January 23, 2014 12:00 am JST

Partnering up

SATOSHI IWAKI, Nikkei staff writer

NEW DELHI -- Japan has been seeking close relations with India since 2005, when the two countries signed an accord pledging to form a strategic partnership.

     While Tokyo's efforts have borne fruit in several areas, they have produced the most significant results in the economic arena, with bilateral trade soaring from some $3.7 billion in fiscal 2002 to roughly $18.5 billion 10 years later. Similarly, Japan's direct investment in India nearly quintupled to $2.23 billion in the same period. Each of the past several years has seen some 100 Japanese companies expand into India, with the total number operating there now exceeded 1,000.

     India is the largest beneficiary of Japan's official development assistance program. It received 349.3 billion yen ($3.34 billion) in Japanese government loans in fiscal 2012, some 60 billion yen more than a year earlier. A joint project to develop the Delhi-Mumbai Industrial Corridor,DMIC is a visible symbol of this economic cooperation.

     Japan announced in December 2011 that it would provide financial support to this and other projects, including industrial park development and saltwater desalination. The indication was that the Japan Bank for International Cooperation would extend some $4.5 billion in loans to India. And both governments have been pressing Japanese private-sector companies to become involved in these projects from the planning stages.

Finally on track

The backbone of the DMIC is a dedicated freight corridor, but the project's lack of progress had long frustrated both governments. The situation finally changed when Japanese trading company Sojitz stepped forward last May, signing a 110 billion yen contract with the Indian government in June 2013 to lay railway track for a freight line in the northwestern section of the corridor. The target year for bringing it into service is 2017.

     Furthermore, some Japanese companies late last year began a feasibility study on a high-speed rail line between Mumbai, India's largest city, and Ahmedabad, in the west. Japan, which wants to increase infrastructure-related exports as a pillar of its growth strategy, aims to sell its shinkansen technology to India in a package deal that includes not only the sale of rolling stock and a train operating system, but also management and maintenance and inspection services. Japan believes that this marketing approach will allow Japanese firms to pull ahead of their Chinese and French rivals.

     In September, Japan and India resumed talks on a nuclear power treaty. The talks had been virtually suspended following the nuclear accident at the Fukushima Daiichi power plant in March 2011. India plans to build 18 nuclear reactors by 2020 to meet its fast-rising power demand, and Japanese Prime Minister Shinzo Abe wants to pave the way for exports of nuclear technology to India when he visits the country this month.

Seeking joint sea-lane defense

Japanese-Indian cooperation is no longer limited to the economic field, as each has increasingly come to see the other as a key partner in the foreign policy and national security realms. India sits at a key juncture along the sea lane from Africa and the Middle East all the way to the Far East. This waterway is used to transport crude oil from the Middle East to Japan. Although the Indian government is circumspect about the country's strategic position, it hopes to keep China's growing maritime ambitions in check. China is busy building a series of harbor facilities in countries along the Indian Ocean. Japanese-Indian security cooperation is expected to counterbalance China's growing presence.

     The two countries have recently held annual summits and other high-level meetings, including those attended by their foreign and defense ministers. They also conducted their first-ever joint naval exercise in Sagami Bay of Japan in 2012. Another was held off the coast of Chennai, India, last year. A third is to be held in Japan this year.

     Tokyo also hopes to export the Japan Maritime Self-Defense Force's US-2 amphibious aircraft, primarily used for rescue missions, to India. Japan is looking for a way to boost arms exports in a way that does not contravene its self-imposed restrictions on these exports. It is now more concerned with stimulating its own economy and reinvigorating the nation's defense industry. India could become the first destination for Japanese arms.

     Indian Prime Minister Manmohan Singh showed great interest in exports of the US-2 when he met with Japanese Defense Minister Itsunori Onodera in New Delhi on Jan. 6, according to sources.