Where India, Japan ties stand now and what is planned for the future

Context

• The 13th India-Japan annual summit commenced with Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe visiting a factory of FANUC Corporation, one of the largest makers of industrial robots in the world.
• The visit to the FANUC facility was important in the context of India’s move towards Industry 4.0 by leveraging developments in the fields such as AI, IoT, 3D printing and robotics.

Background

• Japan and India are partners in peace, with a common interest in and complementary responsibility for promoting the security, stability and prosperity of Asia as well as in advancing international peace and equitable development.
• At the beginning of the 21st century, Japan and India resolved to take their bilateral relationship to a qualitatively new level.
• Today, India and Japan share a global vision of peace, stability and shared prosperity, based on sustainable development. Shared democratic values and commitment to human rights, pluralism, open society, and the rule of law underpin the global partnership between the two countries.
• The global partnership between India and Japan reflects a broad convergence of their long term political, economic and strategic interests, aspirations, objectives and concerns.
• Japan and India view each other as partners that have responsibility for, and are capable of, responding to global and regional challenges in keeping with their global partnership.
• A strong, prosperous and dynamic India is, therefore, in the interest of Japan and vice versa.

Shared Universal Values and Vision

• 2017 holds special significance since it marks a decade of Japanese Prime Minister’s celebrated speech at the Indian Parliament— ‘Confluence of the Two Seas’, underscoring shared universal values and interests.
• Ten years down the line, India is envisioned as a critical strategic anchor in Abe’s latest ‘Free and Open Indo-Pacific Strategy’.
• India-Japan ‘Special Strategic and Global Partnership’, aimed at securing strategic stability and economic prosperity of the Indo-Pacific space, culminated into the Asia-Africa Growth Corridor (AAGC) this year.

Asia-Africa Growth Corridor

• 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 and skill enhancement. The connectivity aspects of the AAGC will be supplemented with quality infrastructure.
• Unlike OBOR, now BRI (Belt and Road Initiative), which entails development of both land corridor and ocean, 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.

Action-oriented Partnership

• In keeping with ‘India-Japan Vision 2025’, robust bilateral relations have laid the foundation to expand the scope of cooperation in the Indo-Pacific theatre. Strong India–strong Japan will not only enrich two nations. It will also be a stabilising factor in Asia and the world.
• The 2016 India-Japan Joint Statement underscores the importance of coordinating bilaterally and with other countries to develop better regional connectivity and facilitating industrial networks.

Securing the Maritime Commons

• As maritime democracies, both nations have argued for rules-based international order, freedom of navigation and over flight, unrestricted lawful commerce, and peaceful settlement of disputes.
• India, US and Japan conducted the annual Malabar Exercise in the Bay of Bengal in July 2017 aimed at enhancing interoperability between the navies of the three democracies and strengthening trilateral cooperation in the Indo-pacific region.
• With the aim of augmenting cooperation, both India and Japan are considering incorporation of Anti-Submarine Warfare (ASW) training and exchanges by ASW aviation units such as P-3C in addition to mine-counter measures (MCM) training.
• The ‘shared responsibility’ in securing the regional SLOC (Sea Lines of Communication) as a ‘public good’ reinforces India-Japan maritime cooperation.
• Japan desires India’s cooperation in guarding the Indian Ocean SLOCs since it is critical for its energy shipments. With dependence on imports for 94 per cent of its primary energy supply, Japan is severely dependent on Middle Eastern oil imports, and the Indian Ocean is, therefore, vital for Japanese energy imports from the region.
• While Japan has depended on the US Navy for safeguarding critical SLOCs, it is increasingly cognisant of India’s capabilities in playing a productive role in defending the regional sea lanes.
• At the India-Japan shipping policy forum, launched in 2010, both countries focus on cooperation in the maritime sector such as the development of ship recycling facilities, ports and inland water transport, ship building and repair, and cooperation on International Maritime Organisation (IMO) issues.
• Besides, there is a 2+2 dialogue framework between the Foreign and Defence Secretaries of both countries since 2010, as mandated by the Action Plan to Advance Security Cooperation concluded in December 2009.

Special Strategic and Global Partnership

• There is a shared recognition that a stronger bilateral strategic partnership entails wider cooperation while responding to global and regional challenges and jointly contributing to the stability of the Indo-Pacific region.
• Both defence ministers stressed the value of deepening interaction between the respective governments and defence industries with the aim of enabling collaboration in defence and dual-use technologies.
• The difficult negotiation over cost and technology transfer with regard to the US-2 amphibious aircraft has not restricted the two countries from exploring and identifying specific items and future areas for cooperation.
• Building on the ‘Special Strategic and Global Partnership’, Indian navy has issued Request for Information (RFI) to six overseas manufacturers including Japanese Mitsubishi Heavy Industries and Kawasaki Heavy Industries to build six advanced submarines with air-independent propulsion (AIP) technology under the Project 75 (I) initiative.
• Two agreements signed in December 2015 — ‘Agreement Concerning Transfer of Defence Equipment and Technology Cooperation’ and ‘Agreement Concerning Security Measures for the Protection of Classified Military Information’, marked a new beginning in bilateral defence cooperation.

India-Japan relations in recent past

• The Japan-India Association was set up in 1903 and is one of the oldest international friendship bodies in Japan.
• As the 13th India-Japan annual summit got under way, Japan had pledged Rs 33,800 crore in government and private sector investments following the first Modi-Abe meeting in 2014.
• The two countries have signed a Comprehensive Economic Partnership Agreement (CEPA) in 2011 to facilitate growth in bilateral trade. This was described as the most comprehensive of all such agreements concluded by India covering trade in goods and services, movement of persons, investments, intellectual property rights, Customs procedures and other trade related issues.
• The CEPA envisages abolition of tariffs on over 94% of items traded between India and Japan over a period of 10 years.
• While Japan has been one of the biggest sources of investment flows into India, accounting for $28.16 billion in FDI between April 2000 and June 2018, trade engagements have been below potential. On the list of countries that India exports to, Japan is a lowly 18th; on the list of countries importing into India, Japan ranks 12th.

“Currency Swap Agreement” between India and Japan: How it will help India

• The big announcement was the decision to conclude a $75 billion bilateral currency swap agreement, which is expected to help stabilise fluctuations in the value of the rupee vis-a-vis the dollar, and bring down the cost of capital for Indian companies while accessing foreign capital markets.
• It involves the exchange of interest and sometimes principal in one currency, for the same in another currency. This facility will enable the agreed amount of foreign capital being available to India for use as and when the need arises.
• The facility will serve as a second line of defence for the rupee after the $ 393.5 billion of foreign exchange reserves.
• It would not only enable the agreed amount of capital being available to India, it will also bring down the cost of capital for Indian entities, while accessing the foreign capital market.

Big-ticket investments by Japan in India

• Japan has been extending bilateral loan and grant assistance to India since 1958, and is its largest bilateral donor.
• In the last five years, $90 billion has gone into the Delhi-Mumbai Industrial Corridor, which will see new towns, industrial parks, ports and airports alongside the 1,483-km high-speed rail and road line being developed between two of India’s top cities.
• Japan is also backing the Mumbai-Ahmedabad High Speed Rail (bullet train) service and has released the first tranche of Rs 5,500 crore. A pact for the second tranche was inked Monday.
• Approximately 81% of the cost of the project is to be funded through a soft loan from Japan’s government.
• Discussions have also taken place on the Dedicated Freight Corridor, a project of close to Rs 50,000 crore of which Japanese assistance has been of about Rs 38,000 crore.
• The first section of 190 km, from New Ateli to New Phulera stations, has been opened on the Western Dedicated Freight Corridor while the next segment of 492 km between Rewari and Marwar is likely to open early next year. Final completion is targeted for March 2020.
• Progress on some of the Metro projects being funded by the Japanese across Indian cities was taken stock of, including the Delhi Mass Rapid Transit System and Chennai Metro.

The China Factor

Evidence of Chinese factor in Indo-Japan Relations-

1. Both the countries have border (land/maritime) issues with China- a common ‘enemy’ for India and Japan.

• Border conflicts between India and China have been a long issue and it is evident from the recent dispute over the Doklam plateau in the Himalayas.
• Japan has the similar border issue with China. Both the countries have the simmering territorial dispute over islands in the East China Sea are known as the Senkakus in Japan and the Diaoyu in China.
• At present, both the island is administered by Japan but are claimed by China. The conflict has been on rising in the last few years is because of increasing China’s maritime mightiness in the region.

2. Alliance with the USA, and its Pivot to Asia Policy in the Asia-Pacific Region.

• In the last few years, India has strengthened it’s diplomatic, economic as well as the military ties with the USA in a view to check growing China’s growing influence in Asia.
• India and USA, both the countries using each other’s military facilities that is evident from the last year’s Logistics Exchange Memorandum of Agreement (LEMOA) and other foundational agreements like CISMOA and BECA have been a headache for China.
• India’s ‘Act East Policy’ (AEP) admirably waning the influence of China in the region. Through AEP, India has imparted greater vigour to its ties with ASEAN.
• So, India has a great opportunity if she able to align its AEP with the USA .India should seek to expand its geo-strategic space to contend with China’s growing assertiveness and foster balanced relations.

3. The dominance of China in the South China Sea and the Indian Ocean and Pacific Region. The threat to commercial and strategic interests of both the nations.

• India has already shown its genuine concern over South China Sea and sought to firmly articulate its principled position of freedom of navigation, maritime security.
• The expeditious resolution of the dispute according to international law and the UN Convention on the Law of the Sea, developing a Code of Conduct, and settlement through dialogue and peaceful means.
• India’s more than 40 percent of total trade volume traverses through the South China Sea, and on account of its interest in harnessing fossil resources in the region.

Challenges Ahead

• A challenge for Modi is to correct the lopsided trade and calibrate China’s market access to progress on bilateral political, territorial and water disputes, or else Beijing will fortify its leverage against India.
• After all, China does not shy away from making efforts to block the rise of India and Japan, including by stepping up military pressure on them and opposing the expansion of the UN Security Council’s permanent membership.

Way Forward

• The two sides also decided to start negotiations on the crucial Acquisition and Cross-Servicing Agreement (ACSA), which will enhance the strategic depth of bilateral security and defence cooperation.
• Another new area where India is likely to make a pitch is for greater synergy or integration between the Ayushman Bharat project and the Japanese programme called Asia Health and Wellbeing Initiative, including how to leverage Japan’s strengths in areas such as medical equipment and hospitals.
• The two leaders shared their view that in order to achieve shared vision, India and Japan must endeavour to work together for a rules-based and inclusive world order that fosters trust and confidence by enhancing communication and connectivity to ensure rule of law, unimpeded trade and flow of people, technology and ideas for shared prosperity.
• 21st century will be Asia’s century and Indo-Japan ties will play a key role in shaping it. Both have agreed to start the 2+2 dialogue. It’s objective is to promote peace and stability in the world.”

Conclusion

• Japanese ODA supports India’s development in sectors such as power, transportation, environmental projects and projects related to basic human needs.
• Recently, a ‘Cool EMS Service’ was started, under which Japanese food items permissible under Indian regulations are transported in cool boxes from Japan to India through postal channels.
• Both sides are striving to push a digital partnership, with the NITI Aayog being the nodal point on the Indian side and the Ministry of Economy, Trade and Industry on the Japanese side. Areas of potential collaboration include AI, IoT, and big data.