Bilateral Trade-India & Japan

1. Overview of the Trade relations between India and Japan

The economic relations between India and Japan exist because of the complementarities
between two Asian economies. Over the years, India and Japan had a relationship with
substantial political engagement following the ups and downs. The strategic pressures of the
Cold War era, prevented Japan, a US ally, and the non-aligned pro-Soviet India from
engaging with each other in a meaningful manner, and thus, the strengthening of bilateral
relations had to wait till the 2000s.

The end of the Cold War finally enabled India and Japan to repair their relationship and seek
closer political ties with each other. India’s economic reforms at the time also opened new
opportunities for Japan, and major Japanese firms started building a presence in India.
However, Pokhran-II, India’s 1998 nuclear test, led to soring of trade relations at the
political, economic and societal levels. Thus, the initial ties were cut because of the warming
up of the bilateral connections.

Further, in the year 2005, Prime Minister Juniehiro Kozumi and Dr. Manmohan Singh agreed
to reinforce the strategic focus in the relationship. In 2006, there was formation of a
strategic partnership named ‘Joint declaration on security cooperation between Japan and
India’. Finally, in year 2011, a Comprehensive Economic Progressive Agreement was signed
with the aim of benefitting each other’s trade markets.

Further, in the year 2014, Prime Minister Narendra Modi assumed the nation’s premiership
and chose Japan as his second overseas destination. The two leaders pledged to maximize
the potential of the bilateral relationship in order to advance peace, stability and prosperity
in Asia and the world.

Cooperation with the US

Japan’s India policy post- World War-II has always been affected by US foreign policy
towards India. Given the centrality of the Japan-US alliance for Japan’s national security
policy, the linkage between Japan and the US’s India Policy is natural. Considering India’s
ambivalence towards the US, it would be easier for Japan and India to strengthen bilateral
rather than trilateral cooperation, especially in security affairs.

In the long run, a prosperous and stable India will benefit both Japan and the US, and also
the two nations’ foreign policy towards India shouldn’t be short sighted in their strategic
calculations.

At the economic level, Japan and the US must seriously consider how to further integrate
the Indian economy into the Asia-Pacific region. It is important that India also indulges in
building a stronger economic architecture in its region. Bilateral tools for economic dialogue
exist with India, such as the US-India Civil Nuclear Agreement and Japan-India
Comprehensive Economic Progressive Agreement, however, Japan and the US should
coordinate their policies to urge India to join multilateral economic institutions in Asia
Pacific.

Thus, there needs to be multiple communication mechanisms with India, as exclusion and
neglect only worsens the disagreement amongst nations.

2. Evolution of trends of trade between India and Japan

3. What are the major goods and services that India imports from
countries like Japan and China? (A trade comparison)
4. Machinery, Chemical products and Transportation machinery- A
look at the 3 most imported goods from Japan
5. Does India indulge in Intra-industry trade with Japan in above
mentioned goods?
6. Has India developed a comparative advantage in any of the
imported goods from Japan over time?
7. What has been the qualitative aspect of growth?
8. How well has ‘Make in India’ initiative contributed in the process
of domestic production of the above goods and are the goods
produced in country competitive enough for the international
market?