India, Japan waltz closer, to sign mega deal today

With China poised to surpass Japan as Asia’s largest and world’s second largest economy as early as 2010, Japanese PM Yukio Hatoyama turned his attention to India. Riding the political tailcoats, Japanese companies, traditionally reluctant to enter India, are mulling big investments in India, reports Samar Halarnkar.

India and Japan waltzed closer to one another over a carefully choreographed but hectic 24 hours across Delhi and Mumbai.

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With China poised to surpass Japan as Asia’s largest — and world’s second largest — economy as early as 2010, Japanese Prime Minister Yukio Hatoyama turned his attention to India despite battling a political scandal and falling popularity at home, diplomatic sources and economic experts said.

Hatoyama’s 36-hour trip began with a closed-door morning meeting on Monday morning at the Taj Mahal hotel with CEOs of India’s largest companies, the first-ever visit by a Japanese PM to Mumbai.

On the sidelines, he met Gujarat Chief Minister Narendra Modi, who, in a 40-minute meeting discussed the $90 billion (Rs 425,000 crore) Delhi-Mumbai Industrial Corridor (DMIC) project, a large area of which passes through Gujarat.

The same afternoon, Hatoyama flew to Delhi for a similar CEOs’ meeting and was later hosted to a dinner by Prime Minister Manmohan Singh.

The two countries signed on a Rs 1,000 crore project development fund that will finance feasibility studies for the DMIC master plan.

“They look upon us as a potential Asian leader,” Ajay Dua, a global adviser to Japanese consumer giant Panasonic and former industry secretary, told Hindustan Times. “This visit signifies that they have come to the conclusion that Asia cannot mean China alone.”

With an ageing population and an economy that is showing the first green shoots of recovery after two years, Japan is hoping for a GDP growth rate of 2 per cent next year. Compare that to the prediction for China (10 per cent) and India (8 per cent) and Japan’s investments into India show a strong economic diplomacy on Hatoyama’s part.

“A lot of work has gone into this visit,” a highly placed Japanese diplomatic source told HT, requesting anonymity because he is not authorised to make a public statement. “It (the visit) is a win-win situation for both India and Japan.”

The industrial corridor to be build on both sides of the 1,480 km of rail track between Delhi and Mumbai across seven states — exemplifies this “win-win”.

But the returns to India will go beyond DMIC, with more Japanese investment expected to flow in as India pushes bilateral deals and moves away from third-world multilateral agreements.

Riding the political tailcoats, Japanese companies, traditionally reluctant to enter India, are mulling big investments in India, primarily in telecom, auto, pharma and power.

Toyota Motor Corp managing director Hiroshi Nakagawa, for instance, told HT that he wants DMIC to go all the way to Chennai, through Bengaluru, with the first phase being the Chennai-Bengaluru arm.

The payoff for Japan, which will also provide soft loans for the Delhi-Mumbai dedicated rail freight corridor: a third of the value of contracts will go to Japanese companies.

“The Japanese don’t make friends easily, and no decision is taken overnight,” said Dua, who advised India on the industrial-corridor deal.

The guest list for the Mumbai meeting with Hatoyama, carefully vetted by the Japanese embassy, included Tata Group Chairman Ratan Tata, Reliance

Industries Chairman Mukesh Ambani, Godrej Group Chairman Adi Godrej, ICICI Bank Managing Director Chanda Kochhar and Bajaj Auto Chairman Rahul Baja. “Both India and Japan have strong potential (to grow investments),” said Godrej. “We discussed how to take this potential forward.”

(With Rachit Vats in Mumbai & Sumant Banerji in New Delhi)