“If Japan and India come together, I’m sure it will strengthen their democratic values and human values.” – Gujarat’s chief minister, Narendra Modi, during a visit to Tokyo this week.
Violence at Maruti Suzuki’s plant in Manesar, which is run by the Japanese automaker, has cast a shadow over Suzuki’s Indian operations in recent days. But as Narendra Modi’s visit to Tokyo highlights, the relationship between India and Japan continues to gain traction.
On the face of it, India and Japan make for strange bedfellows. One is neat, efficient and organized; the other is not. One values precision and orderliness; the other considers jugaad – the overcoming of scarcity through improvisation — to be a point of pride.
In almost every way, Japanese and Indian mores clash. But the clash is what makes the relationship work, some say. In fact, to use a classic Asian aphorism, Japan could well be considered the yin to India’s yang.
There have been a number of high-echelon visits from one to the other in the past 12 months, and economic ties are on the rise. The increasing presence of Japanese expats in New Delhi and Gurgaon is underscored by the rise in resources tailored exclusively for them: for example, Gurgaon’s Best Western Skycity Hotel, which has a number of Japanese speakers on staff, last year opened a karaoke lounge and restaurant, plainly targeting the area’s Japanese residents.
“The tempo of high-level visits has risen dramatically,” said Rory Medcalf, director of the International Security Program at the Lowy Institute, an Australian foreign-policy think tank. “Economic ties are growing, with a trade agreement and with Japanese investment and aid increasingly pivoting from China to India,” he said.
As the two countries mark 60 years of diplomatic relations this year, the relationship between India and Japan may emerge as one of the major Asian alliances of the coming decades, supporters say.
The fundamental reasons for the growing relationship are rooted in demographics and industrial expertise. Japan has an aging population; India’s is overwhelmingly youthful. Japan has technology and infrastructure know-how, both of which India sorely needs. India has natural resources and a desirable geographic location. It is closer to European and Middle Eastern markets for Japanese goods, meaning shipping times – and costs – could be cut in half.
Trade between India and Japan is expected to double in the coming years. In 2011, bilateral trade was worth a relatively modest $17.8 billion; it is targeted to grow to $25 billion by 2014. This expectation is powered by the signing last August of a free trade agreement, known as the Comprehensive Economic Partnership Agreement, which eliminates tariffs on most goods traded between the two countries. Foreign direct investment from Japan to India between April of 2000 and April of 2012 was $12.3 billion - putting Japan in fourth place after Mauritius, Singapore (both countries foreign investment figures are unnaturally inflated by tax treaties) and Britain.
Japanese companies are interested in India because of a saturated home market, explained Yoichi Kondo of the Japanese External Trade Organization. “Here in India, consumer demand is much more than supply,” he said. “Japanese products sell well here, and in particular the Japanese automobile sector is selling well and has a strong presence.”
The Maruti Suzuki partnership dates back to 1981, but there are about 800 Japanese companies operating in India today. Traditionally, Japanese entrants concentrated on auto manufacturing, but now a wider net is being cast into other industries, such as energy, pharmaceuticals and construction. Other big names include Hitachi, Panasonic and Mitsubishi Electric.
“The relationship has gone on for quite a long time now, it’s just been under the radar,” said Punit Majithia, who runs New Delhi-based NRM International, which helps Japanese companies set up and settle in India.
A 30-year-old fluent Japanese speaker, Mr. Majithia moved to India from London in 2008. “I kept bumping into Japanese people at airports around India and wondered what they were doing here,” he explained. His operation has expanded from his dining table to a19-person team.
“For Japan to keep progressing and retain its position as one of the foremost economies of the world, it needs to align itself with a country that can help it best,” he said.
The state government of Rajasthan recognized the growing relationship early on, and in 2006 dedicated 1,100 acres on the highway linking Jaipur and Delhi for what it calls Japan City. The area is a miniature special economic zone, offering tax breaks and electricity links; it houses manufacturing companies including Daikin, Nippon Steel and Nissin Brake. A residential hub is being built nearby for employees and their families, with plans for a number of apartment complexes, shopping malls and hotels.
A longstanding part of the economic relationship is the Delhi to Mumbai Industrial Corridor, an expansive project aimed at linking India’s political and financial capitals with modern highways, railways, special economic zones and freshly-built intermediate cities. (The Jaipur-to-Delhi highway where Japan City can be found is a key part of the project.) Japan has pledged $4.5 billion towards what could be a total bill of $90 billion, most of which authorities hope will come from public-private partnerships.
Phase one of the corridor includes plans for seven new cities to be constructed in six states – Uttar Pradesh, Madhya Pradesh, Haryana, Gujarat, Rajasthan and Maharashtra – along with a high-speed train that would dramatically reduce transit times to ports for goods manufactured in the north.
“This is a big opportunity to work in partnership with Japan,” said Amitabh Kant, the corridor project’s chief executive. “In fact, there are a lot of lessons to be learned from the kind of corridor development Japan did in Tokyo, Osaka and Nagoya.”
It’s an ambitious project, and one that has been beset by serious delays, caused in part by land acquisition difficulties. But authorities continue to be optimistic, saying this level of development is needed to address India’s future needs, as urbanization takes hold in the coming decades. “India will build more infrastructure in the next three to four decades than it has in the past 5,000 years,” said Mr. Kant.
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