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This is the age of Asian dominance, and
fittingly, two Asian giants, India and Japan, are embracing each other for
mutual advantage. The recent visit of Prime Minister Manmohan Singh to
Japan has highlighted the fact that Japan is now, more than ever, eager to
enhance and upgrade commercial ties with India. An analysis of the trade
basket. After years of doling out development aid to India, Japan is eyeing the world's second-most-populous country as a business opportunity, lured by its potential as a low-cost production centre and a market for its exports. Japan and India are major players in Asia sharing strategic interests and upholding common values such as democracy, human rights and a market economy. An India-Japan bilateral agreement may help bring back the importance of Japan in India's total trade basket. To realise this potential, the two countries have initiated a slew of measures including promotion of Special Economic Partnership Initiative (SEPI) that will focus exclusively and extensively on developing infrastructure and manufacturing capacity in India. The SEPI is ambitious in scope, as it covers development activity in the power, transport and manufacturing sectors. Under the SEPI, Japan will help India set up dedicated multi-modal freight corridors between Mumbai-Delhi and Delhi-Howrah, assist in creating a Mumbai-Delhi industrial corridor, and set up multi-product Special Economic Zones to source Japanese investment. A task force on the Indian power sector will also be set up. The Initiative sets out various measures to broaden and deepen the bilateral economic, trade and cooperative ties between Japan and India, raising expectations for further expansion and diversification of goods and services, investment flows and other areas of economic cooperation, and exploration of an India-Japan economic partnership agreement. In the strategic area, both sides agreed to hold annual summit-level meetings and upgrade their strategic dialogue to the ministerial level and undertake a goodwill exercise between the Japan Maritime Defence Force and the Indian Navy in 2007. They will also cooperate in countering terrorism and anti-piracy operations as they resolved to take cultural ties, educational linkages and people to people contacts to new heights. India has been one of the largest recipients of Japan's Overseas Development Assistance with a total of about $1.2 billion. The money was given to upgrade infrastructure, alleviate poverty and rural development besides other initiatives. Nevertheless, Japan is the fourth largest investor in India with some of its ventures such as auto-giants Maruti-Suzuki and Hero-Honda becoming household names here. Japanese companies however complain about India's poor infrastructure, red tape and complicated tax structure. Analysts believe that while India's trade with the rest of the globe has risen over the years, trade with Japan has not kept pace with the growth in India's overall trade. Trade and investment flows between the two countries have been unspectacular because Japanese companies have concentrated their energies on China and Southeast Asia for the past two decades and India has remained out of their focus. Indo-Japanese bilateral trade figures in goods for 2005-2006 stood at $6.5 billion with exports from India at $2.5 billion and imports at $4 billion. Japan accounts for only 2.41 per cent of India's total exports of $103 billion. But now the relations are expected to move from an economic to a strategic level. As Japan heavily relies on shipping for its imports and exports it wants to secure its maritime routes. Piracy and maritime terrorism have been Japan's concerns. With their navy's limited capacity to operate beyond their maritime borders, Tokyo expects countries like India to safeguard international maritime transport in the region.
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