Indo-Japan Ties Strengthen
Two of the most significant economies of Asia are India and Japan. The governments of both countries have a strong electoral mandate to drive economic reforms. The victories of Indian Prime Minister Narendra Modi and Japanese Prime Minister Shinzo Abe, have elevated the bilateral ties between India and Japan. During Narendra Modi’s first official visit to Japan in 2014, these relations turned into a ‘Special Strategic and Global Partnership.’
This was soon followed by the Joint Statement on India and Japan 2025 by the two Prime Ministers during PM Abe’s official visit to India in 2015. The Joint Statement 2025 expanded the bilateral ties in many important aspects such as investment, disaster risk management and people-to-people exchange.
The economic relations between the two countries have been strengthened further by the foundation stone laid by PM Narendra Modi for India’s first bullet train using the Shinkasen technology. Japan provided a helping hand by lending a loan of Rs. 88,000 crore from the Japan International Corporation Agency at a very low interest rate of 0.1 % per annum. Despite initial setbacks, Japanese Foreign Direct Investment (FDI) inflows into India have also been on an upward swing.
Not only have economic relations improved, strategic relations are also building up. First came the week-long trilateral naval exercise in India, Japan and United States. This was followed by the landmark India-Japan civil nuclear agreement that was signed in Tokyo on November 11, 2016 during our Prime Minister’s visit to Japan. The deal dictated building of six new nuclear reactors for the purpose of power generation. On May 23, 2017, yet another agreement was unveiled. It was the Asia-Africa Growth Corridor (AAGC), unveiled during the 52nd Annual Meeting of the African Development Bank held in Gujarat.
Japan is lending its hand in the area of infrastructure too. Japan has already extended its knowledge for the development of Phase 1 of the Delhi Metro. It has now provided a loan of $17 billion for the construction of the Mumbai–Ahmedabad high-speed rail corridor. The high speed bullet train will connect the cities of Ahmedabad, Gujarat, and India’s economic hub, Mumbai. Apart from this, Japan is involved in other mega projects like the Delhi-Mumbai Industrial Corridor.
In the past decade, Japanese investments have proved to be a boon for India’s growth. Japan invested more than $25 billion in different sectors across the nation during the period from 2000-2017 (Economic Times). As of today, Japan is the third biggest investor in India. A knowledge report by Federation of Indian Chambers of Commerce & Industry (FICCI) titled ‘India Japan: Roadmap towards Realising Vision 2025’ observed a manifold increase in Japanese investment in India in the last decade. What’s more important is the fact that Japan has pledged to invest around $35 billion for the period of 2014-19 in India’s manufacturing and infrastructure sectors.
Beginning with telecommunications, automobiles and electrical equipment, FDI from Japan has grown both vertically and horizontally. According to the Economic Times, “Investments from Japan are getting diverse and sectors that have received FDI during 2016-17 period include retail, textile, consumer durables, food & beverages, and banking.”
According to a FICCI report, over 1309 Japanese firms operate in India currently and the numbers are likely to grow steadily. Recent trends show constantly evolving bilateral economic ties between India and Japan and indicate positive future prospects. The growing relationship between the two countries is complimentary in nature and benefits both equally. In return for the Japanese investment, India serves as a potential market for Japanese goods and services. Also, Japan’s initiative of amending its constitution to allow defence relationship with India, further reiterates a prosperous future for Indo-Japan relations.