 crore people in Andhra Pradesh, Madhya Pradesh and Maharashtra.

    The sources said ODA loans were soft loans (with at an interest rate of 1.3 per cent per annum) given to promote economic development and welfare of developing countries. They are concessional in character to avoid severe burdens on developing countries and convey a grant element of at least 25 per cent.

    The following projects are getting the ODA loans (with the loan amount brackets): The 900-MW Purulia Pumped Storage Project (III) in West Bengal (17,963 million yen or Rs. 721 crore); Bangalore Water Supply and Sewerage Project (II-2) (28,358 million yen or Rs. 1,140 crore); Delhi Mass Rapid Transport System Project -Phase 2 (14,900 million yen or Rs. 598.4 crore); Bangalore Metro Rail Project (44,704 million yen or Rs. 1,795 crore); Swan River Integrated Watershed Management Project at the foot of the Himalayas (3,493 million yen or Rs. 140.28 crore); Orissa Forestry Sector Development Project (13,937 million yen or Rs. 559.7 crore); Hussain Sagar Lake and Catchment Area Improvement Project in Hyderabad (7,729 million yen or Rs. 310.4 crore); Kolkata Solid Waste Management Improvement Project (3,584 million yen or Rs. 144 crore); Visakhapatnam Port Expansion Project (161 million yen or Rs. 6.5 crore).

    Strengthening ties

    The JBIC said in an official document that India had been pushing forward its strategic approach by strengthening economic and trading ties with ASEAN members, the United States and others, and by improving political and economic relations with neighbouring China and Pakistan, thereby increasing its presence in the international community.

    Major IT power

    "Japan is now paying growing attention to India as one of the promising markets for trade and foreign investments in the coming years, due to the recent emergence of the country as the major IT power, as well as its 300 million middle-income citizens — well over the entire ASEAN population."

    India gaining significance

    It pointed out that the "Outlook for Japanese Foreign Direct Investment," a study that JBIC conducts annually, indicated that India had been gaining significance as "a promising destination of investments over the medium-term." Results of JBIC's Financial Year 2005-06 Survey rated India the second most promising country after China.

    The document observes that further strengthening of diplomatic relations between India and Japan is expected, as shown by the agreement in April 2005 between Japanese Prime Minister Koizumi and Prime Minister Manmohan Singh for strengthening Japan-India global partnership.

    It noted that in the 10th Five-Year Plan (April 2002-March 2007), the Union Government stressed the equitable and sustainable growth, and to achieve this goal, it had designated the following as the priority development issues: "Not only alleviation of the existing poverty but [also] long-term poverty alleviation through economic growth and environmental conservation to make these efforts sustainable."

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