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Diplomacy

Indo-Japan Relations: Growth and Future Challenges

Indo-Japan Relations: Growth and Future Challenges

Every relationship has its ups and downs and the Indo-Japan relationship is no exception.

President Barack Obama and Secretary of State Hillary Clinton talk with Prime Minister Singh of India in the Cross Hall of the White House. Pete Souza/White House

The link connecting India and Japan has existed for several decades. The history of Indo-Japan relations has been quite unique and the growth of this alliance has been slow. The physical distance between these two states has also meant a level of mental distance as neither country has figured on each other’s political or economic radars for decades. Although cultural ties between the two countries go back fourteen centuries when Buddhism spread to Japan in the 7th century AD via China and Korea, the relationship has primarily been indirect. Direct contact between these two countries was established in the mid-19th century.

Indo-Japan Relations and The Cold War

The advent of the Cold War highlighted the striking contrasts between India and Japan. As India was trying to build itself into a politically recognised democracy, Japan, on the other hand, as a newly defeated nation, divested itself, instead focusing on economic development, particularly through trade with Southeast Asia. As a result, Japan was able to develop a large middle class and an economy focused on technologies and its nascent auto industry, which would dominate the market for decades, until very recently. India adopted the stance of championing the voice of newly independent nations in Asia, Africa and Latin America along with protecting infant industries and shunning international trade. Japan grew increasingly disenchanted with India’s idealistic non-alignment movement. This was because India tended to dismiss Japan as a camp follower of the United States. The general opinion in Japan, was that India was a chaotic, dysfunctional and desperately poor country.

Immediately after the Cold War, India suffered from a balance of payments crisis in 1991, which provided an opportunity for Japan to extend cooperation. India began the “Look East” policy which was designed to improve its ties with the Southeast Asian and East Asian countries – ASEAN countries and beyond. When India conducted a series of nuclear tests in Pokhran, Rajasthan in May of 1998, it took nearly all nations by surprise. Japan reacted strongly to the tests. All political exchanges and even economic assistance was frozen for nearly three years causing a setback to Indo-Japan bilateral ties.

However, a turnaround in the ties was achieved shortly afterwards, when Japanese Prime Minister Yoshiro Mori visited India. Mori, and then Indian Prime Minister, Atal Behari Vajpayee, called for a global partnership to improve relations. During the visit of the Indian Prime Minister Manmohan Singh to Tokyo in 2006, the two Prime Ministers decided to enter into a strategic partnership as “the largest and most developed democratic countries in Asia, the two countries not only have the responsibilities but also are capable of meeting the regional and global challenges together.”

Indo-Japan Relations and Issue of China

One of the main contributing factors to the question of peace and security in the Asian region is the phenomenal growth of China. For both India and Japan, China is a challenge as well as an opportunity. China’s claim over the South China Sea makes the security environment in the East Asian region fragile. Despite tensions between India and China, and Japan and China, their bilateral economic relations have flourished.

China’s position in the world clearly demonstrates the importance of having financial power. Japan cannot afford to derail the process of deepening economic ties with China. Similarly, any irritants between India and China, in the political domain, have not deterred strengthening of economic ties between the two. Engaging China, rather than infuriating it by designing a strategy of containment, would be in the larger interests of securing peace and stability in Asia because the Chinese have spent significant dollars on military expenditures.

Chinese military expenditures were almost 1.5 times more than the defence outlay which stood at 788.0 billion yuan in the year 2010. This expansion of military power is a cause of concern for both countries as they are engaged in talks with China over Arunachal Pradesh and Senoku Islands.

Indo-Japan Economic Relations

Since 1952, Japan and India have maintained trade, economic and technical cooperation. After the Second-World War, the focus of Japan’s economic relations with India switched from the pre-war import of cotton to the import of iron ore. Japan was undergoing a process of rapid modernization, which required a high amount of raw materials, which was supplied by India. The 1980s marked the start of a new phase in Indo-Japan relations with the establishment of the Maruti-Suzuki plant to manufacture cars in India. In 1958, Japan participated in the Consortium Meeting of India’s creditor countries hosted by the World Bank and embarked on assistance programs for India that has continued till date.

Since 1986, Japan has been India’s largest aid donor. In 2009, Japan granted a loan of 137.028 billion yen (Rs7158.32 crore), which is the largest single ODA grant given by Japan to any nation. Japan has long been actively assisting India, primarily in the form of Official Development Assistance, for upgrading India’s infrastructure, elimination of poverty through public health programs, medical care, agricultural, rural development, population, AIDS countermeasures and support for small business enterprises.

Japan has funded few of the major infrastructural development activities. It provided a loan of 341.087 billion yen for the Delhi Mass Rapid Transport System Project, Japan further funded 19,817 million yen for the Simhadri Thermal Power Station Project. The total ODA loan commitment from Japan in FY 2008 came to 236.047 billion yen. With this, India continues to be the largest recipient of Japan’s ODA.

Japanese Exports to India

Exports from India to Japan were worth US 2.8 billion in 2006–07 compared to US 2.4 billion in 2005–06. This growth continued in 2007–08, with exports growing to US 2.46 billion during April–February, compared to US 2.04 billion in the corresponding period in 2006–07.

Japan is the largest importer of Indian shrimp whereas Indian mangoes are also gaining huge popularity in Japan. India’s exports to Japan comprise mostly raw material and minerals such as marine products, minerals and iron ore.

Indian Exports to Japan

Japan has high growth, high rising market share in flat rolled iron, earth-moving machines, transfer machines, and forging machinery, which are required by India. Many of the products have high market share and high growth rate but market shares are falling. Falling market share with rising growth means firms face tough competition due to entries from other countries.

The largest problem faced by Japan is the introductions of cheap Chinese products, which are the main reason for China’s exponential growth and rise as a global superpower. Indian imports from Japan were close to USD 5 billion in 2006-07. Despite the competition from China, Japan is amongst India’s top five trading partners as both countries are involved in several developmental projects. For Japan, the returns for access to India’s markets are considerable. Japan is a comparatively labour scarce country whereas India’s manpower is favourably placed in terms of experience, education and skills. Thus it is believed that imports from Japan will continue to play a pivotal role in India.

Conclusion

Indo-Japan relations have come a long way from being merely formal in the early 1950s. However, several issues need to be addressed before relations between these two economic players in Asia can be considered healthy. Greater cooperation in defence, disaster prevention and management, and energy security will all come but a long-term relationship cannot be sustained if India and Japan do not first understand each other, make sure that they are talking the same language and share the same vision.

The two countries’ lack of adequate knowledge and expertise of each other which will limit growth in the relationship in the short and the long term. India and Japan will continue to grow in importance to each other and their economic relationship will also grow if anything faster than their political relationship but if India is to remain of importance to Japan and vice-versa, both countries must not just leverage the advantages of their economic relationship but also take seriously the shared values that have been declared as forming such an important component of their ties. This would not only be in the interest of both the countries but also in the interest of the world at large.

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