India - Japan Ties

Context

Resignation of Japanese Prime Minister Shinzo Abe due to chronic illness and the flourishment of India's relations with Japan in his tenure.

Background

Prime Minister Shinzo Abe announced on Friday that he would step down as a chronic illness has resurfaced. Abe, 65, was due to be in office till September 2021. He will stay on until his party chooses a successor. Abe had first become the country’s PM in 2006, but resigned in 2007 due to illness. His current stint began in 2012. Abe is the longest-serving PM of Japan by consecutive days in office.

In 2006-07, Abe visited India and addressed Parliament. He was the first Japanese PM to be Chief Guest at the Republic Day parade in 2014. This reflected his commitment towards an India relationship.

In Detail

After the nuke test by India and several sanctions on her, relations rejuvenated by the foundation of the Global Partnership between Japan and India laid in 2001, and further accelerated by the Abe's serious efforts in the annual bilateral summits.

Abe visited India for the first time in August 2007 and delivered the key address “Confluence of the Two Seas” laying the foundation for his concept of Indo-Pacific. This concept has now become mainstream and one of the main pillars of India-Japan ties.

In September 2014. Both Nations agreed to upgrade the bilateral relationship to “Special Strategic and Global Partnership”. The relationship grew and encompassed issues from civilian nuclear energy to maritime security, bullet trains to quality infrastructure, Act East policy to Indo-Pacific strategy.

Abe’s government sign the agreement on the Indo-Japan nuclear deal in 2016. The pact was key to India’s deals with US and French nuclear firms, which were either owned by or had stakes in Japanese firms.

Military and Economic Cooperation

Over the last two decades, India and Japan have come to realize the importance of cooperation in the changing global environment. The increasingly aggressive Chinese behavior in South and East China Seas, its willingness to militarize conflicts, and its desire to dominate sea lanes in East Asia have made New Delhi and Tokyo close ranks in security and strategic areas, displayed in Japanese participation in Malabar naval exercises and reemergence of Quad.

Both have identical outlooks of the Indo-Pacific and are also cooperating providing an alternative to the predatory Belt and Road Initiative of China through Asia Africa growth Corridor. India also supports deepening Japanese involvement in South Asian states’ infrastructure building. This long-term alignment of interests has accentuated post-Covid-19.

On the economic front also, there is widespread acknowledgment of high complementarity between Japan and India in multiple sectors. According to multiple studies, both countries stand to gain much from cooperation in automobile, pharma, chemical, electronics, textile and food processing. In each of these cases, India offers a sound manufacturing base and market for Japanese.

Beneficial To Each Other

Japan has been the largest donor to India and has concluded immensely successful Delhi Metro. It is the lead foreign participant in the National Industrial Corridor Development Corporation (NICDC) with JBIC holding 26% in the venture which aims to create five industrial corridors with industrial cities.

Japan is also investing in high-speed railways and industrial townships housing clusters of Japanese companies. From an attractiveness perspective, India provides a huge and cheap pool of manpower which is highly trainable. This labor pool can provide price advantage to companies with globalized value chains, including electronics and automobiles. India also has a well-developed engineering sector which could easily absorb manufacturing technology and reduce the allied-industry development lead time.

India is also a huge and growing market for Japanese products, from automobile to consumer electronics which promises very long-term profitability. Further, India can act as a good export base e.g. Hyundai has exported more than three million India-made cars to 88 countries. The geographical location of India also makes it a cost-effective base to export to Africa, Latin America and the Middle East.

Key Concerns

While many states roll out friendly policies for investors and promise hassle-free investment regime, the ground reality is not as look. The poor physical infrastructure in bad roads, unreliable electricity and clogged ports increase the cost of production, wiping away all gains made on cheaper labour.

The regulatory environment is stifling despite jumps in India’s ease-of-doing-business ranking. Compared with this muddled environment, investors find real one-stop approvals with efficient physical infrastructure in China and ASEAN countries.

As the Japanese ambassador to India Mr. Satoshi Suzuki said that Japanese companies have invested a lot in India in past decades, and nearly 1,500 companies have set up their base, still, India-Japan economic cooperation has not performed its full potential yet.

Conclusion

Abe has been a valuable G-7 leader for India, focused on strategic, economic and political deliverables, and not getting distracted by India’s domestic developments much to New Delhi’s comfort.

The present global environment is against China and the multinational companies are looking for alternate places for setup. Indian policymakers need to take the matter with priority and should leverage this opportunity by looking at what India’s competitors such as ASEAN countries are doing to attract Japanese investment.

India is competing with China and ASEAN countries that have a history of attracting foreign investments through developed infrastructure and efficient regulatory systems. Only when India addresses these problems, which essentially are its domestic political economy problems, it will be able to fundamentally transform the economic relationship between the two historically aligned nations.

Connecting the Article

Question for Prelims

What is the correct sequence of the following capital cities, while moving from North to South ?

1. Tokyo
2. Hanoi
3. Kuala Lampur

Select the correct answer using the code given below:

(a) 1-2-3
(b) 2-3-1
(c) 3-1-2
(d) 3-2-1

Question for Mains

Despite some disappointments on both sides, the India-Japan relationship looks set to further deepen in the face of an aggressive China. Discuss.