India–Japan Relations: Overview of Important Topics

Here are some of the important topics on India-Japan Relations for quick overview for your examinations.

Historical Trends in India-Japan Relations

Rich cultural, literary and religious linkages coalesce to provide a positive bedrock to India-Japan relations. It is said that Japan first came into contact with India during the reign of Emperor Kimmei (539–571 A.D.). Buddhism was the first common link between both sides, although it did not really find its way directly between the two countries. Japanese links with Buddhism in India continue even today with a number of Japanese visitors travelling to cities like Bodh Gaya. The second vital connection between both sides was a result of the common feeling of Pan-Asianism. Any study of India-Japan relations would be incomplete without a brief discussion of how prominent Indian revolutionaries like Rash Bihari Bose and Subhash Chandra Bose developed intimate links with Japan and the Japanese. R. B. Bose who came to be known as the “Bose of Nakamuraya” not only took political asylum in Japan, married a native woman, but also spent his entire life in the country as a Japanese citizen (from 1924) till his death in January 1945.Despite Japan’s aloofness with the rest of the world, the connectiv- ity between India and Japan remained with the fast-growing Japanese spinning industry, which found India as a source of raw cotton. India also became a destination for finished Japanese goods. As conflict over territorial expansion, securing resources, and interpretation of history continue to raise tensions among Asian nations, the shared ideology between Japan and India has been regarded as the basis of a strong partnership to promote regional growth. In fact, growing ties between the two countries is increasingly viewed as a counterbalance to the shifting power dynamics in Asia.

India-Japan Cultural Ties

Japan and India have strong cultural ties, based mainly on Japanese Buddhism, which remains widely practiced through Japan today . The two nations announced 2007, the 50th anniversary year of Indo-Japan Cultural Agreement, as the Indo-Japan Friendship and Tourism-Promotion Year, holding cultural events in both the countries.One such cultural event is the annual Namaste India Festival, which started in Japan over twenty years ago and is now the largest festival of its kind in the world. At the 2016 festival, representatives from Onagawa Town performed as a sign of appreciation for the support the town received from the Indian Government during the Great East Japan Earthquake.Onagawa is the town where the Indian National Disaster Response Force (NDRF) team was dispatched as its very first overseas mission and conducted search and rescue operations for missing persons. Japan has also supported the reconstruction of Nalanda University, an ancient Buddhist centre of learning in Bihar,India and has agreed to provide financial assistance. Though Hinduism is little practiced in Japan, it has a significant indirect role in the formation of Japanese culture. Many of the Hindu deities are actively worshipped in Japan with different names like Benzaiten (Saraswati), Bishamon (Kubera), Daikoku (Shiva) etc.
As the ethnic and culture of North-East India is more similar to South East Asia than mainland India, they are influenced by the Korean and Japanese culture. Haldia is the only city to have a Japan town on lines of China Town in other cities. The increased cultural relations between the two countries along with economic and strategic partnerships will help for progress in ‘Act East’ policy of India.

India-Japan Economic Ties in general

India represents one of Japan’s best hopes for rejuvenating its export-dependent economy whose own growth rate has remained stagnant at around 1 percent. India has the fastest-growing middle-class society in Asia, expected to grow by almost 20 percent in the next five years. In September 2014, Prime Minister Narendra Modi paid an official visit to Japan and had a summit meeting with Prime Minister Shinzo Abe. They agreed that Japan-India relationship was upgraded to “Special Strategic and Global Partnership.” In December 2015, They announced “Japan and India Vision 2025 Special Strategic and Global Partnership Working Together for Peace and Prosperity of the Indo-Pacific Region and the World” a joint statement that would serve as a guide post for the “new era in Japan-India relations.” During Prime Minister Modi’s visit to Japan in September 2014, two leaders agreed to set a common goal of doubling Japan’s direct investment and the number of Japanese companies in India by 2019.Prime Minister Abe intended to make an effort to realize 3.5 trillion yen of public and private investment and financing, including Official Development Assistance (ODA), to India over the coming five years. Japan expects India for improving the business environment, including the easing of regulations and the stabilization of the system. India established the “Japan Plus” office in the Ministry of Commerce and Industry in October  2014 as a “one-stop” location for resolving problems faced by Japanese companies. India decided to introduce the Shinkansen system in December 2015.The Japan’s Shinkansen system is in a highest class of High-Speed Railway systems around the world in terms of its safety and accuracy. India and Japan signed an agreement in December 2015 to build a bullet train line between Mumbai and Ahmedabad using Japan’s Shinkansen technology. In terms of human resource development in the manufacturing sector in India, Japan announced its cooperation of training 30,000 Indian people over next 10 years in the Japan-India Institute for Manufacturing (JIM), providing Japanese style manufacturing skills and practices, in an effort to enhance India’s manufacturing industry base and contribute to “Make in India” and “Skill India” Initiatives. JIM and the Japanese Endowed Courses (JEC) in engineering colleges will be designated by Japanese companies in India. In summer 2017, the first four JIMs started in the States of Gujarat, Karnataka, Rajasthan and Tamil Nadu, and the first JEC was established in the State of Andhra Pradesh. The Comprehensive Economic Partnership Agreement (CEPA) between India and Japan was signed on 16th February, 2011 and came into force from 1st August of the same year. Apart from accelerating business activities, the deal aims to eliminate tariffs on 90 percent of Japanese exports to India, such as auto parts and electric appliances, and 97 percent of imports from India, including agricultural and fisheries products, until 2021. On the infrastructure front, the two countries agreed to collaborate on the huge, US $90-billion Delhi–Mumbai Industrial Corridor (DMIC) project in 2006. The key agenda of the DMIC project involves the development of nine industrial zones; a high-speed freight line; three ports; six airports; a six-lane intersection-free expressway; and a 4,000-megawatt power plant. A lot of efforts have been taken from both the governments to strengthen economic relations .Optimal efforts are required to harness the tremendous potential of both the economies in coming years.

India Japan and China Angle

It is crucial that growing India-Japan ties are viewed independently of each country’s relations with China. New Delhi and Beijing are engaged in improving relations at various levels, including trade, eventually aiming to amicably resolve the boundary question. China is Japan’s biggest trading partner; the two have a bilateral trade of $340 billion that neither can afford to endanger. China is India’s largest trading partner too. India stated its opposition to China’s Belt and Road Initiative and chose not to attend Beijing’s Belt and Road Forum.  Japan meanwhile,did not participate in China-led institutions like the Asian Infrastructure Investment Bank (AIIB), which was set up to assist in the implementation of various connectivity projects inspite India being a founding member of the AIIB. Trilateral cooperation between India, Japan, and the United States has been steadily expanding in recent years. In 2015, Japan was formally added to the U.S.-India Malabar naval exercise as the third permanent participant, effectively trilateralizing the drills.This China views skeptically and thinks that it is to counter its presence in the East and South China sea. Japan has reservtions about growing North Korea-China relations .Both countries oppose to China’s territorial expansionist attitude. On Japan side its China’s maritime expansion in East China Sea, claims over Parcel and Sprtly islands ( South China Sea) to India’s longstanding boundary issues to more recent incursions in Daulat Beg Oldie and Doklam sector contue to hamper relations between the three countries.

India-Japan  Nuclear Cooperation

The India-Japan Agreement for Cooperation in the Peaceful Uses of Nuclear Energy entered into force on July 20, 2017. This Agreement is a reflection of the strategic partnership between India and Japan and will pave the way for enhanced cooperation in energy security and clean energy. It promotes full cooperation between the two countries in the development and uses of nuclear energy for peaceful purposes on a stable, reliable and predictable basis. The deal allows Japan to export nuclear technology to India, making New Delhi the first non-NPT signatory to have such a deal with Tokyo. The Non-Proliferation Treaty or NPT(1968), is an international treaty whose objective is to prevent the spread of nuclear weapons and weapons technology, to promote cooperation in the peaceful uses of nuclear energy.  Japan will also assist India in nuclear waste management and will undertake joint manufacturing of nuclear power plant components under the ‘Make in India’ initiative. Other nations who have signed civil nuclear deals with India include the US, Russia, South Korea, Mongolia, France, Namibia, Argentina, Canada, Kazakhstan and Australia.

The economics on ODA finances

{This part focuses on a questions – why it is said that Japan uses Seller Finance Model?}

ODA (Official Development Assistance) is broadly divided into bilateral aid — in which assistance is given directly to developing countries, and multilateral aid — which is provided through international organizations. The loans are extended through Japan International Cooperation Agency (JICA).Japan initiated its economic cooperation with India in 1958. The cooperation began by ODA Loan, which was the first ODA Japan had ever provided not only for India but for any country. Japan’s ODA for India is one of the important tools to strengthen Japan-India relations set forth by “Japan-India Strategic and Global Partnership.”

Rest of the economic world thinks Japan’s ODA resembles the Seller Finance Model. Seller financing is a loan the seller of a business gives to the new buyer to cover all, or a portion, of the total purchase price. It can give buyers access to more capital to buy the business, and opens up the pool of potential buyers to a much wider audience for the seller.The world acusses that Japan’s ODA policy that cannot go beyond the narrow economic interest in the market of a peripheral economy where effective demand for Japan’s commodities and consultancies could only be generated through development financing. This comes under a precise that the ODA loans are at very low rates of interest and with a long span. Thus they have not been odious. The trade between the two countries is also typical of trade relations between a developed and a developing country. India essentially exports low value added goods and imports high value added goods. Generally, countries tend to invest abroad when they run out of opportunities to invest at home. This is the reason investment often flows from developed to developing countries. While investments in large-scale infrastructure projects might sometimes be strategic, lending countries often make sure that the funds are used to procure materials and services from the donor country. Thus considering the economic benefits to India the statements seems to be partly true.

Bullet train project – cost benefit analysis

The Mumbai–Ahmedabad high-speed rail corridor popularly known as Bullet Train  is an under-construction high-speed rail line connecting the cities of Ahmedabad, Gujarat, and India’s economic hub Mumbai, Maharashtra. It will be India’s first high-speed rail line. The project is estimated to cost Rs.1.1 lakh crore (US$17 billion). In February 2016,the National High Speed Rail Corporation (NHSRC) was registered under the Companies Act, 2013.The NHSRC is a special purpose vehicle responsible for the implementation of the Mumbai–Ahmedabad Bullet Train.

India could have saved as much as $3.2 billion on construction of  the Mumbai-Ahmedabad bullet train system if it had invited bids instead of awarding the project to Japan on a nomination basis. At least, that is what emerges from a cost comparison with similar high-speed rail (HSR) projects built in other countries in recent years. Japan will provide a 50-year loan of Rs 88,000 crore to finance the project at a 0.1% interest rate, which sounds quite tempting. However, given the difference in inflation between India and Japan, the Japanese yen is projected to appreciate against the Indian rupee over the loan repayment period, potentially wiping out the gain of a low interest rate. As India is required to source equipment exclusively from Japanese vendors for the project, the possibility of the latter overcharging to make up for the loss on account of interest rate cannot be ruled out. Critics say it is difficult to justify a grandiose and expensive project like the bullet train at a time when the existing rail infrastructure in the country is creaking and train derailments, accidents have become a daily occurrence, instilling fear among passengers. The country’s healthcare and education infrastructure, which are critical for sustained economic growth, need massive investment to cope with growing demand. It may be a big economic gamble by the government as there is no guarantee the project will be profitable given its high fares estimated at Rs 3,000-Rs 5,000. The proposed bullet train will have to compete with airlines flying on the Mumbai-Ahmedabad route, which would limit its ability to raise fares. With oil prices projected to remain moderate in the foreseeable future, the bullet train is going to face tough competition from low-cost carriers for traffic. This threat looks real given how the Indian Railways has lost its upper end travellers to budget airlines in recent years. As per the railway’s own projection, local airlines will fly more passengers than its AC coaches by 2019-20.

The government wants the project commissioning schedule to be advanced by a year to August 2022 to coincide with 75th year of India’s Independence, unmindful of the fact that travel by the bullet train would be a luxury for the bulk of the country’s population struggling for the basic necessities of life.

Agreements On The North-East

A memorandum of understanding to set up India Japan Act East Forum with an aim to marry India’s Act East Policy with Japan’s Free and Open Asia-Pacific strategy in the backdrop of China’s One Belt One Road initiative is among the major agreements signed during Japanese Prime Minister Shinzo Abe’s visit to India for the 12th Indo-Japan annual summit . The forum will enhance connectivity and promote developmental projects in India’s Northeast region in an effective manner. Japan has a historic connection to the Northeast and is among the few countries that India has allowed a presence in the eight landlocked states which are the country’s gateway to the Association of Southeast Asian Nations members. India and Japan also signed a document on Japanese loan and aid for highway development in the Northeast that can complement India’s connectivity initiatives in Bangladesh, Myanmar and beyond, besides BBIN (Bangladesh, Bhutan, India, Nepal) and BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) Motor Vehicle Agreements. Japan will extend a loan of Rs 2,239 crore to India for ‘North East Road Network Connectivity Improvement Project’ to improve the National Highway 40 (NH-40) and construct a bypass on NH-54 in the Northeast. Japan has also placed a special emphasis on cooperation in the Northeast for its geographical importance of connecting India to Southeast Asia and historical ties (Japanese forces had fought British in Manipur during World War II). Japan has cooperated with a variety of development projects in the Northeast, ranging from connectivity infrastructure such as roads and electricity, water supply and sewage, to forest resource management and biodiversity. Further, there is a great potential for people-to-people and cultural exchanges between Japan and the Northeast, given Japan’s historical connection with the region.

AAGC

The Asia-Africa Growth Corridor or AAGC is an economic cooperation agreement between the governments of India and Japan. It aims for Indo-Japanese collaboration to develop quality infrastructure in Africa, complemented by digital connectivity, which would undertake the realization of the idea of creating free and open Indo-Pacific Region. The AAGC will give priority to development projects in health and pharmaceuticals, agriculture and agro-processing, disaster management.

Unlike OBOR, now BRI (Belt and Road Initiative), which entails development of both land corridor (new economic belt) and ocean (marine silk road), AAGC will essentially be a sea corridor linking Africa with India and other countries of South-East Asia and Oceania by rediscovering ancient sea-routes and creating new sea corridors that will link ports in Jamnagar (Gujarat) with Djibouti in the Gulf of Eden and similarly the ports of Mombasa and Zanzibar will be connected to ports near Madurai; Kolkata will be linked to Sittwe port in Myanmar.The AAGC would consist of four main components: development and cooperation projects, quality infrastructure and institutional connectivity, capacity and skill enhancement and people-to-people partnerships. These four components are complementary to promote growth and all round development in both the continents. The AAGC initiative is part of Indo-Pacific freedom corridor being put in place by India and Japan with an eye on counterbalancing China’s OBOR. India has a long history of development cooperation in Africa in capacity building and contributing towards development of social sector through several unique programmes such as Pan Africa e-Network. Indian companies have sustainable presence in the African region. The EXIM Bank is the lead organisation for carrying out the development credit tasks.