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 Japanese involvement in the Indian Economy
Re-examining the experience and blueprint for the future 

By
M.L. Sondhi

Preface:  The Third World Foreign Policy Institute represents an initiative by academic specialists in international relations to stimulate thinking and discussion about urgent issues affecting Indian foreign policy with special emphasis on Asian-Pacific developments.  Both India and Japan wish to strengthen parliamentary democracy and free market economies and reassert the cultural identity of Asia.  We are therefore providing a forum to bring together representatives from government, industry and academia to exchange ideas and share experience and ultimately assist in opening a new chapter in the relationship between India and Japan.

Introduction:  Although there is an impressive record of economic, political and cultural relations between India and Japan, the Cold War confrontation between East and West inevitably resulted in Tokyo and New Delhi remaining passive spectators with regard to many issues on which it was necessary to develop an in-depth and integrated approach.  Policy makers and intellectuals were reluctant to evaluate the past on a scientific basis.  For example the archives of the period of Netaji Subhas Chandra Bose and the Indian National Army were not seriously studied with the possibility of building a solid future relationship.  There was a schizophrenic character to the re-evaluation of Indo-Japanese cooperation during an important phase of India’s struggle for freedom.  Now that the Cold War is over it should be recognised that the Subhashist contribution to Indo-Japanese relations is crucial, and it is an important task for historians and policy makers to sort out the legacy of cooperation between the Indian freedom movement and Japan, and take into account the evidence that bears upon the fundamental issue of the future of Indo-Japanese relations.  Similarly the popular misconceptions about the Tokyo Verdict and the Enemy clause in the UN Charter need to be removed.  To those who are familiar with the documentary sources on the Tokyo Verdict, the arguments of Judge Radha Binode Pal, the eminent Indian jurist sound more convincing and logical today then the majority judgement which comes out poorly on grounds of objectivity and rationality.  It is critically important for India and Japan to take the initiative to develop a movement to depart from the frozen official attitudes towards the Tokyo Verdict.  The importance of a scholarly discussion on Judge Radha Binode Pal’s dissenting verdict cannot be exaggerated.  This is an urgent task in the post-Cold War world and although it may be a long and difficult process the time is approaching when the reversal of the Tokyo Verdict will be regarded as a stage of maturity in international law and relations.  Judge Radha Binode Pal’s challenge to the wisdom of the majority verdict will help to eradicate one of the stereotypes of the Cold War mentality.  The dialectics which enabled the Soviet Union to maintain its imperialist hold on the Northern Islands of Japan were not examined seriously by Indian decision makers since the subject was taboo.  New Delhi must now find the right place for the question of return of the northern territories to Japan and accord the issue due weight in discussions with Russia, and at the United Nations.  In viewing the changing world in new terms, India has to maintain a holistic view which does not ignore the special cultural context of Indo-Japan relations.  Since Kaksu Okakura formulated his seminal views on the Ideals of the East, both policy and scholarly circles have been aware of the remedial corrective action which is necessary to restore the interrupted historical dialogue between India and Japan.  With their strong economic commitments and their faith in democracy, the cultural solidarity of India and Japan can help both countries to serve the true interests of Asia.

This is all the more urgent now when so many intractable problems have surfaced and the rhetoric of a new world order has come to dominate nearly all consultations and dialogues among nations.  After the war against Iraq in the Gulf in which the plan of conquest masterminded by Saddam Hussain was frustrated, the human, economic and ecological cost of armed hostilities became glaringly clear.  It is necessary for Indians and Japanese to have a detailed discussion of the events in West Asia and raise a range of critical questions relating to the principal concerns and approaches to problem-solving in the new world order.  Indian scholars should not limit themselves only to the study of the global and regional expansion of Japan’s external economic relations; they should closely examine the developing images of world politics among Japanese statesmen and academics.  The former model of Japan as a country solely occupied with economic activity and indifferent to politics is being drastically revised.  It is to be expected that soon the Japanese will articulate in detail alternate ways to construct a new world order which may intertwine their national goals and universal principles.  India has to take care not to internalise the discourse which results from European or American prejudices against Japan.  The distinguishing factor of “pacificism” in Japan since the end of World War-II can be harnessed for suggesting new methodological options for developing proposals for international cooperation in the Asia-Pacific region by a joint Indo-Japanese working group.

It would seem from India’s point of view that the Japanese example of utilising society’s integration potential is relevant to the problems thrown up by the disintegration of the Soviet Union.  India is in a position of advantage as far as the integration potential of its cultural identity is concerned.  The prevailing characteristics of the political discourse in the erstwhile Soviet Union and Yugoslavia have been given a lot of attention, while the manner in which Japan has tapped its society’s integration potential has not received sufficient attention in India.

Policy Perspectives:  the prospects and possibilities of Indo-Japanese co-operation may be categorised under five main programme areas and prescriptions offered for adjusting Indian and Japanese policies to the post-Cold War context.

1.         Initiatives arising out of the Liberalisation of the Indian Economy

Both Indian and Japanese policy makers have to understand that the changes that have now begun to take effect in the Indian economy are related to a broader vision of international economic and political problems.  Both the Indian government and Indian business firms have to tap best sources of economic information and technological and managerial expertise to mobilise Japanese surplus for India.

 2.         Boosting Indo-Japan economic ties

 An important question for economic negotiators from India is how well they can communicate to the Japanese side the reality of India’s movement towards global integration.  Japan has enough reason to be cautious about socialist-minded economic officials from India, but Indian companies which are involved in trading with Japan can be important links for influencing Japanese sensitivities to the Indian Reform Package and for stimulating government action in India for attracting foreign direct investment from Japan.  The channelling of non-traditional items from India into the Japanese distribution system requires energised export drives and penetrating analysis of India’s export structure.  New initiatives should be undertaken to learn from the experience of other countries which have histories of export-led growth, and government and private sectors should join hands to boost India – Japan economic ties.

3.         International Capital Transfer

Indian officials who handle economic cooperation with Japan have often failed to realise that if India is going to make a breakthrough on the economic front it can only be by tapping Japan as the main source of capital and technology.  Many of India’s economic actions in the past decades have been painfully out of step with what was needed for a genuine Indo-Japanese economic partnership.  The crisis in the Soviet Union has revealed that much of Indian economic cooperation with the Communist bloc was never subjected to real scrutiny.  Soviet insolvency has now placed India in a difficult position.  India’s efforts to move into a free market economy can only succeed by a real commitment to international competitiveness.  Viable economic decisions must therefore be taken in a timely manner if Japan is to be convinced that India has removed the last vestiges of Soviet–style economic practices.

4.         Japanese Overseas Investment Policy

It is reasonable to say that if Japan continues to adopt a policy of “wait and see” towards the Indian effort to become fully integrated with the world economy, it will not be an encouraging sign to other countries.  For both aid and commercial borrowing, Japan’s role is crucial if India is to aim at a high rate of sustained economic growth.  There is no point in only harping on the undesirable developments on the Indian economic scene.  The recognition that many of India’s problems are of a structural nature is accepted by the general consensus in the policy making process.  It is therefore necessary that the Japanese side should reconsider their first impressions about India and Japanese companies should draw up their investment plans in India in terms of the new chances for Japan in a changing India.  On the other hand India should learn to lobby in Japan in an effective manner so that the Indian liberalisation policy is not seen only as an expedient for overcoming the balance of payments crisis but is perceived as a process which India is addressing in earnest for realistic solutions to our economic problems.

 5.         Peace and Prosperity in Asia

The Asianisation of Indian foreign policy and the Asianisation of Japanese foreign policy are both necessary for developing salient approaches to major changes in the global political system and to develop new mechanisms to promote peaceful management of conflicts in Asia.  The Japanese involvement in the Indian economy should be viewed in the context of the emerging world order and as an indicator of the possibilities for long term peace and security in Asia.  At a time when the Soviet Union is facing both economic bankruptcy and political and social disruption, the new Indo-Japanese economic relationship will be an evidence of a programme in developing a more orderly world and help to strengthen democracy and freedom in Asia.  It is necessary that both India and Japan should find their place as Permanent Members of the Security Council in the UN system so that both countries should lend historical and political perspective to the emerging reality of Asia in the new world order.