Abstract
Japanese-Indian relations is supported by historic, political, and cultural affiliation, which usually led towards positive economic relations. Although the Japanese-Indian relationship is a few centuries old, surprisingly, the statistics of trade hardly exhibit any mentionable growth, except the recent upward trend in exports to Japan. In fact, India almost failed to capture the near home market even with the growth (1% market share). Therefore, the chapter is developed based on a qualitative study with the objectives of exploring the history, catalysts, and impediments of Japanese-Indian trade relations and recommends the future course of action. The study recommends completion of India's megaprojects, Japan's policy reform, taxation and supportive reform, arrangement of social life of the foreigners, zero corruption, forgery, and harassment, efficiency, effectiveness, linguistic skill and cultural understanding of human resources, and creating opportunities and building organizational capacities between the two.
TopIntroduction
Japan has long been neo mercantilist (Smith, 2010) seeking foreign markets’ openness while protecting its own, (Lawrence, 1987) through various tariff and non-tariff barriers and standards (Ball, 2010). Japan, symmetric to Ricardo’s theory comparative advantages, (Ricardo, 1988), produces high value tech products and imports the low value agricultural products. Krugman & Obstfeld (2010) explained Prisoners’ dilemma of Game Theory (Neumann, & Morgenstern, 2007) regarding protectionism and showed that the best outcomes are possible only when both the countries were free. Japan always looks for global business opportunity by pursuing its own principles, utilizing Official Development Assistance (ODA) (Jain, 2017), Infrastructural Development, political and Historical Affiliations, Partnerships and Cultural exchanges as tools for economic and political objectives across the world, taking advantages in cost, taxation, market penetration and distribution. Japan usually looks for Least Developed and developing countries as partners and uses financial affluence and technical competence as tools for supremacy. India is one of the largest economies of the world that Japan has a complementary demographic profile for Japan, Mullen & Arora (2017), cultural and economic bonding and shared sense of togetherness and strong diplomatic relations (Raghuramapatruni & Latha, 2020). The prehistoric relationship since 6 AD has evolved through many upheavals and influenced by many factors like: political values, interests, strategic convergence, geopolitical considerations, Pajon & Mezard (2018). Economic co-operation dominates the mutual relationship, Raghuramapatruni & Latha, (2020) which could reach such stage only after bilateral trade became one of the priorities of India’s Look East Policy fifty years after forming the bilateral relations, Reddy, (2014). Although, Shinzo Abe underscored in his book, Utsukushii kuni e (Towards a Beautiful Country: My Vision for Japan) (Abe, 2006), that he would not be surprised to observe that if “in another decade, Japan–US and Japan–China ties are overtaken by Japan–India relations” but the trade relationship is dominated by declining/low trade intensity (Raj & Ambrose, 2014) Raghuramapatruni & Latha,(2020)and higher trade potential, Naoki Ono, (2014). Various JETRO publications exhibit Japanese trade and investment preferences for India, although “developing countries provide same resources” Qian et. al., (2008). Kaura suggested to boost the bilateral economic relationship to further strengthen India- Japan ties and India’s engagement and the balancing of and vibrancy with all the actors Japan, China and USA (Kaura, 2016) while Singh(2016), attributed the continuous engagement for transforming the bilateral relationship. Joseph & Bera, (2011) identified substantial increase in Japanese FDI which, could cater the FDI requirements of India, Raghuramapatruni, (2012),but need to be diverted into more broad-based market, Atrey, (2014) since Japan invested mostly into the automobile and the electronics sector while Japanese aid facilitated infrastructure development of health, water and sanitation, Choudhury (2017). Enhanced connectivity and understanding could help macro level benefits of the CEPA in terms of trade, investment, and technology flows (Chanda & Tokas, 2020) thereby which could offer several opportunities like: increased cross-border and global market engagements and market entry mechanisms such as strategic alliances, subsidiaries, joint ventures etc. (Ramachandran & Gokila, 2012). Horimoto (Horimoto,2016) believed that, Enhanced and effective Japan-India bilateral relationship is essential against Asian power shift which, will achieve most of their strategic objectives except the guarantee of military assistance in war, Mukherjee, (2018) exemplified by state level reluctance to forming any permanent group like, Democratic security diamond (DSD) (Lee & Lee, 2016). Many researchers found that the relation in Asia Pacific rather than strategic is based on purely economic needs which particularly trade relations have for long been ignored in Japan India bilateral relationship, noticeably through bilateral Trade Balance, Technology Transfer, India’s Market Creation and Slow economic revival with the support of Japan. Therefore, it is essential to explore the history, catalysts and constraints of Japan India Trade relation and look for the future scopes and opportunities for cherishing the relationship.
Key Terms in this Chapter
METI: Ministry of Economy, Trade, and Industry (METI) is a ministry of Japan with a mission to develop Japan’s economy and industry by focusing on promoting economic vitality in private companies and smoothly advancing external economic relationships, and to secure stable and efficient supply of energy and mineral resources.
Merger and Acquisition: Mergers and acquisitions (M&A) is a general term that describes the consolidation of companies or assets through various types of financial transactions, including mergers, acquisitions, consolidations, tender offers, purchase of assets, and management acquisitions.
Free Trade Agreement (FTA): The Free Trade Agreement is an agreement for tariff free trade with countries. In this system the FTA partners can send their products easily to the partnering country and vice versa. FTA is good for high quality products with minimum price but is not good for the products with premium prices. In this system the richer partner of FTA influences the poorer country by pricing and this system is not conducive for the weaker partner. In case of Japan and India FTA is not helpful India since the economy is poorer.
Look East Policy: Look East policy is an effort to cultivate extensive economic and strategic relations with the nations of Southeast Asia to bolster its standing as a regional power and a counterweight to the strategic influence of the People's Republic of China.
Foreign Direct Investment (FDI): A foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets in a foreign company.
ODA: The Official Development Assistance is an arm of the Ministry of Foreign Affairs (Japan) that started in 1954 with the goal of the office is to help developing nations with supplies, civil engineering and other assistance through JICA.
Dedicated Freight Corridor (DFC): The Dedicated Freight Corridor (DFC) is the corridor dedicated to carry rail freights at a speed of 100 km/hour through two corridors, the western one in between Haryana and Maharashtra and eastern corridor. The Western Corridor is financed by JICA while the Eastern Corridor is financed by the World Bank and Public Private Partnership (PPP) and the Dedicated Freight Corridor Corporation of India Limited (DFCCIL) oversees the construction of this project.
Act East Policy: The ‘Act East Policy’ announced in November, 2014 is and upgrade of the “Look East Policy” and a diplomatic initiative to promote economic, strategic and cultural relations with Southeast Asian countries in the field of connectivity, trade, culture, defence and people-to-people-contact at bilateral, regional and multilateral levels.
Delhi Mumbai Industrial Corridor (DMIC): The Delhi Mumbai Industrial Corridor is one of the most prioritized projects of Japan in India. The State sponsored Industrial Development project will cover six state in western India and is estimated to have cost US$ 90 billion that will hopefully double the employment, triple the industrial outputs and quadruple the exports. DMIC development Corporation (DMICDC) works as the Office of Primary Interest (OPI) for the project and coordinates with the Government of Japan on the issue.
Comprehensive Economic Partnership Agreement (CEPA): The Comprehensive Economic Partnership Agreement was signed in 2011 in between Japan and India with an aim to facilitate trade through tariff reduction for the next ten years but is likely to bring positive impact in Japan India Bilateral Relationship.
Japan External Trade Organisation (JETRO): JETRO, or the Japan External Trade Organization, is a government-related organization that works to promote mutual trade and investment between Japan and the rest of the world. Originally established in 1958 to promote Japanese exports abroad, JETRO's core focus in the 21st century has shifted toward promoting foreign direct investment into Japan and helping small to medium size Japanese firms maximize their global export potential.