India, Japan sign $75 billion currency swap agreement


What is Important?
UPSC perspective:
Prelims:Highlights
Mains: Significance & Relation with Japan


Why in News?

India and Japan signed a currency swap agreement worth $75 billion during Prime Minister Narendra Modi’s visit to Japan.

Highlights:

*Japan and India entered into a USD 75 billion currency swap agreement that will boost Indian economy as it encounters a steep drop in the rupee’s value.
*Both the sides agreed for a 2+2 dialogue between Foreign Ministers and Defence Ministers,the aim is to work towards world peace and stability.
* Japan announced to join the International Solar Alliance (ISA) by submitting the instrument of ratification
*Japan agreed to provide loans of about 316.458 billion yen for seven major infrastructure projects in India.
*MoU between KAGOME Co Ltd. of Japan and Union Ministry of Food Processing Industries.

USD 75 billion currency swap agreement:

*India and Japan on Monday agreed to conclude a Bilateral Currency Swap Agreement for $75 billion, a 50 per cent enhancement over the previous $50 billion currency swap agreement between the two countries.
*A currency swap typically involves the exchange of interest and sometimes of principal in one currency for the same in another currency. Interest payments are exchanged at fixed dates through the life of the contract.
* It is considered to be a foreign exchange transaction and is not required by law to be shown on a company's balance sheet.
*The currency swap agreement, is an important measure in improving the confidence in the Indian market and that it would not only enable the agreed amount of capital being available to India, but it will also bring down the cost of capital for Indian entities while accessing the foreign capital market.
*This facility will enable the agreed amount of foreign capital being available to India for use as and when the need arises.

India-Japan Economic Relation:

*The Japan-India Association was set up in 1903, and is one of the oldest international friendship bodies in Japan.
*13th India-Japan annual summit got under way, Japan had pledged Rs 33,800 crore in government and private sector investments following the first Modi-Abe meeting in 2014.
* Japan has been one of the biggest sources of investment flows into India, accounting for $28.16 billion in FDI between April 2000 and June 2018, trade engagements have been below potential.
*India exports to, Japan is a lowly 18th; on the list of countries importing into India, Japan ranks 12th.
*The two countries having signed a Comprehensive Economic Partnership Agreement (CEPA) in 2011 to facilitate growth in bilateral trade.
*The CEPA envisages abolition of tariffs on over 94% of items traded between India and Japan over a period of 10 years.
*India’s exports to Japan in FY18 were lower than in FY15 in value terms. Primary exports have been petroleum products, chemicals, elements, compounds, non-metallic mineral ware, fish & fish preparations, metalliferous ores and scrap, clothing and accessories, iron and steel products, textile yarn, fabrics and machinery.
*India’s primary imports from Japan — which too, are sluggish — are machinery, transport equipment, iron and steel, electronic goods, organic chemicals, machine tools, etc.
*Much of the Japanese FDI inflows have been concentrated in the automobile, electrical equipment, telecommunications, chemical, and pharma sectors. As of October 2016, there were 1,305 Japanese companies registered in India, an increase of 76 companies (6% growth) as compared to 1,229 in October 2015, DIPP data show.
*In March this year, a ‘Cool EMS Service’ was started, under which Japanese food items permissible under Indian regulations are transported in cool boxes from Japan to India through postal channels.
*Both sides are striving to push a digital partnership, with the NITI Aayog being the nodal point on the Indian side, and the Ministry of Economy, Trade and Industry on the Japanese side.
*Another new area where India is likely to make a pitch is for greater synergy or integration between the Ayushman Bharat project and the Japanese programme called Asia Health and Wellbeing Initiative, including how to leverage Japan’s strengths in areas such as medical equipment and hospitals.


India, Japan sign $75 billion currency swap agreement India, Japan sign $75 billion currency swap agreement Reviewed by The Hindu Current Affairs on October 30, 2018 Rating: 5

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