India Japan Honeymoon

Another interesting edit in Business India

Business India, Editorial, Dec 9-22, 2013

Indo-Nippon Honeymoon

The high profile visit of Japanese royalty points to the new India-Japan tango in economic and strategic affairs

It is perhaps symbolic that Emperor Akihito and Empress Michiko of Japan who visited India after 53 years were here earlier as Crown Prince and Princess of Japan on their honeymoon. Today the two countries too, are embarking on a strategic and economic honeymoon of their own.

The post war recovery of Japan and its second coming as an economic power did not see any significant growth in its economic relations with India. Japan was focused on North America and Europe and South East Asia and India had autarkic economic policies, while the Cold War kept Japan and India apart strategically.

 Despite liberalization Japan continued to studiously ignore the Indian economy till very recently. Suzuki’s success in the Indian auto market stood out as an exception while the rest of the Japanese companies fretted at the ‘difficulties in India’.

The situation started changing in the last decade due to political and economic developments. On the positive side the ‘Look East’ policy of Prime Minister Manmohan Singh is finally yielding results. asean welcomed it first and now Japan too, is joining the party. The Indian Prime Minister has doggedly pursued Japan along with the landmark Indo-US nuclear deal and has been visiting Japan regularly. The spadework has started yielding results and gained momentum with the election of Shinzo Abe a self-declared Indophile, as the new pm.

India’s public declaration of nuclear weapons status with the five nuclear tests of 1998 did appear to cause a demonstrative but a temporary setback. However, both soon understood each other’s sensitivities, while publicly sticking to their stands regarding nuclear non-proliferation treaty (npt). Finally, Japan seems to be veering around to the reality of a nuclear powered India despite a strong public sentiment against nuclear weapons. Ironically it is China which seems to be making this turn around possible with its belligerent attitude towards territorial disputes with many of its Asian neighbours, including Japan.

If signals from Tokyo and New Delhi are to be believed a civil nuclear deal between the two countries seems nearer than ever. The fact that Toshiba and Hitachi control the nuclear reactor businesses of Westinghouse and General Electric is certainly a factor in this development.

In the strategic tango, Japan is the leading partner, while India has been coy. It is being cautious about Chinese sensitivities. However in the economic tango it has been the other way around. Both are protesting too much that their emerging partnership is not aimed at any “third country”, a euphemism for China, while Beijing appears unconvinced and jittery. Clearly in the Sino-Indian strategic games from the Karakoram to the South China Sea, Japan is entering as a third factor to Beijing’s discomfiture.

While intricate strategic power games have begun, what is heartening is that India-Japan trade is emerging from torpor and picking up momentum. Two way trade has trebled in the last six years to reach $18.5 billion in 2011-12. After six years of negotiation the two countries have concluded a Comprehensive Economic Partnership Agreement (cepa), which has come into force since August 2011, which is expected to give further fillip to rapid growth in two way trade.

Japanese investment in automotive and consumer electronics and white goods segment has also surged, with more investments announced by Panasonic, Hitachi, Sony, Honda, Toyota, Nissan et al. Numerous surveys among Japanese companies show that India is becoming their preferred investment destination over China and US, despite the fact that old complaints regarding rusty infrastructure, cumbersome bureaucracy; militant labour and difficulties in land acquisition remain as before.

While imports from Japan are rising, the exports from India are not keeping pace and constitute largely, non-manufactured commodities like marine products, minerals etc. Indian it services and pharmaceutical companies are yet to make a serious dent in the highly conservative and protected fortress Japan.

The efficient execution of Delhi Metro Rail with Japanese assistance has increased India’s credibility to receive more funds for its infrastructure projects like the Delhi-Mumbai Industrial Corridor.

Quite appropriately Prime Minister Shinzo Abe is the guest of honour next month during the Republic Day parade and we will perhaps see more concrete announcements by both sides on the economic front.

Though largely ceremonial the Japanese royalty’s India visit has great significance in the nuanced symbolism of Japanese culture. Considering that the Empress had cancelled a visit to a Book Fair in Delhi in 1998 due to Pokharan tests, one could say “Heika o youkoso” (Welcome your majesty) .