Abe’s visit marks strategic shift in bilateral relations with India

Abe’s visit marks strategic shift in bilateral relations with India
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First Published: Sun, Aug 19 2007. 11 49 PM IST

Updated: Sun, Aug 19 2007. 11 49 PM IST
While likely to be overshadowed by unfolding political drama here, Japanese Prime Minister Shinzo Abe’s three-day visit starting 21 August, accompanied by a 250-member business delegation is aimed at cementing a redefined bilateral relationship whose cornerstones appear to be an alignment of strategic and economic interests. It comes eight months after Prime Minister Manmohan Singh met Abe in Tokyo.
“You can almost pinpoint the timing of the shift in Japan’s stance towards India,” said Rajiv Kumar, director and CEO of Indian Council for Research on International Economic Relations. “It happened in late 2005 when a country risk report on China finally convinced Japan that it should reduce its dependence on its largest trading partner.”
Indo-Japanese trade, at $6.5-$7 billion (about Rs26,900-29,000 crore) a year, is also less than one third of the Sino-Indian trade, even as Japan is the largest aid donor to India. Of the total foreign direct investment received by India between August 1991 and March 2007 though, just 4.85%, or about $2,209 million accrued from Japan. “More than any other two countries, India and Japan are natural allies. These two Asian democracies have no strategic differences, only convergence of interests,” said strategic affairs analyst Brahma Chellaney. “Japan and India need to come together to restore the power equilibrium in the region, which has been disturbed following the growth of China.”
Agenda for cooperation (Graphic)
Following Abe’s visit, India is also set to conduct a joint naval exercise as part of a quartet comprising the US, Japan and Australia. Chellaney said several sections in India have been too fixated on China’s economic boom to appreciate that Japan remains a much larger economy, the second-largest in the world after the US. “We need to strengthen ties with Japan, more than even the US, because Japan does not have as restrictive laws on the transfer of technology as the US,” he said.
Abe will address a joint session of Indian Parliament on 22 August, an honour denied to the presidents of the US and China, during their respective visits last year, due to political opposition. Abe is also scheduled to address the three Indian chambers of commerce and will meet his Indian counterpart, sign bilateral documents and address a joint press conference. In their joint statement on 15 December 2006, the two Prime Ministers had decided to speed up efforts to clinch a bilateral economic partnership agreement within two years. Pending this agreement, an Indo-Japan special economic partnership initiative was announced. A memorandum of understanding was also signed for multi-nodal dedicated freight corridor between Delhi and Mumbai.
“The great Indian wait is over. We are finally set to gain from the new burst of interest in Japan over bilateral ties,” said N.K. Singh, former member, Planning Commission, who earlier served as the minister (economic and commercial) in the Indian Embassy in Tokyo. “The Japanese take their time. You can’t push them into taking their decisions. Prime Minister Abe’s visit proves that they have finally decided that if they don’t seize the opportunity now, they will be losing out to their competitors.” Analysts are expecting progress on the $90-100 billion Delhi-Mumbai industrial corridor, the 1,483km Delhi-Mumbai freight corridor (Tokyo-based daily Sankei Shimbun has reported an imminent Japanese aid of $3.44 billion), increase in aid and loans to India, agreement on a currency swap and a deal on swapping gas sourced from overseas to save on transportation costs, and talks on Japan’s stance at the 45-nation Nuclear Suppliers Group, which needs to approve the Indo-US civil nuclear energy agreement before it goes to the US Congress.
“Japan is increasingly looking at India for outsourcing manufacturing, for exports to Europe to West Asia. India stands to gain greater access to the Japanese market, along with FDI and technology,” said T.S. Vishwanath, head of international trade policy at the Confederation of Indian Industry. Japan is working towards amending its capital market laws to allow overseas companies to raise equity capital through issue of Japanese Depositary Receipts. Ajay Dua, former secretary in the Department of Industrial Promotion and Policy, told Mint in July that the Indian government was hopeful that the amendments to the Japanese capital market laws would be carried out this year, which would help Indian companies participating in the freight corridor raise equity capital in Japan.
Singh said he hopes discussions will not be restricted to the western corridor (Delhi-Mumbai), but “extend to the eastern corridor (Delhi-Howrah) as well, since that would help development along the poorer states of the country”.
Singh said he also expects consolidation of ties in the automobile and auto ancillary sectors, besides announcements on Japanese investment in the ambitious international university in Bihar and cooperation in infrastructure development along the Buddhist tourism circuit. Both Singh and Kumar said they expected Japanese assistance on the nuclear issue as well. “There could well be an exceptional change of Japanese stance for India’s benefit,” said Kumar.
“The Japanese are particularly sensitive towards nuclear technology, having been the only ones to suffer from an atomic bomb, but they are realistic people,” said Singh.
(Sanjiv Shankaran contributed to this story.)
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First Published: Sun, Aug 19 2007. 11 49 PM IST
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