Strategic alliance: India-Japan economic engagement

India-Japan strategic partnership can only be sustained on a long term basis on the solid foundation of deep economic engagement, for which Japan has provided enough fertilizer to nurture the relationship.

Along with the promise to conclude the Civil Nuclear Cooperation Agreement by the end of the year, other mega projects will help propel the bilateral economic and political relationship to unimaginable heights. The Civil nuclear cooperation agreement with Japan will help India enter many of the restricted nuclear clubs and trade regimes and encourage other countries also to respect India’s desire to promote civil nuclear energy.

It is upto India to provide an enabling environment for not only the Japanese but other international investors to make the country an attractive place and worthy of engagement in the strategic areas.

The kind of huge market and strategic possibilities that India has emerged has led the Japanese government to encourage its investors to consider India as an alternative to China, where they have till now made more than US$ 70 billion investment and conduct more than US$ 345 billion of bilateral trade.

Promoting investment

In fact the anti Japanese sentiments over the Senkaku/Diayou islands in China will force the Japanese business to seek greener pastures and India must seize the opportunity by putting its own house in order.

During the visit of the Prime Minister Manmohan Singh to Tokyo the Japanese government once again reiterated its commitment to promote hundreds of billion dollars of investment in India through various infrastructure projects which has the potentials of transforming India into a mega market and multi-trillion dollar economy.

The joint statement released after the Manmohan-Abe meeting reflects the Japanese commitment to help raise the economic profile of India through various long term infrastructure projects. If the Delhi Metro can be said to be a shining example and symbol of Japanese assistance to India the new infrastructure projects, if successfully completed on the pattern of Delhi Metro could elevate the country as an economic force to reckon with on par with China.

Here is a glimpse of few ongoing and new Japanese sponsored projects-Dedicated Freight Corridors-According to an official release of the Indian Railways, the DFC will enable Indian Railways to improve its customer orientation and meet market needs more effectively. Creation of rail infrastructure on such a scale-unprecedented in independent India-is also expected to drive the establishment of industrial corridors and logistic parks along its alignment.

The DFC will have two corridors-the Western DFC and Eastern DFC-spanning a total length of about 3300 route km. The Eastern Corridor, starting from Ludhiana in Punjab will pass through the states of Haryana, Uttar Pradesh, Bihar and terminate at Dankuni in West Bengal. The Western Corridor will traverse the distance from Dadri to Mumbai, passing through the states of Delhi, Haryana, Rajasthan, Gujarat and Maharashtra.

After the talks the Japanese government signed a loan agreement worth 136 billion Yen for the second phase of the DFC.

Delhi Mumbai Industrial Corridor-The MoU for this project was signed in 2007, which is  a mega infra-structure project of USD 90 billion with the financial & technical aids from Japan, covering an overall length of 1483 kms between the political capital and the business capital of India, i.e. Delhi and Mumbai.

The joint statement described this as a visionary India-Japan Strategic Partnership project which would enable India to access innovative, cutting edge technologies.

The two countries have also resolved to undertake the development of Chennai-Bengaluru areas and have directed the authorities to prepare a Master Plan for the Chennai-Bengaluru Industrial Corridor (CBIC).

Rare Earths-In view of China’s decision to restrict its Rare Earth exports to Japan, which is vital for its electronics and other hi-tech industries, the Japanese government has decided to partner with India in expanding its rare earth industry, for which the Department of Atomic Energy of India and the Ministry of Economy, Trade and Industry (METI) of Japan have signed an agreement during the visit on cooperation in rare earths industry in India.

This will make India an alternative to China in the production of rare earth minerals and encourage other developed countries to source them from India, which would be multi-billion dollar export.

Gas hydrate-Japan has achieved success in extracting Natural Gas from methane hydrate deposits under the sea and promised support to India in exploiting the gas from Indian coastal areas, which is expected to fulfil country’s energy needs for decades to come.

High Speed Rail-Japan has also offered to assist India in the development of High Speed and Semi High Speed Rail in India, which will be role model for development of Railways all over the country. Both sides will co-finance a joint feasibility study of High Speed Railway system on the Mumbai-Ahmedabad route.

The two Prime Ministers also said that they recognise the importance of upgrading the speed of passenger trains on the existing Delhi-Mumbai route to 160-200 kmph (Semi-High Speed Railway system) and welcomed the final report of the feasibility study undertaken with Japan’s cooperation, and confirmed that further consultation between the two countries would be continued to draw up a road-map.

Continued efforts

To enhance the bilateral trade and investment India and Japan have already signed a Comprehensive Economic Partnership Agreement (CEPA) in 2011 which has given a fillip to economic and trade relations.

The two Prime Ministers stressed the importance of continued efforts to further enhance trade in goods and services as well as investments. However in spite of the CEPA, the bilateral trade has only reached a level of US$ 17.8 billion, which is much below the market potentials of the two countries.

It is expected that with the opening of high tech goods market for India, the bilateral trade will pick up as Japan has agreed to ease the regulations in this sector.

The two Prime Ministers appreciated the steady progress made in enhancing trade in high technology for mutual benefit and directed their relevant organizations to bring the dialogue in this field to a successful outcome.

For trade and economic relations to flourish between the two countries, the main trade route namely the South China Sea must be open for international traffic. In the event of India-Japan trade picking up, the two countries through their strategic partnership will ensure that the freedom of navigation is maintained in the South China Sea.

A smooth functioning trade route in the Asia Pacific region will require the two countries to strengthen the Democratic Security Diamond, as proposed by the Japanese Prime Minister Shinzo Abe.

Thus Japan sees a huge opportunity in forging an economic and strategic partnership with India. India must seize the strategic opportunity to deepen bilateral relations while simultaneously walking a diplomatic tightrope to maintain equally cordial working relations with the rival of China.

In fact the deepened economic relations with Japan will increase India’s leverage in the region which will also compel the Chinese to come to terms with India.

This is why the Prime Minister Manmohan Singh emphasized that the India-Japan commercial relationship is a strategic objective and must be treated in the same way.

Addressing the business community in Tokyo, Dr Singh said that a stronger commercial partnership between the two countries should be the cornerstone of the relationship. It would not only contribute to each other’s economic growth but will also be in the strategic interest of India and Japan.