January 23, 2014 12:00 am JST

Why India and Japan are becoming closer

Special contribution from Hindustan Times

Indian Prime Minister Manmohan Singh shakes hands with his Japanese counterpart, Shinzo Abe, during a signing ceremony in Tokyo eight months ago.

NEW DELHI -- On Jan. 26, Japanese Prime Minister Shinzo Abe will be the chief guest during India's Republic Day parade, an honor bestowed on the leaders of countries seen as especially close to India.

     Abe's visit follows an equally important six-day visit made in December by Japan's emperor and empress.

     Indian Prime Minister Manmohan Singh, who admires Japan, has visited the country more than 20 times. An economist, he has long seen the postwar development of Japan as a model for India. As his advisers point out, he applies the word "transformational" to only two bilateral Indian relationships, those with the U.S. and Japan. Singh sees Japan as having the ability and desire to radically upgrade India's capacity to be a global player.

     Among postwar Japanese prime ministers, Abe is seen as the most attached to a close relationship with India. During his first term as prime minister, from September 2006 through September 2007, Abe spoke of the vast Indian and Pacific ocean areas as a single Indo-Pacific strategic region. When Singh this past May visited Japan, he deliberately echoed Abe. Japan was "a natural and indispensable partner" in India's "quest for stability and peace" in the part of Asia "washed by the Pacific and Indian oceans," he said. 

Economics, first

There are two elements to the budding Indo-Japanese relationship.

     One is an economic interest, driven by the past decade of high economic growth in India and a need to seek overseas alternatives to Japan's demand-constrained economy.

     Initially, this converged with a broader U.S.-led policy first enunciated during the Clinton administration: The rise of India is in the interests of the Western world.

     Tokyo concluded it could contribute to this effort by encouraging direct investment into India, particularly in manufacturing. When New Delhi proved unable to build the sort of infrastructure such investment would require, Japan decided to help set up the necessary roads, railways and ports. The Delhi-Mumbai Industrial Corridor (see next article) is the most important manifestation of this decision.

     Japan is now India's fourth largest foreign investor, with accumulated foreign direct investment from April 2000 to March 2013 of $14.5 billion.

     Meanwhile, the value of trade between the two countries tripled from fiscal 2005 to fiscal 2012, to $18.5 billion.

     While growth figures have been impressive, the economic relationship is still nascent. Japan's foreign direct investment into India is a fraction of what it has invested in China. Each country represents less than 3% of the other's total trade. 

     The glue holding the economic relationship together must come from the ties between Japanese and Indian companies. More than 1,000 Japanese companies have a presence in India. A few, notably Maruti Suzuki, the Indian subsidiary of the Japanese motorcycle and small car maker, have become predominant in their sectors.

     India is a less than hospitable environment for business. Japanese officials say their companies -- used to Southeast Asia's and China' excellent infrastructure and corporate-friendly bureaucracies -- will take a while to understand that things work differently in India. "They have been spoiled in the past," one said. "But they understand that if they are to succeed globally, they must succeed here."

     There have been many ups and downs. The much-lauded $4.6 billion purchase of India's largest pharmaceutical company, Ranbaxy, by Daiichi Sankyo in 2008 has degenerated into a legal battle between the Indian operators and Japanese owners. On the other hand, Maruti has gone from strength to strength and now contributes a quarter of Suzuki's global profits.

     Japanese executives remain upbeat. Shinji Yamabe, managing director of Mitsubishi Electric India, recently spoke of sales growing 40-50% a year. An equally bullish Hitachi last year held its global board meeting here. And a senior Japanese executive was quoted last year as saying, "Japan in the past, Thailand now, India in the future."

Net agenda: security

The other facet of the relationship is in the military sphere.

     Though both governments stress their growing relationship is not aimed at any third countries, it is no secret a key pillar of the Indo-Japanese bond is a shared sense that China has become increasingly assertive and unpredictable.

     The combination of the U.S.'s loss of nerve since the global financial crisis of 2008 and a spurt in Chinese assertiveness regarding its territorial claims, which began soon thereafter, has helped accelerate Indo-Japanese military relations.

     Naval cooperation was initially restricted to multilateral exercises in the Indian Ocean. In 2011, then Prime Minister Yoshihiko Noda's visit to India led to the launch of bilateral naval exercises off the coasts of both India and Japan. The two navies have held so many exercises that Japanese diplomats admit they have lost track of the number.

     India is also considering the purchase of 15 US-2 amphibious aircraft for its navy. This would constitute a thinly disguised military export by Japan and begin what Indian officials already foresee as wide-ranging defense technology and hardware cooperation.

     A key element missing from the relationship is a civilian nuclear agreement. India sees such understandings as a litmus test for "strategic trust." But the strength of anti-nuclear sentiment in Japan and within Abe's coalition partner, the New Komeito, has meant this important component in the strategic relationship remains up in the air.

Rejuvenation

Japanese and Indian security analysts have speculated on Abe's enthusiasm for India. Tokyo's interest in India has been bipartisan: Two Democratic Party of Japan prime ministers, Yukio Hatoyama and Noda, were instrumental in promoting both the Delhi-Mumbai Industrial Corridor and the naval relationship. Abe's interest in India has been far more ambitious and strategic.

     While out of office, Abe in 2011 told an Indian audience that he hoped Indian warships would use Japan's base in Djibouti and work closely with Japan's maritime forces "so that sooner rather than later, Japan's navy and the Indian navy can become seamlessly interconnected."

     The statement no doubt was born of Abe's desire to make Japan a "normal" country. Japan's Constitution renounces war and bars Japan from fielding a military, though Japan has what it calls Self-Defense Forces. Abe likely had an economic motivation as well.

     India offers a large market for Japanese exports and an alternative to China as an investment base. But it also provides a foreign policy partner that shares Abe's view of Asian security and could help to legitimize a more assertive Japanese foreign policy. Abe often cites the experience of his grandfather, former Prime Minister Nobusuke Kishi, who used a visit to democratic India to end Japan's postwar pariah status.

     It helps that Indians have no concerns about Japan's wartime record. When Abe a few weeks ago riled parts of Asia by visiting Yasukuni Shrine, which enshrines Class A war criminals as well as Japanese killed in wars, the Indian Foreign Ministry dismissed it as an "internal affair" of Japan.