India, Japan bhai, bhai

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: The world witnessed the Japan-India friendship year in 2007. A strong relationship structured over half-a-century forms the foundation of Indo-Japanese cooperation today. Substantial complementarities characterise the economic engagement between Japan and India. Capital, technological skills and new product development are some of the advantages of Japan. On the other, India’s strength lies in knowledge-based services and high quality, labour force, which gained international recognition. Japan is looking for Indian skills whereas India needs Japanese technology. An honest collaboration between the two countries is, therefore, fast emerging.

Meanwhile, at the start of the 21st century, with a perspective to further enhance friendly cooperative relations that had been nurtured historically, both countries agreed for a Japan-India Global partnership in August 2000 on the occasion of former Prime Minister Mori’s visit to India. Additionally, in 2005, a joint statement called the “Japan-India Partnership in a New Asian Era” was declared.

There is a perceived advantage in trade in services. The services sector is a significant player as it contributes over 50% of GDP in India and above two-thirds in Japan. In addition, the huge gap in population dynamics of Japan with India, with the former having an ageing society and the latter a large younger population base is another aspect that makes the Japanese and Indian economies complementary.

Japan is the world’s second-biggest spender on technology after the US. The total IT outsourcing market in the country grew to $15 billion in 2005 and the market is forecasted to grow by 5.8% through 2010 to 2.34 trillion yen. This provides vast opportunities for Indian companies to collaborate with Japanese counterparts.

There is a recent spurt in Indian investments in Japan, driven by software companies. About 70 Indian companies have established their offices in Japan. During 1996 to 2006, Indian direct investment through joint ventures and wholly owned subsidiaries in Japan was only $7.55 million, much lower than the potential.

The two-way bilateral trade between Japan and India has been growing rapidly, reaching almost $9 billion in 2006. Unfortunately, this figure is not commensurate with the two countries’ economic power and potential. Japan ranks 10th among India’s export destinations (share 2.5%) and 10th among import sources (2.8%) and India ranks 26th among Japan’s export destinations (0.6%) and 28th among import (0.6%).