Japan started to take India seriously for the first time when, in the last decade, the Indian economy hit eight per cent-plus growth rates. As it happened, Japan was contemplating at the time the dismal consequences of two decades of economic stagnation. While the economic downturn was brought on by the collapse of asset bubbles, negative sentiment was heightened by the gradual loss of manufacturing competitiveness, notably to China. This was painful for a country that had prided itself on its manufacturing excellence.
In this scenario, the demographic dividend created by India’s young population stood in sharp contrast to Japan’s ageing population and its shrinking domestic market. Also, both Indian and Japan faced an increasingly powerful and truculent China. Japan needed to outsource manufacturing to a low-cost destination other than China; India desperately needed to invest in, expand and modernise its manufacturing. The preconditions for India and Japan to hold hands and go forward could not have been better.
The Indian economy has lost some of its shine after the recent slowdown in growth. But in these times of difficulty for the global economy, when most emerging economies have decelerated, India’s near-seven per cent growth remains impressive and the geopolitical imperatives for the two Asian countries to strengthen ties are as strong as ever. So it is not surprising that the two countries should have just concluded a very hectic round of ministerial meetings that point to growing co-operation across areas. On a single day (April 30), four ministerial meetings took place in Delhi — the sixth strategic dialogue between the two foreign ministers, the first ministerial-level economic dialogue, the second ministerial business-government policy dialogue and the fifth energy dialogue.
Several important signals emanated from these meetings. Two new dialogues, on cyber security and maritime matters, were launched; the co-operation on rare earths was declared to be close to take-off; and both sides looked forward to their first joint naval exercise later this year. Maritime matters in the Indo-Pacific area have acquired a higher profile with India seeking to secure safe passage even as China moves towards its goal of a blue-water navy. At least two flashpoints were reached in recent years over China’s claims to areas in the South China Sea: the Japanese arrest – and quick release, under Chinese threat – of the captain of a Chinese fishing trawler in disputed seas; and China’s vociferous protests against an agreement between ONGC Videsh Limited and Vietnam for joint energy exploration in the same disputed seas. The ban imposed by China on rare-earth shipments after the trawler captain’s arrest has made Japan turn to India, and given a new significance to progress in co-operation in the area.
Increasing India-Japan co-operation is not happening in a vacuum. Trilateral relations between the two and the US have been shifted to a higher level. Issues that matter have been listed in a summary of the three-way track-two strategic discussions that took place in New Delhi this year in March. (First-track discussions started in December.) All have a common interest in keeping the Indo-Pacific maritime area secure and safe, and feel the need to answer recent Chinese action regarding the area.
The track-two discussions also outlined what each country expects the others to do. India has to get back to growth of eight to nine per cent. Japan seeks a better foreign direct investment environment, so that India can become the next manufacturing hub of the global economy. This can happen through improved independent regulation and transparent bidding processes, particularly in cases involving technical evaluation. The US and India have also urged Japan to reach an agreement on peaceful nuclear co-operation on the same terms as the US has — without insisting on India signing the non-proliferation treaty.
Strategic co-operation has to move at its own pace, given political sensitivities. But one clear example of absolutely non-controversial actions that can speed up co-operation is the announcement during the ministerial meetings to give Japan a 26 per cent stake in the Delhi-Mumbai Industrial Corridor Development Corporation, which will run the western freight corridor. This project, with all its elements, can act as a powerful catalyst for the right kind of technology investment in infrastructure.
China has a bitter memory of Japanese imperialism. India has a sweet memory of Japan helping Subhas Chandra Bose and the Indian National Army. Japan today is concerned about its shrinking population and overdependence on outsourced manufacturing to China. India has the low-cost skills and ability to host a good part of that manufacturing and do wonders for its blue-collar employment and incomes. If, that is, it sets its policy house in order!
