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The annual summit between India and Japan on Saturday will seek to forge greater bilateral trade and investment ties, with Japanese Prime Minister Shinzo Abe coming with a high-powered business delegation.
Abe, here from Saturday to Monday on a hurricane tour, will be accompanied by heads from companies such as Mitsubishi Heavy Industries, Sumitomo Chemicals, Toshiba Corporation, Mitsui, Daiichi Sankyo, Bank of Tokyo-Mitsubishi, East Japan Railway Company and Hitachi, among others.
“The three priority areas for India in its relationship with Japan are Japanese technology, capital and modern management practices. Our relationship with Japan is a testimony to India’s successful outcome of its ‘Look East Policy’. The visit will focus in these areas,” said Gautam Bambawale, joint secretary (east Asia), ministry of external affairs.
Abe is to address a joint business chambers’ meeting (CII, Assocham and Ficci). He then is to have delegation-level talks with Prime Minister Manmohan Singh. He’s also to be chief guest for the Republic Day parade. This is the first time Japan has been invited for the celebration.
Bambawale said Abe’s presence as chief guest for the parade reflected the fact that India regarded Japan as a key ally in its growing relations with Northeast Asia. He added both countries enjoyed economic and business ties, besides defence, military and political cooperation.
Japan is India’s 12th largest trading partner, with bilateral trade reaching $18.5 billion in 2012-2013. India’s exports to Japan more than doubled from $2.5 billion in 2005-06 to $5.2 billion in 2010-11, growing at an average rate of 16 per cent annually. However, the share of Japan in India’s global exports fell from 2.4 per cent in 2005-06 to 2.1 per cent in 2010-11.
In 2011, both sides vowed to take their economic and business ties to newer heights, even as India and Japan marked 60th anniversary of the establishment of diplomatic relations. Some significant business deals are expected to be announced during the meeting between Abe and Singh.
Top five exports to Japan (2012-13)
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Abe’s economic policies have earned the nomenclature of ‘Abenomics’ because of the bold measures taken by him in changing Japan’s tax structure to boost its growth. During the first three quarters of 2013, Japan has witnessed economic growth after gross domestic product contracted in 2012.
Addressing participants at the World Economic Forum in Switzerland, the Japanese PM had said his country was about to break free from chronic deflation and also to get back on track for fiscal consolidation.
“It is not twilight but a new dawn that is breaking over Japan... I am willing to act like a drill bit, strong enough to break vested interests. Over the next two years, no vested interests will remain immune from my drill,” he said at Davos.
Japan is the fourth largest investor in India. Most of the Japanese foreign direct investment (FDI) in India is in the manufacturing sector. The main sectors are automobiles, electronics and a few related ones.
Currently, there are 1,072 Japanese companies present in India, as compared to 926 in 2012. The total number of Japanese business establishments in India is 2,542, according to their embassy and the Japan External Trade Organization.
According to our department of industrial policy and promotion, FDI from Japan was $14,749 billion from April 2000 till June 2013, about 7.4 per cent of total FDI into India during this period. Delhi hopes to see an increase across the board in Japanese FDI, including in the service sectors (financial and non-financial). To encourage more investment in India, Japan has decided to open its second business support centre in Mumbai.
In February 2011, India and Japan signed an ambitious Comprehensive Economic Partnership Agreement (CEPA). It is assumed India stands to gain significantly; 90 per cent of tariff lines are covered. Despite this, India has a huge negative trade balance with Japan. The total trade deficit with Japan was $6.3 billion in 2012-13, more than our total exports to Japan.
The CEPA, effective from 2012, is expected to ensure access to a highly developed Japanese market for the pharmaceutical sector. For the first time, Japan has committed to give the same treatment for Indian generics as their domestic industry.
Overseas development assistance (ODA) from Japan has remained a significant part of the economic relationship. India has been the largest recipient of Japanese ODA since 2003-04. In 2006-07, Tokyo committed ¥184.9 billion for 11 projects in India. This was the largest-ever commitment by Japan to India in a single financial year.
According to CII, this ODA is expected to increase under the Dedicated Freight Corridor. It is expected the first phase of funding the project will entail financing worth ¥410 billion, while the second phase might see ¥226 billion.
Japan is involved in some of the country’s marquee infrastructure projects such as the Metro rail network, Delhi Mumbai Industrial Corridor and the Bangalore-Chennai Corridor, involving billions of dollars of investment.
In Saturday's meeting, both sides are also expected to discuss the pending civil nuclear agreement that has been going on since June 2010. However, India slowed down the pace of negotiations in the aftermath of Fukushima nuclear accident in March 2011. But talks were revived in May last year by both the prime ministers, who gave it a fresh lease of life.
