India and Japan: From friends to strategic partners

ndia-Japan ties have now evolved into a comprehensive partnership encompassing defence, security, and strategic domains

Growing synergy between India and Japan. PTI

Japan, once a global leader in consumer electronics and industrial products, has struggled to keep pace with the rapid advancements in artificial intelligence (AI) and the semiconductor revolution. In the late 1980s, Japan commanded over half of the global semiconductor market, but its share has since declined sharply to just 10 per cent.

Japanese firms continued to bet on DRAM (Dynamic Random Access Memory) production which became increasingly less profitable over time. Its competitors meanwhile diversified into more advanced and lucrative segments like microprocessors, which became crucial components in personal computers and other digital devices.

This decline can be attributed to several factors, including complacency, prolonged trade friction with the United States, delays in adopting advanced production technologies, an aging workforce and corporate leadership, and sluggish investment in emerging technologies. Over time, competitors such as the United States, China, Taiwan, and South Korea have surged ahead, leaving Japan trailing in this critical sector.

To regain its competitive edge, Japan has launched an ambitious $65 billion investment initiative aimed at revitalising its semiconductor industry and advancing its AI capabilities. This strategic vision has opened new avenues for partnership between India and Japan.

During a visit to India in July 2023, Japan’s Minister for Economy, Trade, and Industry (METI) Nishimura and India’s Minister for Electronics and Information Technology Ashwini Vaishnaw signed a memorandum of cooperation to strengthen collaboration in semiconductor design, manufacturing, equipment research, talent development, and supply chain resilience. This partnership is set to unfold at both government-to-government (G2G) and business-to-business (B2B) levels.

The global disruption of supply chains in the wake of the Covid-19 pandemic has starkly exposed their fragility and vulnerability to geopolitical factors. In response, concerted efforts are now afoot to develop more robust, resilient, and trusted supply chains, particularly with respect to sensitive, critical, and emerging technologies, components, and commodities.

The scale, scope, complexity, capital requirements, and potential rewards of AI and semiconductor applications, services, and products are of such magnitude that no single country or company can dominate the entire ecosystem of innovation, design, fabrication, and marketing. This reality underscores the critical importance of collaboration among friendly nations like Japan and India.

By combining Japan’s capabilities in advanced manufacturing, robotics and technology with India’s software prowess, digital services, and large talent base, both countries can create a more resilient and competitive ecosystem. Besides AI and semiconductors, Hi-Tech engagement between the two nations cover a variety of sectors such as robotics, renewable energy, 5G, space exploration, and digital public infrastructure. India’s NITI Aayog has identified Japan as a key partner in advancing AI solutions.

Hi-tech cooperation is a key component of the “Special Strategic and Global Partnership” between India and Japan, established in 2014. However, this has not always been the case. While India and Japan have historically maintained cordial relations, they were initially limited in scope. Beginning 1958 Japan did provide invaluable ODA (overseas development assistance) to India.

This was primarily due to a divergence in the economic and political outlook of both countries. India followed a doctrine of non-alignment and a socialist model of development, while Japan forged a security alliance with the US and embraced capitalism. The conclusion of the Cold War marked a turning point in India-Japan relations, but not without some high-octane political drama.

Japan responded sharply to India’s nuclear tests in May 1998 by suspending ODA and pushing for punitive UN sanctions. However, its position began to shift in tandem with the United States, influenced by the success of strategic dialogues between US Deputy Secretary of State Strobe Talbott and India’s Minister for External Affairs, Jaswant Singh. Both the US and Japan started reassessing their ties with India, framing them within a broader geopolitical context.

Japanese Prime Minister Yoshiro Mori visited India in August 2000 when the sides agreed to establish the “Japan-India Global Partnership in the 21st Century”, laying the groundwork for deeper collaboration. It set the stage for future high-level exchanges and a series of agreements that would strengthen ties between the two countries.

Prime Minister Shinzo Abe’s landmark visit to India in 2007 when he delivered the seminal ‘confluence of the two seas’ address in the Parliament marked a turning point in bilateral relations. India and Japan concluded a civil nuclear cooperation agreement and Comprehensive Economic Partnership Agreement in 2011.

Bilateral trade between India and Japan has grown steadily since, rising from $16.95 billion in 2019-20 to $22.85 billion in 2023-24. Japan has also emerged as India’s fifth-largest foreign investor, with cumulative investments of $41.4 billion by December 2023, primarily in sectors such as manufacturing, finance, and services.

However, these figures remain well below the potential of their economic partnership. In comparison, Japanese businesses have invested a staggering $130 billion in China, with bilateral trade between Japan and China reaching $313 billion in 2022.

The investment gap between Japan and India is expected to narrow as numerous Japanese manufacturing companies scale down their operations in China and increasingly view India as a promising investment destination. This shift has been bolstered by Japanese Prime Minister Fumio Kishida’s pledge, made during his visit to India in March 2022, to invest JPY 5 trillion (approximately $37 billion) over five years in public and private projects.

India is the largest recipient of Japanese ODA, which has been instrumental in the development of numerous landmark infrastructure projects across the country. An excellent example of this collaboration is the ambitious Mumbai-Ahmedabad High-Speed Rail (MAHSR) project, or the “Bullet Train”, which leverages Japan’s cutting-edge railway technology and is supported by a concessional loan of approximately $11 billion from Japan.

India-Japan ties have evolved into a comprehensive partnership also encompassing defence, security, and strategic domains. The sides share a common perspective on regional opportunities and challenges, including China’s aggressive behaviour in the Indo-Pacific.

The rapidly evolving multifaceted partnership between a resurgent Japan and a rising India, the world’s fourth- and fifth-largest economies respectively, holds immense promise for mutual growth and regional stability. With a strong foundation already in place, this relationship is poised to become even more robust and dynamic in the years ahead.

(Part 2 of the two-part series.)

[Also read Part 1: Why Japan is struggling to recover its economic mojo]

The author is a foreign affairs specialist and an ex-envoy to Canada and South Korea. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.