“The 21st century is Asia’s century, the World has accepted it. The question is how will it be? The two ways are “Vistarvaad” (expansionism) and “Vikasvaad” (development). We see around us the forces of expansionism… and development will come gradually, which is way ahead.”
— Narendra Modi, Indian Prime Minister
Japan is one of India’s closest partner regionally and globally. The two countries associate politically, economically, culturally and on security levels. India and Japan established diplomatic relations in April 1952 and, over the next six decades, developed a strong and stable partnership based on mutual respect and understanding. Both the countries share strong goodwill and are mutual admirers of each other.
The Japanese economy is highly advanced, with the services sector accounting for 73.2 percent of the GDP in 2013. The industrial sector, once the engine of Japan’s growth, now contributes only 25.7 percent to the GDP while the agricultural sector accounts for one percent. Similarly, the services sector is the largest contributor to India’s GDP, accounting for 56.9 percent while agriculture and industry contribute 17.4 percent and 25.8 percent respectively. The two countries, therefore, share a similar structure.
In recent years, India and Japan have strengthened bilateral ties through new initiatives and programmes ranging from economic and cultural linkages to defence and security. The year 2007 was celebrated as the Year of Friendship between the two countries.
Both the countries agreed in 2007 to increase two-way trade flows to $20 billion in 2010, but bilateral trade summed up to just 1,059 billion yen ($9.91 billion) in 2009, about 4.33 percent of Japan’s trade with China. Until 2013, it has not reached $20 billion. Chart below gives detailed bilateral trade between India and Japan.
India mainly exports mineral fuel, oils, sea food, precious stones and pearls to Japan, while main products in Japan’s export basket are machinery, iron and steel, electrical and electronic products. Bilateral trade and investment flows between the two countries have been discreet because Japanese companies have focused on business with China and Southeast Asia. About 630 Japanese firms are operating in India and Japan’s direct investment in India totalled about 344 billion Yen in 2009, according to the Japanese Government data.
Strengthening of India-Japan trade relations is also important from the point of view of “Look East Policy” of India, which was initiated by Prime Minister Narsimha Rao. This initiative was established with a motive of strengthening economic relations with Japan, Korea, China and ASEAN countries. Though, India has historic ties with these countries its momentum towards trade ties with them remained slow. In pursuance of this “eastern drive” of India towards Japan, both the countries soon realised that the new emerging world provided them with a unique opportunity to deepen their bilateral relations and that they “must cooperate in restructuring international relations in a manner that permits global and regional issues to be tackled both effectively and in a more democratic international environment.”
In 2007, India and Japan with a vision of congruence interests towards deepening the strategic dialogue as well as strengthening defence exchange and cooperation between the coast guards, discovered a Roadmap for New Dimensions to the Strategic and Global Partnership. The thought behind this was “a strong, prosperous and dynamic India, in the interest of Japan and a strong, prosperous and dynamic Japan, in the interest of India”. These issues of common concern were highlighted in the “East Asia Summit”. In 2009, under the leadership of Japanese Prime Minister Yukio Hatoyama, the action plan to advance Security Cooperation based on the Joint Declaration on Security Cooperation between India and Japan was discussed and adopted. In 2012, the two countries conducted their first bilateral exercise off the coast of Tokyo.
In continuation of these efforts, India and Japan are now set to write a new chapter in the annals of relation between two Asia’s long-standing democracies under the governance of Prime Minister Narender Modi. India and Japan are planning and strategizing to take their relationship to next higher level, through bilateral cooperation in the area of defence, civil nuclear energy and infrastructure.
Realising the enormous potential to transfer and implementing projects in collaboration in defence equipment and technology, two countries are negotiating on the civil nuclear agreement which aims to boost defence and security cooperation amongst them, including cooperation in defence technology, equipment and industry. With this cooperation Japan also plans to double its investments in India. It is believed that the bilateral cooperation will lead to rise in public and private investments and financing from Japan of an amount up to USD 33.5 billion.
This cooperation also envisions Japan’s support towards the development of Indian infrastructure. Construction of high-speed railways and other transport systems, cleaning up of the Ganges and other rivers, rural development and establishment of “smart cities” are the areas where Japan is expected to support India.
“A partner city” memorandum of understanding has to be signed as well. This will provide cooperation in heritage conservation, city modernisation and cooperation in the fields of art, culture and academics. Varanasi which is a heritage city with Indian culture is expected to sign an agreement with Kyoto (old capital of Japan) on Smart Heritage City framework programme namely, “Varanasi-Kyoto Smart Heritage City program agreement”. This programme aims at developing Varanasi, in a similar way as Kyoto has been developed. This programme comes with a vision of “rejuvenating” old India cities.
Japan is a hub for manufacturing electronic gadgets, mobiles, cars etc. An important component for manufacturing these high-tech products are “rare earth material”, which is a set of seventeen chemical elements and are considered rare elements as they tend to occur in the same ore deposit and exhibit similar chemical property. These features of rare earth material makes it expensive to extract and it’s processing come outs with considerable environmental effects. Japan is finalising an agreement, to allow import of rare earths from India and to diversify away its supply from China. Currently, China exports this product to Japan at the rate of USD 39 million per ton. India is expected to supply the product to Japan at a cheaper price.
Indo-Japan Cooperation is entering a new stage in their developments and is likely to expand further in future. Through these initiatives for cooperation, taken by the ruling governments, it is likely to see some significant changes in the economic and political ties of the two countries. Cooperation of defence and civil nuclear energy will bring India and Japan as an emerging power in the world as both the countries will have access to each other’s nuclear energy, naval exercises and defence equipment, in which both the countries specialises.
With such cooperation (through various agreements) Japan has huge opportunity to invest and enhance its presence in India. India has been ranked second most promising investment destination after China, according to Japan Bank for International Cooperation (JBIC) in 2012, for next 10 years. On the other side, for the development and growth of India, these engagements will result in positive friendship, as it will result in progressive security and better and improved infrastructure for the country.