Compared with its long historical and cultural ties and deep economic relations with China, Japan’s relations with India are not so strong. But the economic and strategic importance of the world’s largest democracy to Japan is growing fast. Prime Minister Yoshihiko Noda’s visit to India in late December was followed by visits this month by trade and industry minister Yukio Edano and infrastructure and transport minister Takeshi Maeda.
Mr. Noda and his Indian counterpart, Mr. Manmohan Singh, agreed on several points. Japan’s Maritime Self-Defense Forces and the Indian Navy will conduct their first joint exercise this year. Japan will provide $4.5 billion over five years for the Delhi-Mumbai Industrial Corridor project. Both countries will raise their currency swap ceiling from $3 billion to $15 billion to help India cope with the rapid withdrawal of foreign funds due to the gloomy world economy outlook. They will push consultations to resume negotiations over bilateral nuclear energy cooperation.
As of October, 812 Japanese firms had business bases in India, much smaller compared with the corresponding number in China — some 22,300 firms. Trade between Japan and India in that month was $14.7 billion, dwarfed by trade between Japan and China at $301.9 billion. But India has strong growth potential. It has achieved an average 8.4 percent annual economic growth for the past five years. As of the end of October, China had a population of 1.35 billion and India 1.24 billion. But India’s population is expected to reach 1.4 billion in 2021, topping that of China.
India’s per capita gross domestic product in 2010 was $1,371, less than China’s $4,382, meaning that India has more room for economic growth than China. India’s working-age population (15 to 64 years) will grow while China’s population will become grayer.
In August, a free trade agreement between Japan and India came into force. This year marks the 60th anniversary of the establishment of diplomatic ties. By deepening ties with India, Japan can counter China, which is trying to increase its maritime influence, and can reduce the risk of excessive economic reliance on China. But Japan must act carefully to avoid antagonizing China. In addition, nuclear energy cooperation with India could provoke public opposition as the Fukushima nuclear crisis simmers on.