Japan's yo-yo ties with India

The two share a variety of goals and concerns

Given that almost all historical, cultural, economic and geo-political factors overwhelmingly point to a close partnership between India and Japan it has taken an inordinately long time for these two Asian nations to strike a meaningful strategic partnership. Hopefully the visit to India of Japanese Prime Minister Yukio Hatoyama should spur this up-again-down-again yo-yo relationship forward. The news that came on the evening of the Hatoyama visit that India has become the most important destination for Japanese investment, as it has been for Japanese aid, defines the new tenor of the relationship. This change is significant considering that in the past two decades there has been a secular decline in Japan’s economic engagement with India. While India has been seeking investment and trade opportunities for sometime now, not just aid, Japan has been far too pre-occupied with its own problems and far too narrowly focused on China and south-east Asia to utilise the India opportunity till now. It is a pity, of course, that India’s opening up in the 1990s coincided with Japan’s slowdown and internal problems. Japanese investors have had their tale of woe and their ‘suggestions’ for improving India’s investment climate. From land acquisition to the tax system, from infrastructure to logistics and regulatory policies, from administrative hassles to issues relating to intellectual property rights, Japanese companies have been waiting for India to become a more hospitable place, while rival Korean companies have stolen a march.

Japan has clawed its way back, increasing its share of foreign direct investment and institutional investment into India. The iconic Delhi-Mumbai Industrial Corridor (DMIC) project and the high speed freight train line that it is partly funding have helped alter Japan's profile as a partner. These have laid the foundation for a bigger role for Japan in India's development. That in fact ought to be Japan's strategic approach — to be seen as India's key partner in the latter’s rise. At a political and diplomatic level Japan and India are not only comfortable with each other but have a variety of shared goals and concerns. But this political cement has not been enough to forge a closer economic relationship. Unless Japan invests more in India, economically and politically, and above all strategically, the relationship will not graduate from good to great.

The trick for both Asian giants is to set aside their differences on the contentious nuclear issue and move on a wider front, forging closer people to people and business to business contacts. Thus far Japan has adopted a regional approach to India — focusing on the coastal states rather than the north Indian heartland. The DMIC project would raise Japan’s profile in the industrial development of north-western India provided the region is able to get over the teething troubles of providing the infrastructure necessary for seeding industrial projects. For its part Japan has to resolve internal differences between its economic and foreign ministries which tend to take divergent views on long term relations with India. There is really no reason why the Land of the Rising Sun and the Land of the Buddha cannot come closer in a win-win partnership.