India-Japan economic cooperation

Trust is the key. Japanese Prime Minister Shinzo Abe seems to have finally recognised that India can be fully trusted with technology transfer and large fund investments. It may have taken almost a quarter of a century since Osamu Suzuki chose India for small car production in equity collaboration with the government-owned Maruti Udyog for Japan to finally trust India to engage itself with the country for civil nuclear cooperation. But, Japan today is convinced that slow-and-steady-moving democratic India is probably the most trusted country for economic and technology cooperation outside the USA. The huge $12-billion Japanese long-term soft credit commitment for a single project in India – the 550 km Mumbai-Ahmedabad bullet train service – along with a proposal of technology transfer in defence production among 14 other economic cooperation pacts symbolise growing Japanese trust for India as a reliable partner in progress. It is unlikely that Japan’s current China perspective alone is behind the latest level of Japanese economic cooperation with India.

It is true that many giant Japanese corporations, which made large investments in China over the last 25 years, are now facing indirect political pressure and uncertain times in China. The growing diplomatic wrangle between the two countries over the control of the South China Sea has made life much less comfortable for Japanese companies in China. Japanese firms suddenly find market access in China more difficult. In many ways, China now prefers neighbouring South Korea to Japan. The social and political history of Korea between 1904 and 1945 had embittered post-war Japan-South Korea relations. China seems to be standing in the way of normalisation of relations between South Korea and Japan. However, it is good to see that Japan trusts India now more than ever. Trust has been a part of India’s psychic system. India trusts practically most countries, barring Pakistan to an extent. India has readily welcomed the latest Chinese trade and investment in the country despite suffering the single largest blow of trade deficit of almost $50 billion a year with China and a huge hue and cry from a section of India’s industry which is finding it tough to exist in the face of uneven competition and ‘dumping’ from China. Foreign companies doing business in India would generally agree that it is a much decent and reliable place to operate as its legal and judicial systems are transparent and trustworthy. This is despite the fact that some of them such as Union Carbide of the US took a massive advantage of this congenial business atmosphere and comparatively soft government and political systems inflicted massive damage to the country and its population at Bhopal. The government – both Central and state – is generally industry-friendly. Few will appreciate this more than Mitsubishi Chemicals, the largest single foreign investor in petrochemicals in India, at West Bengal’s Haldia, which recently got a massive helping hand from Chief Minister Mamata Banerjee to largely tide over its financial stress. The Japanese collaboration made Hero and Honda the undisputed global leaders in two-wheeler market. Maruti under Suzuki became India’s largest commercial car manufacturer. Suzuki had no problem to take over India government stake in Maruti to make it a majority Japanese company. Almost all major Japanese automobile companies are today in India following the success of Suzuki. Few may be aware that Japan already has the largest foreign presence in India in the MSME sector with well over 100 outfits located across the country – from West Bengal in the east to Tamil Nadu, Kerala, Karnataka, Maharashtra, Gujarat, Haryana and Punjab.

While business exit is often more complex than business entry in a country, the recent experiences of entry and exit of Japanese companies in India’s pharmaceuticals, automobile and mineral industries exhibit the maturity of the Indian system and also the least government interference in lawful business practices, including corporate equity transactions by foreign firms, mergers, amalgamations and demergers. The Japanese industry has witnessed the events and participated in the development. Though a bit late, the growing Japanese trust in India is good for the latter’s own industrial progress, benefiting both the economies. It is a win-win situation for the two countries.

India needs more BHELs, SAILs, HAL, Larsen & Toubro and other technology companies to grow to its full potential. The participation by Japanese giants such as Mitsubishi, Toshiba and Hitachi in manufacturing heavy equipment in India, including nuclear reactors, will immensely benefit both India and Japan. Prime Minister Narendra Modi’s ‘Make in India’ programme offers a massive opportunity for global manufacturing and technology companies, of which Japanese conglomerates are among the leaders, to participate in a variety of fields – from infrastructure such as the railways, roads and ports to microchips, defence and nuclear equipment, advanced steel, high-end non-ferrous metals, marine equipment, merchant vessels and smart cities.

Decades ago, Nippon Steel was keen to enter India and proposed to take over the Burnpur-based sickly Indian Iron, having its own deposit of iron ore and coking coal, and convert the enterprise into a leading global steelmaker. That was before Suzuki came to India. Unfortunately, the Government did not respond positively to the Japanese offer. The country’s industrial policy has vastly changed since then. Today’s $2-trillion Indian economy is potentially the world’s second largest consumer of technology and products after China. A more integrated Japanese participation will help India exploit the potential faster while opening opportunities to other technology leaders to invest in India’s growth for mutual benefit. IPA