It takes two to tango. In the context of the India-Japan relations, Abenomics driven by Prime Minister Shinzo Abe’s efforts to re-catalyse the Japanese economy and Modinomics steered by Prime Minister Narendra Modi’s ambitious reform plans to fire up the Indian economy have all the potential to create the most enduring global partnership in Asia.
Not surprisingly, a lot had been anticipated at the third annual summit meeting between the Prime Ministers of India and Japan in Tokyo in terms of an action-oriented roadmap which will set the stage for an even grander partnership.
The expectations were not out of place for two reasons. The personal chemistry between Prime Minister Shinzo Abe and Prime Minister Modi has injected a new vigour and substance to the India-Japan Special Strategic and Global Partnership which industry hopes will be calibrated as the Prime Minister Modi goes ahead with. In his words: “A detailed interaction with top business leaders from India and Japan to look for ways to further strengthen trade and investment ties.”
Second, Abenomics and Modinomics are creating just the right synergies in the respective nations for Japan and India to give a deeper meaning to their cooperation. In Japan, according to the Economist, it is visible in a stimulus package for economic revival, a construction boom, reforms to modernise company boards, private sector efforts to modernise management practices and corporate cultures to better compete in a globalised, technology-led economy and drive to tap innovation capabilities. In India, reforms to unify the country into a single market through a Goods and Service Tax, measures to cut red tape and liberalise foreign investment norms in Defence, railways, insurance and construction have placed the country on a sustained path of 7.5 per cent plus growth, the fastest pace among the world’s major economies.
The good news is that both the countries are responding to the imperatives of growth and development as was evident during the 41st Joint meeting of India Japan and Japan India Business Cooperation Committee organised by FICCI in partnership with the Japan Chamber of Commerce and Industry. Bilateral trade between India and Japan has increased from about 10.3 USD billion in 2009 to 14.5 USD billion currently and cumulative FDI inflows (including equity, re-invested earnings & other capital) has grown from April 2000 to March 2016 to US$ 20.96 billion.
However, much more can be achieved. A strategy to tap unexplored strengths, broaden economic and business linkages by developing new areas of cooperation will boost trade and reverse the growing deficit and ensure a bigger flow of investment.
To start with, fast-track movement on the conclusion of the civil nuclear cooperation accord between India and Japan could pave the way for Japan to export nuclear technology to India which includes key elements like safety components and the construction of domes of nuclear power plants. Industry is keen to see the deal which will also make it easier for US-based nuclear plant makers Westinghouse Electric Corporation and GE Energy Inc to set up atomic plants in India as both these conglomerates have Japanese investments.
With shared economic interests of India and Japan converging in Asia Pacific, New Delhi and Tokyo would do well to actively explore the prospects of a network connecting the Pacific to the Indian Ocean as they eye joint development of infrastructure and capacity building projects in this vast region. Such a mechanism would help India utilise Japanese funds to finance a variety of projects across the region and use their investments and initiatives for Africa’s infrastructure development, education and healthcare to build a stronger plank of bilateral economic engagement.
Defence has emerged as an important area of strategic cooperation and this opens a lot of doors with the sector opened upto 100% FDI. The India-Japan agreements on Defence Exchange and Technology Cooperation and Protection of Classified Military Information creates strong prospects for industry to collaborate in research, development and production of aircraft and equipment.
We also expect the two sides to take forward the success of collaborating on high-speed rail links and expand cooperation to a second high speed rail project which Japan is keen to fund. This will enhance bilateral trade and investment and will be an excellent chance for industry to partner in engineering design work for the link which includes a number of tunnels and bridges. These high speed links of 300 kmph or higher can serve the other freight corridors being planned — Delhi-Mumbai, Mumbai-Chennai, Delhi-Kolkata, Delhi-Nagpur and Mumbai-Nagpur. This will also create skilled jobs in India, improve our infrastructure and give a boost to our ‘Make in India’ mission.
There is scope for a fruitful cooperation in pharmaceuticals. Japanese pharmaceutical market offers a huge untapped potential for Indian pharma industry and our affordable generics. This is the right time for India to push for increased access of Indian medicines as the demand for generics in Japan and India’s capability to meet this demand can prove a win-win for both countries.
India has also not fully exploited its potential in services despite being a global IT hub with vast reservoir of intellectual capital. The implementation of the Social Security Agreement between India and Japan from 1 October 2016 creates a favourable atmosphere for focus on trade in IT services as the deal will favourably impact the profitability and competitive position of Indian and Japanese companies with foreign operations in either countries by reducing their cost of doing business abroad.
Then, there is tourism where India and Japan should consider expanded cooperation. Initiatives like India Japan Tourism Meet, which was organized by FICCI in partnership with the Embassy of Japan in India last month, proactive marketing pushes and leveraging on Bollywood can help in substantially increasing the number of visitors.
There is no doubt that few countries have played such a decisive role in India’s economic transformation as Japan. I believe industry can be instrumental in the next leap forward and initiatives such as “FICCI India Plus” which we plan to launch in Japan will be of great help in this mission. We expect this summit to herald the start of a new era for Japan-India ties.
(Onkar S. Kanwar is Past President-FICCI, and Chairman and Managing Director, Apollo Tyres Limited)