Ties with Japan can steer India to a high growth path

The most enduring global partnership in Asia is witnessing a dynamic calibration as Japan’s Prime Minister Shinzo Abe and PM Narendra Modi team up for a ‘high speed’ ride into a new dawn of friendship and global engagement.

A ‘high speed’ journey it literally promises to be, with India and Japan signing up for the bullet train project which, apart from marking another milestone in the economic cooperation, symbolises the bilateral commitment to inject a lot more vigour and substance to the India–Japan strategic partnership. Bilateral relations are on a high trajectory with cooperation becoming more broad-based in automobiles and production of lithium-ion batteries to power the next generation hybrid and electric vehicles, as well as in human resource development through Japan-India institutes of manufacturing being developed by Japanese companies. Official development assistance from Japan has recorded the highest ever disbursement last year and Japanese investments have made a quantum leap during 2016-17 to touch $4.7 billion from $2.6 billion during 2015-16.

The expectations, therefore, of a significant transformation in the economic engagement between India and Japan are not misplaced. Especially if seen in the context of the dynamics that the two economies are experiencing.

Japan has growing technological strength and a cadre of mighty corporations hungry for new markets as a resurgent economy powered by strong GDP trends, robust consumer and business spending, high capital investment and low unemployment positions. This is good news for India which is undertaking reforms aimed at transforming the country into a new India powered by the technology, and energy of its youth and global manufacturing capabilities. The efforts to simplify business processes, unify India into a single market through the Goods and Service Tax, and attract foreign investment by opening up sectors like defence, insurance, construction to 100 per cent foreign equity, not to miss out an expanding middle class eager for high-end products, are huge draws for foreign investors.

So as the commitment of PM Shinzo Abe and PM Modi to a more ambitious global partnership gathers traction, let us look at some key deliverables.

India’s defence modernisation with special emphasis on ‘Make in India’ presents enormous opportunities by way of transfer of, and collaboration on co-development and co-production of projects related to defence equipment and technology. Indian companies in the defence sector need to tap the huge possibilities in design and transfer of technology for building of naval ships and high-end equipment for naval warships. In aerospace, India and Japan can work together on mechanical system integration and high precision component manufacturing for aerospace industry.

India is also moving steadily towards the goal of a knowledge-based, skill supported and technology-driven society. A beginning has already been made through our drives like ‘Digital India’, ‘Skill India’ and ‘Start-up India’ which also aims to build a strong eco-system of innovation. Here Japanese partnerships would be valuable in infusing that critical edge in India’s efforts towards the fulfilment of the objective.

To strengthen business linkages, India and Japan need to ramp up air connectivity through an open-sky agreement which will allow airlines from India and Japan to operate as many flights as possible between the two countries. This would benefit both partners through reduced airfare and people-to-people contacts.

On the infrastructure side, the Indian Government has launched ambitious initiatives, which present huge opportunities to investors. This includes the 100 Smart Cities Mission, housing for 50 million homeless, building roads, bridges and ports. The priority now should also be to expedite Japanese investment in the 12 industrial parks to be set up by Japan across various Indian states. Indian companies in the infrastructure space would do well to explore prospects of setting up industrial parks with Japanese investment in eastern and north-eastern India which is being seen as critical in India’s outreach to Southeast Asia and in India’s Act East Policy.

On the same tangent, there is a lot of potential to be tapped in India’s north-east through Japanese investment in the development of road networks and connectivity improvement projects and upgradation of the infrastructure in rail, telecom, power, and waterways. Considering the huge pool of natural resources and the quality of its human resources, northeast of India has the potential of being an important investment destination and a centre for trade and business.

This regional perspective should also encourage industry to pursue opportunities arising out of the rapidly evolving India-Japan initiative on the Asia Africa Growth Corridor (AAGC). There has been some loud thinking on the project during Prime Minister Shinzo Abe’s visit on the need to strategise and intensify cooperation with Africa and deepen their own engagement. This opens up huge potential for business and investments, and Indian industry can leverage on its strong connection with African businesses, especially on the east coast, to collaborate with Japan on development cooperation projects, quality infrastructure, and institutional connectivity.

The author is President, FICCI