DMIC snippets

The Prime Minister has recently suggested large investment in infrastructure as the best way out of the economic crisis facing the world. Accelerated investment in the the Delhi-Mumbai Industrial Corridor (DMIC) should, for instance, be a priority today. DMIC — the country’s most ambitious development project ever — revolves round the establishment of high impact, market-driven nodes, affording investorfriendly regime by way of self-sustaining investment regions and industrial areas. Its anchor, the 1,483 km multimodal high axle-load dedicated freight rail corridor (DFC) on the west coast envisages linking Jawaharlal Nehru port (JNP) with NCR’s (National Capital Region’s) inland container depots at Dadri and Tughlakabad. Sprawling over 436,486 sq km, 13.8% of India’s total land mass, as the DMIC zone of influence, the hinterland area has 31.8 million households accounting for 17% or 173.4 million of the country’s population (2001 census), contributing half of its agricultural output and catering to 60% of its exports. The DMIC zone of influence includes Delhi, Haryana, Rajasthan, Gujarat, Maharashtra, Union Territories of Daman and Diu, and Dadra and Nagar Haveli besides parts of western Uttar Pradesh, Uttrakhand and Madhya Pradesh. The main project goals for DMIC include: to double employment potential in five years (14.87% CAGR); to triple industrial output in five years (24.57% CAGR); and to quadruple exports from the region in five years (31.95% CAGR). The $90-billion DMIC aims at facilitating an effective integration of industry with infrastructure conducive to overall economic and social development. The project recognises the primacy of infrastructure wherewithal, e.g., state-of-theart network of ports and airports, rail and road networks, special industrial zones, logistics parks and transshipment hubs, knowledge parks, townships with full urban backup services. Appropriate linkages with existing network by way of feeder rail and road connectivity with DFC will be an integral part, which will help interweave the proposed industrial and economic nodes all within 150 km of DFC (west) alignment on either side with hinterland markets as well as gateways. Visualised as a specifically delineated industrial region, an investment region will have a minimum area of 200 sq km, and an industrial area, a minimum of 100 sq km for manufacturing facilities for domestic and export-led production backed up with associated services and infrastructure, each region or area developing on the strength of raw material availability, technological prowess, human resources, e.g., largely petrochemical and chemical industry in Gujarat, IT & ITES in Haryana, automobile and auto components in Maharashtra, textiles, stones, leather in Rajasthan. The project involves construction of 4,000 km of feeder road linkages to be built by respective state governments, in addition to the 4/6 laning of 24,000 km of NHs already being done under NHDP, and another 1,000 km of port connectivity highways undertaken by NHAI. Likewise, DMIC involves construction/augmentation of 2,500 km long feeder rail linkages. Two greenfield ports (Dholera and Maroli in Gujarat) and another two (Alewadi and Dighi in Maharashtra) are proposed to be developed under the DMIC umbrella, which will also upgrade Gujarat’s Dahej and Hazira ports, the entire port sector entailing a project expenditure of Rs 12,000 crore. Similarly, upgradation of six airports (Udaipur, Jodhpur, Vadodara, Surat, Nashik and Pune) and construction of new airstrips in Rajasthan, Gujarat and Uttar Pradesh is estimated to cost Rs 6,500 crore. It has been estimated that three million jobs will be generated by DMIC, in addition to the indirect employment potential it has in construction, operation and maintenance. Overall, major DMIC activities — industrial processing, IT/ITES, knowledge centres, logistics and other infrastructure — are expected to generate some 10 million jobs. The timeframe for DMIC to materialise has been projected as 2008-2012 for phase I, while for the rest in phase II it is 2013-16. The DMIC cost estimates of Rs 360,000 crore ($90 billion) include a predominant component (33.8%) of projected outlay of Rs 135,000 crore for manufacturing, industrial processing areas and SEZs, 15% (Rs 60,000 crore) for integrated townships and real estate development, 10% (Rs 40,000 crore) for 10,000 MW of additional power generation, 8.8% (Rs 35,000 crore) for IT and ITES hubs, 7.5% (Rs 30,000 crore) for knowledge cities, 3.8% (Rs 15,000 crore) for logistics infrastructure. Of a total of Rs 360,000 crore, the Centre is expected to sponsor an element of Rs 100,000 crore, three-fourth of it through PPP, whereas the concerned state governments would provide for Rs 260,000 crore, inclusive of Rs 195,000 crore for PPP projects. Development of DMIC thus requires about $10 billion contribution from the Centre and $25 billion from state government agencies, the remaining $55 billion envisaged to come from private sector, which, in turn, is expected to source over 60% through capital market and various debt and equity instruments such as JBIC (Japanese Bank for International Cooperation), etc. It has been broadly estimated that DMIC offers investment opportunities to Japanese business and industry to the extent of $30-35 billion in sectors like manufacturing, infrastructure, cold chain, port operations, skill development, power generation. In fact, India-Japan cooperation and partnership is the hallmark of the project. Currently, India is the largest beneficiary of JBIC funding (6.5% share or $13.2 billion) among the 27 countries, with an overall loan portfolio of $184.4 billion. There is already this SEPI (Special Economic Partnership Initiative), a joint India-Japan government initiative for early realisation of the DFC and promotion of DMIC. When India began to open its doors to foreign investment, Japan appeared to be a natural partner. Somehow, perhaps being too finicky about India’s ineptitude, they fought shy. Now, there is a renewed interest in India among Japan Inc. Besides, India’s induction into the quadrilateral with Australia and the US in addition to Japan, there is on the horizon an India-Japan strategic alignment as well. India needs to ensure that the opportunity is not frittered away.

India and Japan bond together

The real achievement of Singh’s visit has been to put Japan and India on the same page in terms of international security. The joint declaration on security cooperation opens up Asia to a security association between two of the biggest maritime powers in the region. It’s an agreement that will certainly raise eyebrows in Beijing, despite both Aso and Singh going to great lengths to deny any connection with or “targeting” of China.Interestingly, for Japan, it’s only the second security agreement that it has in the world apart from US. Japan has stitched very similar agreements with Australia in March 2007 and now India. A new security architecture in Asia is taking shape.After the talks, Singh told a joint press conference, “Economic partnership and security cooperation between India and Japan are not at the cost of any third country, least of all, China.... I sincerely believe there is no competition between India and China. The world offers enormous hope for both our countries to realise their development ambitions.” Aso added, “This is not aimed at, or meant to target China.” The declaration says India and Japan will work together not only on transnational crimes and terrorism, but will conduct joint exercises, work together in “peace building”, disaster management and disarmament and non-proliferation. The agreement now binds the two countries to regular consultations at the level of foreign ministers, foreign secretaries, NSA, defence ministers, defence secretaries, service chiefs, navies as well as Isro and JAXA (Japan Aerospace Exploration Agency).Foreign secretary Shivshankar Menon told journalists later that the India-Japan relationship “walks on two legs, economic and security”. India saw a huge commitment of 450 billion yen for the dedicated freight corridor and projects on the Delhi-Mumbai Industrial Corridor, which the PM believes will transform the nature and scope of the Indian economy. It’s the largest-ever loan by Japan for any single overseas infrastructure project. The commitment at a time of a financial recession is seen by India as a “strategic” gesture by Japan. Japan on Wednesday also announced that it would give $971 million in 2008-09 to four projects in India: Chennai metro, Hyderabad ring road, forest management and energy saving projects for small and medium enterprises. Singh spent the better part of the morning soliciting investment in India from the cream of Japanese industry. Addressing the Nippon Keidanren, the apex body for Japanese Inc., Singh said, “The short term outlook (for the Indian economy) is cloudy but I am confident that the Indian economy has the resilience to sustain its growth momentum in the medium term.” Singh outlined the areas of future cooperation: high technology trade, energy efficiency technologies, power generation, “ultra-mega projects based on super-critical technologies”, clean coal, etc. “This will broaden our trade basket and enhance reciprocal investments,” Singh told a group of Indian and Japanese CEOs at lunch.

Prime Minister Manmohan Singh provoked Japan to invest more in India and participate in its growth story. Today, Japan lags behind China considerably in terms of its bilateral trade with India. Korean companies such as Samsung, Hyundai and LG too have overtaken iconic Japanese brands to get a higher mindshare among the Indian masses in the value for money segment.
Addressing a business luncheon hosted by Nippon Keidanren, Japan’s most influential industry chamber, Singh pointed out that the increase in India’s bilateral trade with China in the past one year alone is more than the whole of India’s total trade with Japan. “Korean products dominate our white goods sector and have high brand recognition in India,” he said.
The total trade between India and China has jumped from just $4.8 billion in 2002-03 to $25 billion in 2006-07. It increased $12.7 billion or more than 50 per cent to touch 37.8 billion in 2007-08. In fact, China has already displaced the US as India’s number one trading partner and the government expects bilateral trade to top $50 billion in the current financial year.
Compare this with India’s trade with Japan that stood at a meager $10 billion in 2006-07. Even by 2010, the two countries hope to just about double the size of bilateral trade to $20 billion. The tepid response by Japanese private sector to investments in and trade with India is attributed to the procedural bottlenecks that plague the domestic business climate.
“...new investors often worry about the difficulties that they may face in a new environment. A vibrant democracy often presents new challenges. I urge you to have faith in our system and our resolve.We are committed to creating a congenial climate for private initiative, risk-taking and enterprise,” Singh said. Stating that “sky is the limit” for Japanese investments in India, the Prime Minister said India’s infrastructure funding needs are expected at $500 billion over the next five years. “Financing this level of investment presents a special challenge in view of the uncertainties now prevailing in capital markets. We have begun to attract investment from Japan, but it is much less than the full potential,” he said.
Japan Prime Minister Aso Taro, however, said in a media briefing later in the day that over the past five years, Japanese investment in India had increased ten-fold compared with the last 10 years. “We are making progress and the situation is changing really fast,” he said, pointing out that the number of Japanese companies has doubled to over 500 during the period.
Japanese premier Taro Aso, however, said negotiations were still underway and he would refrain from commenting on specific issues. “We will strive for early conclusion of the talks on CEPA,” he said.