The Manmohan Singh government gives pride of place in its foreign policy to countries with the ways and means to transform India. The leader of the pack today, in a typically understated fashion, is Japan.
The story goes back to the late 1990s.
Japan had invested hundreds of billions of dollars in China and had contributed hugely to the rise of the Middle Kingdom. But it wasn’t earning much gratitude for it.
The Chinese Communist Party, whose legitimacy partly arises from fighting the Japanese invasion before the second world war, became more nationalistic as China became stronger.
Japan, facing an ageing workforce and in need of a new overseas manufacturing hub, considered Vietnam (too small), Indonesia (too seismic) and India. India’s problem was its shoddy infrastructure and seeming inability to do anything about it.
As a Japanese diplomat said then, “We decided to shift our aid programme to infrastructure rather than poverty alleviation.”
One consequence was the Delhi Metro.
Post-Cold War uncertainty helped feed a new conservative Japanese politics that manifested itself in the election of prime ministers like Junichiro Koizumi, Shinzo Abe and Taro Aso.
Each of them saw India as a potential player in a Pacific Great Game in which hedging against China was pretty much the only rule.
Three things changed the game.
One, Chinese bellicosity and Japanese economic decline helped seal a political consensus in Tokyo that for reasons either strategic or economic, India was an essential part of Japan’s foreign partnering.
Thus, when the present Democratic Party of Japan came to power, virtually their first action was to kick off the industrial corridor.
They were soft on China, but their economic growth strategy had a huge India component. This helped reassure New Delhi as well. Indian officials often fretted about Japan’s short-lived governments.
Two, closer relations between India and the US helped Japan get the confidence to raise the stakes. Thus was born the Delhi-Mumbai Industrial Corridor, a $90 billion whopper that, when completed, will give India a state-of-the-art manufacturing and exporting base.
When Indian officials talk about Indo-Japan relations being transformational, they are talking about this sort of thing.
Three, India Inc knocked the kimonos off Japan Inc by winning Alfred Deming Prizes. Demings are given for quality manufacturing.
Over the past decade, unknown Indian auto-component firms began beating competitors, including Japan. In the past 10 years, India has won more Demings than any other country other than Japan itself. Corporate Japan was convinced: India had proven it wasn’t just another grimy face.
After muddling around at about Rs 2,000 crore a year, Japan firms invested a hefty Rs 9,000 crore in 2007. Recent polls show that 70 per cent of Japanese firms say India is their preferred investment destination. Today, an average of 100 Japanese firms are moving here every year.
As the comfort level rose, mergers and acquisitions such as Daiichi-Sankyo’s $4.6 billion purchase of Ranbaxy, India’s largest pharma company, too place. The economic relationship is now a fixture. The soon-to-be-completed free-trade agreement will put in place the last missing piece: the drawing of India into the global supply chains of Japanese manufacturers.
Today, the circle is complete. Japan’s initial strategic interest manifested itself in the creation of an economic bond. That bond is now so large that it is giving birth to an independent strategic policy.
Last year, India and Japan signed a bilateral defence framework. A former Japanese official noted, “Japan has only two other comparable agreements, with the US and Australia. And the Australian one is hazier than the one we have with you.”
The final culmination of this will be an Indo-Japanese nuclear deal.
Both sides know this will be a tough baby to deliver, but both capitals have a political consensus that this is a marriage made in the hard realities of earth.