THE BLOG

India-Japan Ties: Investing in the future

09/02/2014 09:25 am ET | Updated Nov 02, 2014
  • Samarth Pathak Public policy analyst and advocacy expert specializing in international relations, politics and sustainable development. Currently associated with the Ananta Aspen Centre, Indian partner of The Aspen Institute (US)

Indian visitors to Tokyo are often told about the very special gift that India's first Prime Minister, Jawaharlal Nehru, presented to Japan in 1949--a baby elephant. In the aftermath of the Second World War, the elephant symbolised the love and friendship of the Indians for the people of Japan, and lent a healing touch to their pain. Over six decades later, the gift is still cherished in Japan, and has left an enduring legacy of bilateral solidarity.

On the Indian front, a similar symbol of Japanese friendship has been Maruti Suzuki--arguably the country's most popular and historic automobile brands--which has been synonymous with Japan and its technological prowess ever since it captured India's imagination over three decades back. "Simple, sturdy and reliable", words that are often used to laud Maruti Suzuki, also describe the India-Japan relationship in many ways.

Given this natural affinity shared by the two nations, it is not surprising that Indian Prime Minister Narendra Modi's ongoing visit to Japan--his first outside South Asia since coming to power with a massive electoral sweep--has triggered an electric wave of anticipation and hope in both nations. Can Modi and his Japanese counterpart Shinzo Abe strengthen economic cooperation to fix their domestic economies? Can New Delhi and Tokyo join hands to fuel global growth? These are some of the questions being raised on both sides.

On his part, Modi has evinced, through several fora, his keen desire to strengthen existing connections with the Japanese business community and attract greater investments in India. And this is welcome: because economic ties are like chains that bind India and Japan close together, and on this hinge the other components of the relationship.

In the past few years, bilateral trade between the two countries has nearly tripled from $6.5 billion in 2005-06 to $18.5 billion in 2012-13. However, the two countries cannot be satisfied with anything less than $100 billion dollar in trade, feel experts. Undoubtedly, it is vital for both governments to reinvigorate relations to forge strategic and defence cooperation while working towards a ten-fold rise in trade and investment.

To give a ballast to economic ties, infrastructure is one of the most lucrative sectors that needs to be accorded focus. At present, India requires around $1 trillion foreign investment for infrastructure development--a major part of which would need to be funded by the private sector. Japan is involved in nearly 70 infrastructure projects in India, and has invested $4.5 billion in the Delhi Mumbai Industrial Corridor. Indian infrastructure has also benefited from the $2.32 billion aid extended by Japan in 2013. Moreover, Japanese companies such as Mitsubishi, Suzuki Motors and Toshiba Corporation have been investing heavily in the Indian markets and collaborating across sectors.

However, to increase Japanese corporate presence, Indian government must ease the process of foreign firms setting up businesses in its cities. This can be done by establishing a month-long time limit for approvals, and providing research assistance to Japanese companies. At the same time, enhancing Indian presence in Japan can be done through new joint ventures in areas such as water, nano-technology, space and IT industry, apparels and biotechnology. In terms of exports, raw materials and textiles are key sectors where India can boost its exports to Japan. Tokyo's imports of clothing and accessories from China have significantly declined, both in financial terms as well as quantity. This can be attributed to the fact that manufacturers are increasingly shifting production from China to other nations to reduce costs. India should tap into this demand pool by setting up dedicated garment producing units for export to Japan.

Creating Special Economic Zones for Japanese companies, and expediting work on the Delhi Mumbai Industrial Corridor--which is a symbol of major Japanese investment and participation in India--also stand to complement India's investment needs. Building a high-speed train network, based on Japan's 'Tokaido Shinkasen' model, is another landmark area for mutually-beneficial collaboration. The recently opened Metro project in Mumbai was made possible through a Japanese loan worth $753 million. Similar high-impact rail projects, supported by public private partnerships, must remain high on the agenda for both countries. This is also an opportune moment for New Delhi and Tokyo to join hands for greater nuclear cooperation. A nuclear partnership with Japan would greatly enhance India's quest for clean energy while infusing fresh life into Japan's ailing economy.

Trade and technical collaborations, especially in the field of renewable energy, is bound to reap rich dividends. Japan has the technological prowess that India needs to develop, and India has the market that Japan requires to boost its domestic economy, from which the two nations can benefit. Besides, measures like opening up India's Northeast region for Japanese investments will help New Delhi connect with Myanmar, ASEAN and beyond, thereby giving a strategic impetus. Infusing fresh life into the Regional Comprehensive Economic Partnership (RCEP) will also promote freer trade in South East Asia--in turn benefiting the two nations.

Inarguably, the time is ripe to infuse energy into this historic relationship. Not only are both governments stable with visionary leadership but there is also a strong will among businesses and policymakers on both sides to build a mutually-beneficial partnership. This ongoing churning of relations between New Delhi and Tokyo is set to not merely reengineer Asia's financial and strategic paradigm, but also give a fresh lease of life to an ailing global economy. Because if Japan is the land of rising sun, India is the land of shining opportunities.

(Samarth Pathak is a Program Officer at the Ananta Aspen Centre, a New Delhi-based institution working on international relations, domestic policy and values-based leadership. A former journalist, his experience encompasses news reporting and policy research on issues pertaining to politics, foreign policy and human rights. Follow him on Facebook and Twitter. Views expressed are personal.)