From defence to bullet train: Where are India-Japan ties heading?

How will Shinzo Abe's two-day visit to India further shape New Delhi's ties with Japan? BS brings you the details

Japanese Prime Minister Shinzo Abe arrived this week in Prime Minister Narendra Modi's home state of Gujarat for what was the tenth meeting between the two leaders since Modi came to power in 2014.  

The centrepiece of the visit has been the Mumbai-Ahmedabad high-speed rail project. Modi and Abe laid the foundation stone for the bullet train in Ahmedabad on Thursday, with the former lauding Japan as India's friend for having extended a Rs 88,000 crore loan at just 0.1 per cent interest.  

Further cementing their bilateral ties, India and Japan on Thursday also signed 15 memorandums of understanding (MoUs), which dealt with wide-ranging issues such as bilateral relations, defence and security cooperation, and supporting each other for a permanent seat on the United Nations’ expanded Security Council.  

It remains to be seen if the bullet train will prove to be economically viable and whether India and Japan's joint front against China will yield any dividends for either of the nations going ahead.   

Read our entire coverage below: 

Japanese firms to invest Rs 5 lakh crore in India

While no figure was released on how much Japanese companies planned to invest in India, some sources said it would be around Rs 5 lakh crore, including the flagship bullet train project. One of the more import MoUs was on civil aviation cooperation and open skies. (Read all the details here) 

Apart from fresh investment proposals at the summit, Modi claimed Japan’s foreign direct investment (FDI) to India had actually trebled in the past few years, a testimony to the growing economic ties. So far, around $25.7 billion has flown in as FDI from Japan; the plan now is to double this by 2019. 

Bullet train project kicks off

Modi and Abe on Thursday laid the foundation stone for the proposed Ahmedabad-Mumbai High-Speed Rail Network, commonly known as the bullet train, in the Gujarat city of Ahmedabad. (Read our full coverage on the viability of the bullet train project here)

Around Rs 1.10 lakh crore will be spent on the project that is being partially funded by Japan. Out of the Rs 1,10,000 crore, Japan is giving a loan of Rs 88,000 crore. The interest on this loan is minimal at 0.1 per cent and it is to be repaid in 50 years, with a grace period of 15 years.

The train will stop at each of the 12 railway stations on the route, but only for 165 seconds. A 21-km-long tunnel will be dug between Boisar and BKC in Mumbai, of which seven km will be under water.

Enhancing defence ties with an eye on China, countering terrorism

During the visit, Abe and Modi agreed to deepen defence ties and push for more cooperation with Australia and the United States, as they seek to counter growing Chinese influence across Asia. (Read all the details here)

Abe's visit comes less than three weeks after New Delhi and Beijing agreed to end the longest and most serious military confrontation along their shared and contested border in decades. In fact, Japan had come out in full support for India in its protracted military standoff with China at Doklam, near the Sikkim-Tibet-Bhutan tri-junction, saying no country should use unilateral forces to change the status quo on the ground. 

In a lengthy joint statement, India and Japan said deepening security links was paramount. This included collaboration on research into unmanned ground vehicles and robotics and the possibility of joint field exercises between their armies. There was also "renewed momentum" for cooperation with the United States and Australia. 

Both nations addressed the other's security concerns beyond China too. Modi and Abe used the summit to jointly condemn North Korea’s latest nuclear test and uranium enrichment activities, urging the hermit nation to comply with UNSC resolutions. Further, one of the most significant joint announcements was when the two called upon all countries to work towards rooting out terrorist safe havens. India and Japan vowed to cooperate to tackle terrorist groups and the joint statement by the two countries mentioned names such as Al-Qaeda, Lashkar-e-Taiba, and Jaish-e-Mohammed. The two leaders also demanded Pakistan to initiate action against terrorist outfits responsible for attacks in Mumbai (2008) and Pathankot (2016).

Progress on India-Japan trade will take time to fructify

Though the India-Japan joint statement mentioned “enhancing free, fair and open trade”, the industry specific trade developments will take time to fructify. India’s trade with Japan fell 16 per cent in four years from 2013-14 to 2016-17, mostly on account of falling petroleum demand and prices. (Take a look at India's major imports and exports with Japan here)

Petroleum products like liquid paraffin, mineral oils and transformer oils form the highest exported component (at the 8-digit HS code level), but their exports to Japan have bottomed over the years, from more than a third of total exports at $2.4 billion to $70 million. By and large, this can be attributed to fallen oil prices and reduced demand from advanced economies, including Japan. 

On the other hand, petrochemical exports — especially those of naphtha and some oils — to Japan have improved, but there is a caveat. “Naphtha is getting exported without adding value domestically as a raw material,” Mahendra Singh, general secretary of the Chemicals and Petrochemicals Manufacturer’s Association (CPMA) of India told Business Standard.

Throwing the doors open for Japanese industrial townships and expats

With India and Japan declaring that the key to global economic progress lies in the development of both the Indian and Pacific Ocean regions, PM Modi on Thursday invited more Japanese investments in India even as agreements were announced for setting up four Japanese industrial townships in India. (Read all the details here)

"Today, four locations have been announced... Gujarat, Rajasthan, Andhra Pradesh and Tamil Nadu... for setting up Japanese industrial townships," Modi said on Thursday in his address at the India-Japan Business Plenary, which was held in Gandhinagar.