What does a country get when it invests in an another country? What is Japan getting when it invests 30 billion in India?
Answer by Gopal Kalita:
Japan's economy is stagnating and it's population declining. The country is also having a huge percentage of population above 60 years. It means consumption demand is reducing every year as well as working population. At the present rate Japan would have 40% of its population above 65 years presenting a huge social and economic problem. Japan therefore needs to invest its money properly so that it keeps getting a steady cash flow during its old age.
On the other hand, India's economy is growing as well it's working age young population (18-40). India is especially hungry in infrastructure and manufacturing sector, both areas in which Japan has strong expertise and experience.
Financial security reasons:
India is also a safer and long term investment destination than many other emerging economies due to India's strong financial infrastructure ,intellectual property rights laws, stable democratic government etc.
Strategic and diplomatic reasons:
India is also a good ally of Japan. When China blocked export of rare-earth minerals to Japan, India promptly started exporting these minerals to Japan. The rare-earth minerals are essential for Japan's semiconductor industry and China tried to put pressure on Japan's economy by blocking export of this vital raw material.
By helping India grow, Japan can also balance the increasing clout of China in Asia with whom it does not share a really good relationship.