The recent debt rating downgrade of Japan by Moody’s is likely to adversely impact the ambitious $ 90 billion Delhi-Mumbai Industrial Corridor (DMIC) project, apex industry body The Associated Chamber of Commerce and Industry (ASSOCHAM) said here on Friday.
The DMIC passes through the six states: National Capital Region (NCR) of Delhi, Uttar Pradesh, Haryana, Rajasthan, Gujarat and Maharashtra. About 39% of the 1,483-km-long Corridor passes through Rajasthan and 38% through Gujarat.
Being one of the biggest infrastructure development projects in India, an estimated 80% of funds for DMIC would come from Japanese loan and assistance. The downgrade of Japan’s credit rating by one step to Aa3 by credit rating agency Moody’s Investor Service is going to have an adverse impact on the project, which is a cause of concern, said ASSOCHAM.
Besides, inflow of foreign direct investment (FDI) in Haryana, referred to as India’s ‘mini-Japan’, is also going to be impacted by the lowered Japanese credit rating.
“Frequent changes in leadership, deflation and sluggish economic growth together with the recent natural disaster and nuclear crisis in Japan are certain significant reasons for the trust deficit in the Japan Government’s debt”, said Ms Bhagyesh Soneji, Chairperson, ASSOCHAM Gujarat Council.
Swift measures to weaken yen and push the export-led Japanese economy together with certain aggressive steps like raising taxes might help curb Japan’s debt burden, she said.
Inflow of investments worth about Rs 4,300 crore from Japan constitutes about 35 per cent of overall FDI attracted by Haryana which has a considerable presence of Japanese MNCs and is also home to about 2,000 Japanese nationals.
“The downgrade might have a tepid effect on Haryana’s industry scene as no funding crisis is likely to arise for at least next 12 to 18 months but the main concern is the DMIC as a consortium of Japanese majors have entered into agreements with various state governments to set up seven eco-cities along the corridor,” said Mr D.S. Rawat, Secretary- General, ASSOCHAM.