If the Japanese Prime Minister, Shinzo Abe, is visiting India later this week, it is not to swap tales of domestic political troubles with Manmohan Singh. This happens to be the Indo-Japan Friendship Year, bilateral economic ties have been growing, and a new strategic element to mutual ties is about to be introduced. Mr Abe is bringing along 160 businessmen, who are led by the head of Japan's largest business lobby. The Japanese economy is the second-largest in the world. India's is the second-fastest growing one. One would expect the two to have been deeply enmeshed in each other by way of trade and investment. But that is not yet the case. Bilateral trade is only around $7 billion. It should be at least double that. Total Japanese investment in India is around $5 billion, which too is small beer. Even so, it is the fourth-largest source of foreign direct investment (FDI). Both countries have been focusing on China, which buys and sells more from each of them. The result is that in India's trade rankings, Japan comes behind even Belgium (because of diamonds) and Switzerland, at the No. 10 spot. This need not be so. | |
| One problem was the sluggishness of the Indian economy between 1996 and 2004. This led Japanese firms to look to other countries in Asia, even as more aggressive players from South Korea invested heavily in building their position in the Indian market for everything from cars to consumer durables. Now Japan is taking more of an interest. Suzuki plans to invest $1.7 billion more by 2010 in its second four-wheeler plant and to increase its production capacity for car engines. Toyota may be getting ready to set up an assembly plant for low-priced compact cars. Zentek Technology is setting up a development base in Gurgaon. Kyushu Electric has signed a memorandum of understanding with National Thermal Power Corporation for cooperation in technology and environmental engineering. Nissan says it will make four-wheelers in India jointly with Renault and Mahindra & Mahindra. |
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| All this suggests a new momentum, but both India and Japan need to do more. Now there is talk of a partnership agreement, not to mention the plan to build an industrial corridor linking Delhi and Mumbai. The corridor, when fully done, will cost around $100 billion. Japan may pay a tenth of that, making it the biggest donor of aid to India. But even that is not enough. Perhaps an over-arching political engagement will create the conditions for business and aid to flourish much more, despite the difficulties Japanese companies experience when doing business in India, and which India firms encounter in Japan. |
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| Such constraints do not apply to the budding strategic relationship. "The purpose of Mr Abe's visit is to agree on a roadmap for implementing the strategic partnership agreed upon last December, which was based on an agreement on a global partnership with strategic orientation during Prime Minister Junichiro Koizumi's visit in 2005." That is the official Japanese line. It is true that Japan has been somewhat hesitant in this regard, perhaps in order not to annoy China, which already has been carefully watching India's developing relationship with the US. The US too has been pressing Japan to come out of its shell. So India and Japan are now talking about an engagement that could cover security, space and joint research. The Japanese defence minister is also coming therefore "" but, in order to downgrade his participation, on the last day of his Prime Minister's visit. |
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