TOKYO -- India and Japan on Monday inked a $75 billion bilateral currency swap agreement which should bring greater stability to foreign exchange and capital markets in Asia's third largest economy.
The pact, which was concluded during Prime Minister Narendra Modi's visit to Japan, is aimed at enhancing financial and economic cooperation between the two countries, according to a jointly issued statement.
Japan and India had a currency swap agreement of up to $50 billion that had expired. The Indian rupee has tumbled 15% against the dollar since January amid the U.S. Federal Reserve's interest rate hikes. The new swap deal will guarantee a buyer for the rupee that will help to stem a fall in value in case of a currency crisis.
"The importance of [the] swap agreement is that India can borrow U.S. dollars from Japan and give it Indian rupees of the borrowed amount to stabilize its currency," said Shamshad Ahmad Khan, a visiting associate fellow at the Institute of Chinese Studies in New Delhi. "This is very important considering the timing when [the] Indian rupee is depreciating."
During their talks on Sunday and Monday, Modi and his counterpart Shinzo Abe discussed a range of bilateral and international issues, including further cooperation in the Indo-Pacific region.
"Prime Minster Abe underscored the basic importance of India-Japan relationship for the regional order and is determined to advancingthe 'new era in India-Japan relations' so as to further cooperate for peace, stability and prosperity of [the] Indo-Pacific [region]," the statement said.
Modi said the leaders had agreed on a "two-plus-two" dialogue between their foreign ministers and defense ministers, with the aim of working toward encouraging world peace and stability. Until now, the two countries have been holding the "two-plus-two" at vice-ministerial level.
Khan, an expert in India-Japan relations, said Tokyo had been keen for this mechanism to be upgraded to the ministerial level but New Delhi "deliberately kept it at the [vice-ministerial level] fearing backlash from China." He added: "[But] they have upgraded it to ministers' level as the strategy requires greater synergy between the two countries' defense and foreign ministries."
Modi also pointed out that Japanese investors, during his visit, have committed $2.5 billion to India, which would create employment for 30,000 people. "We will strengthen our partnership in every sphere, including digital, cyberspace, health, defense, oceans and space."
Modi and Abe also reviewed cooperation on the development of connectivity through infrastructure and capacity-building projects undertaken bilaterally and with other countries.
"This synergy is embodied in collaborative projects between India and Japan in the Indo-Pacific region, including in Sri Lanka, Myanmar and Bangladesh as well as in Africa," the statement said.
During Modi's visit, the two sides also signed cooperation pacts in next-generation technologies such as artificial intelligence and the internet of things; the exchange of information in the maritime domain; health care; and food safety, among other sectors.
They also exchanged notes about a loan agreement for the ambitious 1.1 trillion rupee ($15 billion) Mumbai-Ahmedabad high speed rail, the construction of which started last year. Japan is funding over 80% of the project.