Japanese Prime Minister Shinzo Abe follows only three personalities on
Twitter. One is India's newly minted Prime Minister Narendra Modi. So it
came as no surprise when Abe dispatched a congratulatory tweet to Modi
minutes after it became clear that the latter would occupy the prime
minister's official residence at 7 Race Course Road in New Delhi. Modi's
tweet in response read, "I am sure we will take India-Japan ties to
newer heights." It sounded as though the two politicians were continuing
a previous conversation rather than forging a new relationship.
Much of Shinzo Abe's economic reforms in Japan will not bear fruit without a significant emerging market driving the growth of Japanese industry. Japanese exports to China declined by 18% in the 12 months leading to the Indian elections. The decline was triggered by the controversy over the Senkaku (or Diaoyu, in Chinese) Islands and is unlikely to reverse course in the near future.
Meanwhile, many Japanese companies are well entrenched in India but suffered at the hands of the previous outgoing United Progressive Alliance government. Two major Japanese corporations, Mitsubishi and Honda, were slapped with tax recovery notices to the tune of US$2.6 billion following a retrospective amendment to a tax law in India. All this makes Modi look like a white-bearded Samurai savior in the eyes of Abe's business-minded constituents.
The annulment of tax demands might be on top of Abe's wish-list, but there is much more that he expects from Modi. Japan has cultivated India as an export destination for a long time by funneling investment into big ticket infrastructure projects such as the Delhi-Mumbai corridor. Abe would like this trend to continue. India might consider inviting Japanese investment in its Northeast region as a fitting reply to China's claim over what it calls South Tibet. Modi has already inducted a retired army general to supervise the impending boost to infrastructure in this region.
In what appears to be an unintentional Machiavellian twist, Modi has managed to cultivate an equally friendly relationship with China. More surprising is the fact that the Modi-China relationship is now burdened with exactly the same expectations as the relationship between Modi and Abe.
Chinese engineering, procurement and construction contractors are thirsting for a bigger slice of the $1 trillion infrastructure outlay in India over the next five years. Chinese manufactures of mobile phones, transformers and everything else in between have announced plans to enter the Indian market. Low interest loans from Chinese banks that will accompany the activities of Chinese companies in India is also a carrot that India cannot easily ignore.
India too has spruced up its wish list. Last month, the country's first ever service sector delegation to China reached Beijing making a case for Indian information technology and pharmaceutical companies that have been struggling to make headway in the China's domestic market. China's only positive response so far has been an admission that Indian movies are popular among its citizens and cultural co-operation is vital. Everything else is being held back until China gets what it wants from India.
China is rushing its foreign minister to New Delhi on June 8 to ensure that Modi does not overlook its interests as he gets down to business. With the India-China border dispute being tamed by a joint dialogue mechanism over the past several years, the stage appears to be set for a decisive barter where both parties are completely aware of what the other wants in the economic sphere.
This is the first time that the Chinese state media has provided extensive coverage of an Indian general election, so most Chinese are familiar with Modi. It also helps that most Chinese can pronounce Modi's name without much difficulty. Chinese businessmen who have visited Gujarat province, where Modi was chief minister, look at him as a messiah and are relieved that India's democratic process could finally elevate an effective leader.
The courting of Modi by Japan and China certainly resembles a Bollywood plot. But whom will Modi embrace and when? One can only enjoy the songs and drama while waiting for a happy ending.
Much of Shinzo Abe's economic reforms in Japan will not bear fruit without a significant emerging market driving the growth of Japanese industry. Japanese exports to China declined by 18% in the 12 months leading to the Indian elections. The decline was triggered by the controversy over the Senkaku (or Diaoyu, in Chinese) Islands and is unlikely to reverse course in the near future.
Meanwhile, many Japanese companies are well entrenched in India but suffered at the hands of the previous outgoing United Progressive Alliance government. Two major Japanese corporations, Mitsubishi and Honda, were slapped with tax recovery notices to the tune of US$2.6 billion following a retrospective amendment to a tax law in India. All this makes Modi look like a white-bearded Samurai savior in the eyes of Abe's business-minded constituents.
The annulment of tax demands might be on top of Abe's wish-list, but there is much more that he expects from Modi. Japan has cultivated India as an export destination for a long time by funneling investment into big ticket infrastructure projects such as the Delhi-Mumbai corridor. Abe would like this trend to continue. India might consider inviting Japanese investment in its Northeast region as a fitting reply to China's claim over what it calls South Tibet. Modi has already inducted a retired army general to supervise the impending boost to infrastructure in this region.
Regarding Delhi Mumbai Industrial Corridor (DMIC) project, Indian author and activist Arundhati Roy wrote in her book Capitalism: A Ghost StoryAbe will also expect Modi to replicate the Gujarat model of governance delivery at the national level. A simplified indirect tax system, time-bound land acquisition schemes and transparency in industrial licensing will be essential ingredients of this model. This will allow Japanese companies to maximize their growth prospects in India and will give Abenomics a new lease of life.It will be connected to the Delhi Mumbai Industrial Corridor (DMIC), a 1,500-km-long and 300-km-wide corridor with nine megaindustrial zones, a high-speed freight line, three seaports, six airports, a six-lane intersection-free expressway, and a 4,000-mw power plant. The DMIC is a collaborative venture between the governments of India and Japan, and their respective corporate partners, and has been proposed by the McKinsey Global Institute. The DMIC website says that approximately 180 million people will be "affected" by the project. Exactly how it doesn't say. It envisages the building of several new cities and estimates that the population in the region will grow from the current 231 million to 314 million by 2019. That's in seven years' time.
When was the last time a state, despot, or dictator carried out a population transfer of millions of people? Can it possibly be a peaceful process? The Indian army might need to go on a recruitment drive so that it's not taken unawares when it is ordered to deploy all over India. In preparation for its role in Central India, it publicly released its updated doctrine of military psychological operations, which outlines "a planned process of conveying a message to a select target audience, to promote particular themes that result in desired attitudes and behaviour, which affect the achievement of political and military objectives of the country." This process of "perception management," it said, would be conducted by "using media available to the Services."
In what appears to be an unintentional Machiavellian twist, Modi has managed to cultivate an equally friendly relationship with China. More surprising is the fact that the Modi-China relationship is now burdened with exactly the same expectations as the relationship between Modi and Abe.
Chinese engineering, procurement and construction contractors are thirsting for a bigger slice of the $1 trillion infrastructure outlay in India over the next five years. Chinese manufactures of mobile phones, transformers and everything else in between have announced plans to enter the Indian market. Low interest loans from Chinese banks that will accompany the activities of Chinese companies in India is also a carrot that India cannot easily ignore.
India too has spruced up its wish list. Last month, the country's first ever service sector delegation to China reached Beijing making a case for Indian information technology and pharmaceutical companies that have been struggling to make headway in the China's domestic market. China's only positive response so far has been an admission that Indian movies are popular among its citizens and cultural co-operation is vital. Everything else is being held back until China gets what it wants from India.
China is rushing its foreign minister to New Delhi on June 8 to ensure that Modi does not overlook its interests as he gets down to business. With the India-China border dispute being tamed by a joint dialogue mechanism over the past several years, the stage appears to be set for a decisive barter where both parties are completely aware of what the other wants in the economic sphere.
This is the first time that the Chinese state media has provided extensive coverage of an Indian general election, so most Chinese are familiar with Modi. It also helps that most Chinese can pronounce Modi's name without much difficulty. Chinese businessmen who have visited Gujarat province, where Modi was chief minister, look at him as a messiah and are relieved that India's democratic process could finally elevate an effective leader.
The courting of Modi by Japan and China certainly resembles a Bollywood plot. But whom will Modi embrace and when? One can only enjoy the songs and drama while waiting for a happy ending.
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