Mumbai: India and Japan on Monday waltzed closer to one another over a carefully choreographed but hectic 24 hours across Delhi and Mumbai.
With China poised to surpass Japan as Asia’s largest—and the world’s second largest—economy as early as 2010, Japanese Prime Minister Yukio Hatoyama turned his attention to India despite battling a political scandal and falling popularity at home, diplomatic sources and economic experts said.
Hatoyama’s 36-hour trip, the first ever visit by a Japanese PM to Mumbai, began with a closed-door morning meeting at the Taj Mahal hotel with CEOs of India’s largest companies.
On the sidelines, he met Gujarat chief minister Narendra Modi who, in a 40-minute meeting, discussed the $90 billion (Rs4.2 trillion) Delhi-Mumbai Industrial Corridor (DMIC) project, a large area of which passes through Gujarat.
The same afternoon, Hatoyama flew to New Delhi for a similar meeting with CEOs and was later hosted to a dinner by Prime Minister Manmohan Singh.
The two countries signed on a Rs1,000 crore project development fund that will finance feasibility studies for the DMIC master plan.
“They look upon us as a potential Asian leader,” Ajay Dua, a global adviser to Japanese consumer giant Panasonic and former industry secretary, told the Hindustan Times (HT). “This visit signifies that they have come to the conclusion that Asia cannot mean China alone.”
With an ageing population and an economy that is showing the first green shoots of recovery after two years, Japan is hoping for a gross domestic product growth rate of 2% next year. Compare that to the prediction for China (10%) and India (8%) and Japan’s investments into India show strong economic diplomacy on Hatoyama’s part.
“A lot of work has gone into this visit,” a highly placed Japanese diplomatic source told HT, requesting anonymity because he is not authorized to make a public statement. “It (the visit) is a win-win situation for both India and Japan.”
The industrial corridor—to be built on both sides of the 1,480km of rail track between Delhi and Mumbai across seven states—exemplifies this “win-win”.
But the returns to India will go beyond DMIC, with more Japanese investment expected to flow in as India pushes bilateral deals and moves away from third world multilateral agreements.
Riding this political tailcoat, Japanese firms, traditionally reluctant to enter India, are mulling big investments in the nation, primarily in telecom, auto, drugs and power.
Toyota Motor Corp. managing director Hiroshi Nakagawa, for instance, told HT that he wants DMIC to go all the way to Chennai, through Bangalore, with the first phase being the Chennai-Bangalore arm.
The payoff for Japan, which will also provide soft loans for the Delhi-Mumbai dedicated rail freight corridor: a third of the value of the contracts will go to Japanese companies.
“The Japanese don’t make friends easily, and no decision is taken overnight,” said Dua, who advised India on the industrial-corridor deal.
The guest list for the Mumbai meeting with Hatoyama, carefully vetted by the Japanese embassy, included Tata group chairman Ratan Tata, Reliance Industries Ltd chairman Mukesh Ambani, Godrej Group chairman Adi Godrej, ICICI Bank Ltd managing director Chanda Kochhar and Bajaj Auto Ltd chairman Rahul Bajaj. “Both India and Japan have strong potential (to grow investments),” said Godrej. “We discussed how to take this potential forward.”
HT’s Rachit Vats in Mumbai and Sumant Banerji in New Delhi contributed to this story.