ECONOMY-JAPAN: Finally, Tokyo Takes Notice of India

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Mar 3 2004 (IPS) - After years of pushing India to the sidelines, Japan is now changing its tune and actively courting the world’s largest democracy, lured by its growing international economic and political prowess.

‘‘The old image if India as a poverty stricken country is no more. Japan has begun to view India as a place with huge investment and manufacturing potential,” says Satoshi Matsuki, a specialist on India at the foreign ministry.

Indeed, the foreign ministry announced in February a new research programme called ‘India, A Strategic Global Partner’, under which improvements will be also be made in Japanese development assistance to India.

Japanese aid to India in 2002 reached 112 million U.S. dollars, making the country the next highest recipient following China.

Measures toward deregulation in the Indian economy and its rapid ascent into a global information technology leader has helped to elevate the appeal of its economy of one billion people and vast natural resources, according to analysts interviewed here..

On the political front too, Professor Perma Galpo, an expert on South Asia at Gifu University, sees India-Japan diplomacy taking on greater importance as the two countries work in coordination to gain permanent seats in the U.N. Security Council.

‘‘Upcoming revisions to expand the Security Council has attracted both countries and now encourages them see them working together for a common aim,” he says in an interview. ‘’They need each other.”

Galpo points out that bilateral ties facer a smoother future in comparison to Tokyo’s usual problematic relations with East Asia. While Japan has closer economic and commercial links with East Asia and countries like China and South Korea, relations are often bogged down by the legacy of Japan’s pre-World War II colonisation period of Asian nations.

Japan’s latest approach to India has so far also been reciprocated well by Indian businesses that have traditionally been looking West – 70 percent of India’s exports are aimed at the U.S. market.

‘‘More smaller Indian companies are seriously developing strategies toward Japan. Japan is becoming an important market as a way of balancing their trading partners,” says Yoshie Shimane of the Institute of Developing Economies in Japan. .

For instance, Japan is the world’s second-largest software market after the United States. Already, Japanese companies have begun to accept Indian engineers. Projects to supply software in India and to provide this to Japan via communication networks have been set up between Indian and Japanese companies.

Two-way trade figures, while still way below that of Japan’s trade with South-east Asian countries and China, are already reflecting this increased economic interest.

Trade between India and Japan grew 4.4 million dollars in 2003 from the previous year to reach almost 24 million dollars. India is at present Japan’s 14th largest trade partner, ranking even below Cambodia.

But signs of change are apparent. In October Fujitsu Ltd, a Japanese information-technology giant, launched a joint venture project with two Indian firms to develop software in Bangalore, India’s Silicon Valley.

The joint venture that employs 100 staff produces software in India’s offshore production facilities, where Indian engineers exchange data with their Japanese customers through communication networks.

‘‘Partnering with Indian firms is key for Fujitsu to grow in the global market,” points out an official at Fujitsu.

In the area of automobiles too, India is an attraction for Japanese investors. India’s motorcycle market now eats up more than 5 million units a year, second only to China, and is expected to double by the end of 2010.

Honda Motor Co reports that its local joint venture – Hero Honda – produced 1.68 million motorcycles in 2003, making it the world’s largest single producer of two-wheeled vehicles.

‘’India has far more potential than China,” Akio Kazusa, joint managing director at Hero Honda, commented in December. He says Honda is planning to aggressively expand its production and has already established a new research section aimed at developing models catering to Indian consumers.

Says a spokesman for Isuzu Motors, Tad Ioka: ‘‘ Right now our focus is on Thailand and China. But in two years’ time, it’s going to shift to India. We see India as an important production base.”

Indeed, economists see India’s electronic market is being almost equal to Japan. The sale of television sets for 2002 reached some eight million units, close to Japan, which was at 8.6 million, only slightly higher.

Expert say the IT industry has also seen the rapid growth of households that can afford to buy expensive cars and personal computers – from 3 million in 1999 to 6 million by 2005.

The trends are promising to many but some like Shimane advise cautious optimism instead in sizing up the potential of the Indian market for Japan.

Economic relations between Japan and India are likely to be slower to take off compared to Japan’s ties with South-east Asia, which have been there for decades.

‘‘India symbolises a different market from South-east Asia, where Japanese companies were embraced wholly in the eighties and even now. With India, where local companies have a stronghold, the steps will be slower. But the future is bright,” she explains.