As Prime Minister of Japan, Shinzo Abe, lays the foundation stone for India’s first high-speed rail project – a venture that is at the heart of Prime Minister Narendra Modi’s vision to create a new India by 2022 – in Ahmedabad today, an increasingly close relationship between India and Japan will be on display.
Having assumed greater importance in an atmosphere of common concerns about China’s rise and its growing assertiveness across Asia, the relationship has grown rapidly over the past decade. Both countries today find themselves indispensable in the economic, political and strategic calculations of the other and their convergence on issues related to security and economics continue to grow.
Security concern vis-à-vis China remains the primary driver of the relationship, but the engagement in the economic realm has grown drastically under Modi and Abe. Between 2000 and 2017, Japan invested over $25 billion in different sectors across India, constituting 8 per cent of the country’s overall foreign direct investment (FDI) during this period. A large part of this investment flowed into India between 2014 and 2017.
Japan is currently the third biggest investor in India, with investments rising substantially during 2016-17. During this period, the investments have reached $4.7 billion, an 80 per cent increase over the $2.6 billion invested between 2015 and 2016. In 2014, Japan had pledged to invest around $35 billion in India’s manufacturing and infrastructure sectors in the 2014-2019 period.
Economic engagement between the two countries has translated on the ground in the form of ventures such as the Mumbai-Ahmedabad high-speed rail corridor, connectivity projects of immense strategic value in India’s North-East and development of 12 industrial parks. Japan is also assisting India in developing civilian and strategic infrastructure in the Andaman and Nicobar Islands.
The bullet train project, which is being built with technological and economic assistance from Japan, is the largest of these initiatives. Japan is providing around 81 per cent of the funding for the project in the form of a loan worth $12 billion, at a cost of 0.1 per cent, for a 50-year period including a 15-year moratorium.
The project has the potential to emerge as a model for sustainable development cooperation at a time when China’s One Belt, One Road (OBOR) initiative is being criticised for creating unsustainable debts.
For connectivity projects in the North-East, Japan International Cooperation Agency (JICA) has signed an agreement with India to provide $610 million for the North-East Road Network Connectivity Improvement Project. The two countries have also set up an India-Japan Coordination Forum for Development of North East to focus on strategic infrastructure, electricity and disaster management. Upgrading the 351 km road between Aizawl and Tuipang in Mizoram, being carried out with the help of a loan from the Japan, is one of the many projects being undertaken under this scheme. Infrastructure development in the North-East assumes importance in the backdrop of repeated Chinese incursions into Indian territory and the lack of quality infrastructure connecting India to South-East Asia, a major constraint in India’s Act-East policy.
Asia-Africa Growth Corridor
Another area where economic and strategic challenges have forced the two to come together is the Indian Ocean Region. India and Japan are already two key players in the Indian Ocean and the African continent, taking on massive Chinese investment in the region. Cooperation in this area comes in the form of the Asia-Africa Growth Corridor, which emerged in the joint declaration issued by Modi and Abe in November 2016. The formal announcement of the AAGC was made by Modi back in May in Gandhinagar at a meeting of the African Development Bank.
The AAGC, unlike China’s OBOR, will not only focus on connectivity. It will essentially be a sea corridor linking Africa with India and other countries of South-East Asia, also focusing on institutional connectivity, skill development and capacity building – things found lacking in Chinese initiatives in the region. It is being seen as a counter to OBOR’s maritime component – the maritime silk route. The AAGC is also closely linked to India-Japan Vision 2025, which envisages a peaceful, open, equitable, stable and rule-based order in the Indo-Pacific region.
Having institutionalised a dialogue on Africa back in 2010, India and Japan have been engaging on issues related to the continent for a number of years. Both countries bring unique advantages as they come on-board to execute the AAGC. While India brings its proximity to Africa, historical linkages to the continent and a long history of development cooperation on the table, Japan brings the much required expertise, economic and technological resources. The two, in this scene, are uniquely placed to execute the project successfully.
Defence And Security
Defence and security relationship between India and Japan have been the primary driver of their bilateral relationship. The two countries have shared concerns about China, with which both have major territorial disputes. India’s outreach to the United States and the declaration of Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region has boosted this aspect of the relationship.
The security relationship has witnessed remarkable progress under Modi and Abe. Japan became a permanent member of the Malabar exercise between India and the US in 2015 and is also engaged with India and Australia in a trilateral dialogue. The two countries have advanced their cooperation in the maritime security domain, have signed agreements on defence technology transfers and have agreed to share classified military information. India has also improved security partnership with Australia, arguably Japan’s second most important strategic partner. Australia and India held their first ever bilateral naval exercises in 2015. These engagements point towards growing strategic convergence.
Japan was the only nation to extend public support to India during the Doklam crisis with China. Japan’s support for India’s position was a manifestation of the evolving security partnership between the two countries.
Nuclear Energy And Space
India and Japan have also been cooperating in other areas, such as nuclear energy and space. The two countries signed a civil nuclear agreement during Modi’s visit to Japan in November 2016. The agreement came into force in July 2017, making India the first country that has not signed the nuclear Non-Proliferation Treaty to have signed a civil nuclear deal with Japan. The signing of the treaty was an achievement for both Modi and Abe as they not only successfully navigated Japan’s ‘nuclear allergy’ but also tackled resistance from the opposition block in the Diet (Japan’s legislature). The pact has paved the way for India to buy nuclear technology from Japan, which would help the country in producing clean energy.
In the realm of space, cooperation between Japan Space Exploration Agency (JAXA) and Indian Space Research Organisation (ISRO) dates back to 1960s. JAXA had played a prominent role in the establishment of Thumba Equatorial Rocket Station at Thumba in Thiruvananthapuram. Modi and Abe had called for greater cooperation between the space agencies of the two countries in the 2016 joint statement. ISRO and JAXA are currently working on the Asia‐Pacific Regional Space Agency Forum, which focuses on disaster mitigation.
Cooperation in space has also moved to the private sector. Two teams from India and Japan are among the five groups competing for $30-million Lunar XPrize, sponsored by Google. The competition calls for privately funded teams to be the first to land a robotic spacecraft on the Moon and transmit back high-definition video and images. Despite the competition, India’s TeamIndus and Japan’s Team HAKUTO have agreed to launch their probes together, atop ISRO’s Polar Satellite Launch Vehicle (PSLV). The Japanese team is also collaborating with JAXA, bringing both private and state-owned players from the two countries together.
Despite Japanese investment in India and engagement between private sectors, the scope for further cooperation remains. India’s trade deficit with Japan has widened to $5.9 billion in 2016-17 against $2.7 billion in 2013-14. However, in a recent survey, around 1,000 Japanese manufacturing companies ranked India as the most favoured nation for future investments followed by Indonesia and China. As Modi’s plan to make India a business-friendly destination progresses, the scope for cooperation between India and Japan is expected to grow further.
Although successive governments in Delhi and Tokyo have contributed to this relationship, the personal bonhomie between Modi and Abe and the convergence in their strategic worldview has propelled ties between India and Japan to new heights. As Abe looks to free Japan from its post-war pacifism and Modi seeks to drive India towards greater economic growth in an atmosphere of common concerns about China’s rise and the growing uncertainty over America’s future role in Asia, the two countries will continue to find new avenues for cooperation.