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Modi’s focus on the India-Japan relationship

by Madhuchanda Ghosh

Special To The Japan Times

In India’s 16th general election, the “Modi tsunami” swept the nation, ushering in a new era for the world’s largest democracy. Prime Minister Narendra Modi’s making Japan his second overseas destination indicates the high degree of importance that Japan will be accorded in the new government’s Look East agenda.

During his visit to Japan from late this month into early September, Modi is scheduled to meet Prime Minister Shinzo Abe in Tokyo on Sept. 1.

Modi has assumed India’s leadership as the nation battles the worst economic slowdown in over a decade with GDP growth below 5 percent. How to attract more foreign direct investment for rejuvenating the Indian economy seems to be one of the primary concerns of the new Indian government.

This in turn will impel the government to strive for deepening India’s economic engagement with Japan, which is one of the largest foreign direct investors in the world. Despite the economic slowdown, India has emerged as the third-largest economy in the world after the United States and China in terms of PPP (purchasing power parity).

India has figured as one of the most attractive destinations for Japanese investments in recent surveys conducted by the Japan External Trade Organization. The number of Japanese companies operating in India is increasing rapidly. From 267 in 2006, the number has increased to around 1,800 in 2013 — more than sixfold in seven years.

To sustain high growth in the Indian economy over the next 15 years, the new government has to focus on some major structural reforms. The three key areas that need urgent economic reforms include: labor, infrastructure and land.

To increase FDI inflows, including Japanese investment, pressure is mounting on the Modi government to emphasize the acceleration of infrastructural development, resolving land acquisition problems and reforming the taxation system and the rigid labor laws.

Japan has committed billions of dollars in the upgrade of India’s infrastructure. In the May 2013 joint declaration, Japan agreed to invest heavily in the freight and industrial corridors linking Delhi and Mumbai and extend financial assistance for more metro railway projects modeled on the successful Delhi Metro and high-speed railway (Shinkansen) systems.

The Delhi-Mumbai freight corridor will be the largest industrial corridor in India, connecting industrial complexes and harbors in six states from Delhi to India’s industrial capital.

It needs to be noted that the burgeoning India-Japan strategic and global partnership is the outcome of the concerted efforts of the predecessors of Modi and Abe who made critical contributions in bolstering Indo-Japanese ties since the early 2000s. The steady transformation in India-Japan relations started in the beginning of the 21st century.

Prime Minister Yoshiro Mori played a pioneering role in deepening Japan’s engagement with India by declaring the two states “global partners.” Japan, for the first time, used the term “global partnership” in reference to a nation other than the U.S.

Mori, in a research interview, opined that he envisioned India’s rise as a global power in the 21st century, compelling him to make the historic declaration, and that was a major turning point in the strengthening of India-Japan relations.

Over the past decade, former Indian Prime Minister Manmohan Singh, along with Japanese prime ministers — starting with Junichiro Koizumi — have revitalized the bilateral relationship.

Today, a high level of mutual trust between the two states could be perceived, which is reflected particularly in the annual prime ministerial visits, the ongoing talks on civil nuclear cooperation and the evolving bilateral security cooperation ranging from joint naval exercises to India’s plans to purchase US-2 amphibious aircrafts from Japan.

Though India and Japan have succeeded in forging a robust politico-strategic partnership, the two states are yet to build a strong economic relationship as evident from stagnating bilateral trade relations. Former Ambassador Hiroshi Hirabayashi pointed out during an interview that while Japan accounts for around 2.3 percent share of India’s global trade, India does not even figure for more than 1.1 percent share in Japan’s global trade.

The India-Japan Comprehensive Economic Partnership Agreement, concluded in 2011, is likely to give a major boost to bilateral trade. Abe is keen on giving adequate focus on the existing mutual complementarities of the Indian and the Japanese economies, which have not been adequately harnessed.

In 2011, Abe opined that the two states would gain significantly from economic complementarities such as India’s growing market of more than 1.2 billion people and Japan’s search for new markets, Japan’s strength in hardware and India’s in software, and India’s huge infrastructural and energy needs and Japan’s technological expertise.

India can offer Japan, the world’s largest pool of skilled manpower. Abe also views that the pattern of relations among the U.S., Japan and India as of crucial importance in the context of the emerging security architecture in Asia.

Given Abe’s strong admiration for India, his friendly ties with India’s new premier and his urge to bolster the India-Japan strategic and global partnership, Modi’s forthcoming visit is likely to bring about a major transformation in India-Japan relations in the changing complex Asian geopolitical and geo-economic scenario.

Dr. Madhuchanda Ghosh, a faculty member at the Department of Political Science in Presidency University, Kolkata, India, is a Japan Foundation post-doctoral fellow at the Graduate School of Law and Politics, Rikkyo University, Tokyo.