The finalisation of the bullet train programme between India and Japan is significant. Both countries are discovering a steady concurrence of interests and concerns in a deteriorating security situation in Asia
Japanese Prime Minister Shinzo Abe’s visit to India, that witnessed the finalisation of the Shinkansen (bullet) train programme is strategically very significant. India and Japan are discovering a steady concurrence of interests and concerns in a rapidly deteriorating security situation in Asia. With their fourth interaction at the highest level, both countries are investing precious political capital in cementing this naturally complimentary diplomatic relationship.
The Japanese infrastructure push: From metro trains to highways and the dedicated Delhi Mumbai fright corridor, Japan is upgrading India’s infrastructure on an epic scale. One important difference between Japanese investments in Indian infrastructure and Chinese investments in Pakistan is the rate of interest charged by Japan for loans and the level of technology offered.
For the Mumbai-Ahmedabad bullet train project, Japan is providing 81 per cent of the funding for the Rs 1.08 trillion ($16.9 billion) project, through a 50-year loan at 0.1 per cent annual interest.
In contrast, the Chinese loans are at a 2.5 per cent rate over just 20 years and project Chinese have a staggering 17 per cent assured rate of return. In time, Chinese loans for Pakistan are a debt time bomb while Japanese loans for India are developmental game changers.
Upgrading strategic ties: The Japanese are looking to upgrade India to a top strategic partner. With this in mind, the Japanese side wants to right away upgrade the two-plus-two consultation structure that is already in place. In this structure, the Minister of State of Defense and Foreign Affairs meet.
Now, these will likely be upgraded to Cabinet Minister level interactions. With this upgrade, India will come in the same bracket as the European Union and the United States for Japan.
Chinese actions in Doklam, South China Sea as well as tensions in North Korea have contributed to India and Japan sharing greater strategic space. Both countries perceive common threats to their interests in Asia and are looking for ways of a coordinated joint response to these.
In the past, India and Japan would have been weary of a closer joint posture on defence and foreign affairs. This is changing partly because China continuous to be aggressive and unpredictable. Chinese aggressiveness is bringing the two maritime democracies together.
In Asia, India and Japan have Naval power that can provide a counter to growing Chinese presence. Beijing is discovering that its aggressive international behaviour is making it possible for India and Japan to come together much more closely — and much less coyly on defence related issues.
This was also in evidence when Japan came out openly in support of the Indian stance on the tense Doklam stand-off which boosted India’s position internationally.
India Japan and the US conducted the large scale Malabar maritime exercises earlier this year. Japan sent its largest ship for this exercise
JS Izumo, JS Sazanami along with Indian Naval ship Jalashwa and INS Vikramaditya also participated in the exercise.
These exercises are likely to be massively upgraded with much bigger warship and aircraft participation after this visit.
The aim of these exercises is to sharpen interoperation ability between the two Armed Forces so that in the event of a situation, both can work better and more coherently together.
India and Japan are also set to finalise anti terrorism drills this year. On the security front, the Navies are leading the charge of working together to reassure friendly navies and deter foes on the high seas.
Japan offered India the U2 maritime aircraft in 2010 but the deal has been delayed as India found the aircraft too expensive. It is believed that Union Finance Minister Arun Jaitley’s visit to Tokyo lead to the reduction of the price tag of the $1.3 billion deal.
With this deal, India will buy 12 aircrafts from Japan off the shelf and another 18 will be manufactured in India. The aircraft will add a new dimension to surveillance and rescue capabilities of the Indian Navy. With a top speed of 560 km an hour and a 4,800 kilometers, the aircraft can help India better serve its vast 7,500 kilometers coastline.
Trade and Investment gathering momentum: A lot of the strategic ties flow from the steadily increasing trade and investment relations between India and Japan. Japan was slow to take to the charms of the Indian market after India started its liberalisation policy. It waited almost a decade for serious investments. Today, Japan exports $9.5 billion of goods and services to India and imports $3.85 billion from India. India has thus a huge trade deficit with Japan.
Japanese investments in India have picked up lately. Suzuki and Honda have invested nearly a billion dollar in their plants in Gujarat over the last two years. Namoura, the Japanese equity house, announced a $3.4 billion fund exclusively for India making it one of the biggest equity bets by any fund manager on India.
Masayoshi Son, Japan’s richest man, has called India the world’s best investment opportunity. He is putting his money where his mouth is with investments exceeding a staggering three billion dollar in companies like Flipkart, Oyo and Ola. In short, Japan has never been this interested, and invested in India.
However, India will do well to address some Japanese concerns from retrospective taxes to transfer pricing — many big Japanese companies have signaled displeasure at the highest level.
India has set up a special cell in the Prime Minister’s Office to deal with Japanese investments and it will do well to address Japanese concerns expeditiously.
People-to-people contacts — the missing link: For all the strategic and financial closeness, the contact between Japanese and Indian people remains peripheral. This is a critical weakness in the bilateral relationship. The Japanese people know next to nothing about India. Indian likewise, while admiring Japan’s technological might, remains largely unaware of modern Japan. Cultural, language and geographical barriers are huge.
India has offered visa on arrival to Japan and this has lead to some upswing in contact. However, a joint fund that promotes joint scholarships youth exchange programmers and such like is of critical importance to add depth to this fast maturing relationship between New Delhi and Tokyo.
(The writer is a senior journalist)