India Japan Bilateral Summit 2019 Strengthening Economic And Defence Ties

In 2019, the Indian Prime Minister visited Tokyo for the 13th Indo-Japan annual bilateral summit. Key outcomes included increased economic cooperation, highlighted by Japan offering India a $75 billion currency swap (50% larger than the previous one). Significant infrastructure projects in India, supported by Japanese Official Development Assistance (ODA), were also discussed, including the Delhi-Mumbai Freight Corridor, Delhi-Mumbai Industrial Corridor, Chennai-Bangalore Industrial Corridor, and the Ahmedabad-Mumbai High-Speed Rail system.

Furthermore, India and Japan announced the commencement of negotiations on an Acquisition and Cross-Servicing Agreement, which would allow Japanese ships to access fuel and servicing at Indian naval bases. This signals a deeper strategic alignment between the two nations, particularly in the maritime domain.

Deepening Ties: The 2019 India-Japan Summit and its Implications

The 13th Indo-Japan bilateral summit, held in Tokyo in 2019, marked a significant step forward in the evolving strategic partnership between the two nations. This summit was not merely a ceremonial event; it produced tangible outcomes that underscored the depth and breadth of the relationship, particularly in the areas of economic cooperation, infrastructure development, and defence collaboration. The centerpiece of the summit was Japan's offer of a $75 billion currency swap to India, a substantial increase over the previous arrangement, coupled with continued commitments to supporting India's ambitious infrastructure projects. Moreover, the decision to initiate negotiations on an Acquisition and Cross-Servicing Agreement (ACSA) signaled a new phase in defence cooperation, potentially paving the way for greater interoperability and logistical support between the two countries' armed forces.

The Genesis of a Strategic Partnership

To fully appreciate the significance of the 2019 summit, it is essential to understand the historical context that has shaped India-Japan relations. While formal diplomatic ties were established soon after India's independence, the relationship has undergone a remarkable transformation over the decades, evolving from a primarily economic partnership to a comprehensive strategic alliance.

The seeds of this transformation were sown in the aftermath of the Cold War, as both India and Japan began to reassess their foreign policy priorities in a rapidly changing geopolitical landscape. For India, the collapse of the Soviet Union and the rise of a unipolar world order necessitated a diversification of its strategic partnerships. Japan, on the other hand, found itself increasingly concerned about the rise of China and the need to secure its maritime interests in the Indo-Pacific region.

These converging interests led to a gradual strengthening of ties, with both countries recognizing the potential for mutually beneficial cooperation in various fields. Economic cooperation was a natural starting point, with Japan becoming a major source of foreign investment and technology transfer for India. However, the relationship soon expanded to encompass defence and security cooperation, as both countries began to share concerns about regional stability and the need to maintain a rules-based international order.

Economic Pillars: Currency Swaps and Infrastructure Development

The economic dimension of the India-Japan relationship has been a cornerstone of the partnership, with Japan playing a vital role in India's economic development. The $75 billion currency swap offered by Japan during the 2019 summit is a testament to this commitment. A currency swap agreement is a financial arrangement between two countries whereby they agree to exchange currencies at a predetermined exchange rate. This mechanism serves several important purposes. First, it provides a buffer against external economic shocks, particularly those arising from fluctuations in global currency markets. By having access to a large pool of Japanese Yen, India can mitigate the impact of currency volatility on its trade and investment flows. Second, it facilitates bilateral trade by reducing the transaction costs associated with currency conversions. Indian companies importing goods from Japan can pay in Rupees, which are then converted into Yen through the swap arrangement, eliminating the need to purchase Yen on the open market. Third, it enhances financial stability by providing a source of liquidity in times of crisis. If India faces a balance of payments problem, it can draw on the currency swap facility to meet its external obligations.

The 2019 currency swap agreement was particularly significant because it represented a substantial increase over the previous $50 billion arrangement. This increase reflected the growing confidence in the Indian economy and the deepening economic ties between the two countries. It also signaled Japan's willingness to support India's economic growth and its efforts to become a major player in the global economy.

In addition to the currency swap, Japan has also been a major provider of Official Development Assistance (ODA) to India, particularly for infrastructure projects. ODA refers to government aid designed to promote the economic development and welfare of developing countries. It can take the form of grants, loans, or technical assistance. Japan's ODA to India has been instrumental in financing several large-scale infrastructure projects, including the Delhi-Mumbai Freight Corridor, the Delhi-Mumbai Industrial Corridor, the Chennai-Bangalore Industrial Corridor, and the Ahmedabad-Mumbai High-Speed Rail system.

These projects are not merely about building roads and railways; they are about transforming India's economic landscape. The Delhi-Mumbai Freight Corridor, for example, is designed to improve the efficiency of freight transport, reducing transit times and lowering logistics costs. This will make Indian goods more competitive in the global market and boost exports. The Delhi-Mumbai Industrial Corridor aims to create a modern industrial base along the freight corridor, attracting investment and generating employment opportunities. The Chennai-Bangalore Industrial Corridor seeks to replicate the success of the Delhi-Mumbai model in South India, fostering economic growth and regional development. The Ahmedabad-Mumbai High-Speed Rail system, also known as the bullet train project, is a flagship project that symbolizes India's ambition to modernize its infrastructure and integrate its economy with the rest of the world. This project, while facing delays and cost overruns, is expected to revolutionize transportation in India, reducing travel times between major cities and boosting tourism and business travel.

Japan's involvement in these infrastructure projects is not simply about providing financial assistance; it also involves the transfer of technology and expertise. Japanese companies are known for their expertise in infrastructure development, and they are working closely with Indian companies to ensure that these projects are implemented to the highest standards. This collaboration is helping to build India's own capacity in infrastructure development, making it more self-reliant in the long run.

Defence and Security Cooperation: The Significance of ACSA

While economic cooperation has been the foundation of the India-Japan partnership, defence and security cooperation has emerged as an increasingly important pillar. The decision to commence negotiations on an Acquisition and Cross-Servicing Agreement (ACSA) during the 2019 summit is a clear indication of this trend.

An ACSA is a logistical support agreement that allows militaries to exchange goods and services, such as fuel, food, transportation, and spare parts, during joint exercises or operations. It is not a military alliance, but it enhances interoperability and facilitates cooperation between the armed forces of the two countries.

The significance of the ACSA for India and Japan lies in the fact that it will allow their navies to operate more closely together in the Indo-Pacific region. Both countries share concerns about the rise of China and its growing assertiveness in the South China Sea. They also have a common interest in maintaining freedom of navigation and ensuring the security of maritime trade routes. By having access to each other's naval bases and logistical support, the Indian and Japanese navies can enhance their ability to patrol the region and respond to any potential threats.

The ACSA is not the only area of defence cooperation between India and Japan. The two countries also conduct regular joint military exercises, including the Malabar naval exercise, which also involves the United States. These exercises help to improve coordination and interoperability between the armed forces of the three countries. India and Japan also engage in defence technology cooperation, exploring opportunities to jointly develop and produce military equipment.

The growing defence cooperation between India and Japan is not aimed at any particular country, but it is clearly driven by a shared concern about the changing security landscape in the Indo-Pacific region. Both countries recognize the need to work together to maintain peace and stability in the region and to ensure that international law is respected.

Organizations at Play: RBI and the Japanese Government

The deepening of India-Japan relations involves the active participation of various organizations from both countries. On the Indian side, the Reserve Bank of India (RBI) plays a crucial role in managing the currency swap agreement and facilitating trade and investment flows. The RBI is India's central bank, responsible for managing the country's monetary policy and foreign exchange reserves. It regulates the banking system, issues currency, and manages the country's foreign exchange reserves. In the context of the India-Japan relationship, the RBI works closely with the Bank of Japan to implement the currency swap agreement and to ensure that it operates smoothly. It also monitors the flow of trade and investment between the two countries and takes steps to promote greater economic integration. However, the RBI's actions are subject to government policy and macroeconomic conditions, which can sometimes constrain its ability to fully pursue its objectives.

On the Japanese side, the Government of Japan, particularly its Ministry of Foreign Affairs and Ministry of Economy, Trade and Industry (METI), plays a key role in providing ODA and engaging in diplomatic negotiations with India. The Government of Japan determines foreign policy, allocates ODA, and negotiates international agreements. It works closely with the Indian government to identify areas where Japanese assistance can be most effective and to ensure that ODA projects are implemented in a timely and efficient manner. However, the Japanese government's actions are subject to domestic political considerations and budgetary constraints, which can sometimes limit its ability to provide assistance to India.

Historical Precedents: Building on Past Successes

The 2019 summit was not an isolated event; it was part of a long-term process of strengthening the India-Japan partnership. Regular bilateral summits have been held between the two countries for many years, and these summits have led to increased cooperation in various fields, including economics, defence, and technology. Each summit builds upon the agreements and understandings reached at previous summits, gradually deepening the relationship and expanding its scope.

One notable example of a previous success is the Comprehensive Economic Partnership Agreement (CEPA) between India and Japan, which came into effect in 2011. The CEPA is a free trade agreement that eliminates tariffs and other barriers to trade between the two countries. It has led to a significant increase in bilateral trade and investment, boosting economic growth in both countries.

The 2019 summit builds upon the CEPA and other previous agreements, further strengthening the overall strategic partnership between India and Japan. It demonstrates the commitment of both countries to work together to address common challenges and to promote peace and prosperity in the Indo-Pacific region.

Stakeholder Perspectives: India and Japan's Strategic Interests

To fully understand the dynamics of the India-Japan relationship, it is important to consider the perspectives of the key stakeholders involved. India's official position is that it seeks to strengthen economic and strategic ties with Japan. This position is driven by several underlying interests. First, India wants to attract Japanese investment to support its economic growth and development. Japan is a major source of foreign investment, and India sees it as a key partner in its efforts to modernize its economy and create jobs. Second, India wants to enhance its defence capabilities by cooperating with Japan on defence technology and joint military exercises. India faces a number of security challenges, including terrorism and border disputes, and it sees Japan as a reliable partner in its efforts to address these challenges. Third, India wants to promote regional stability by working with Japan to maintain a rules-based international order in the Indo-Pacific region. India believes that a stable and peaceful region is essential for its economic growth and security, and it sees Japan as a key partner in its efforts to achieve this goal. To advance these interests, India actively participates in bilateral summits, negotiates agreements with Japan, and welcomes Japanese investment.

Japan's official position is that it aims to deepen its strategic partnership with India. This position is also driven by several underlying interests. First, Japan seeks to counter China's growing influence in the region by strengthening its ties with India. Japan views China as a potential rival, and it sees India as a strategic counterweight to China's growing power. Second, Japan wants to promote economic growth by expanding its trade and investment ties with India. India is a large and growing market, and Japan sees it as a key partner in its efforts to boost its economy. Third, Japan wants to enhance maritime security by cooperating with India on naval exercises and intelligence sharing. Japan relies heavily on maritime trade, and it sees India as a key partner in its efforts to protect its sea lanes. To advance these interests, Japan hosts bilateral summits with India, offers economic assistance, and negotiates defence agreements.

Broader Implications: Political, Diplomatic, and Economic Dimensions

The strengthening of the India-Japan partnership has broad implications for the region and the world. Politically, it contributes to a multipolar world order by providing a counterweight to the dominance of any single power. This is particularly important in the context of the rise of China, which has led to concerns about the balance of power in the Indo-Pacific region. The India-Japan partnership helps to ensure that no single country can dominate the region and that all countries have a voice in shaping its future.

Diplomatically, the partnership enhances India's diplomatic influence in the Indo-Pacific region. India is increasingly seen as a key player in the region, and its close ties with Japan give it additional credibility and leverage. This allows India to play a more active role in shaping the regional agenda and in promoting its interests.

Economically, the partnership boosts economic growth in India through Japanese investment and trade. Japan is a major source of foreign investment for India, and its investments are helping to modernize India's economy and create jobs. Bilateral trade between the two countries is also growing rapidly, and this is helping to boost economic growth in both countries.

The implications for security are also significant. The improved maritime security cooperation between India and Japan contributes to the overall security of the Indo-Pacific region. By working together to patrol the region and share intelligence, the two countries are helping to deter piracy, terrorism, and other maritime threats. This is essential for maintaining freedom of navigation and ensuring the security of maritime trade routes.

Connections and Context: Ongoing Issues and Historical Ties

The India-Japan partnership is closely connected to several ongoing issues in the region, including India-China relations, Indo-Pacific security, and regional economic integration. The relationship is also rooted in historical ties that date back centuries.

The India-China relationship is a complex one, characterized by both cooperation and competition. While India and China are major trading partners, they also have unresolved border disputes and competing strategic interests. The India-Japan partnership is seen by some as a way to balance China's growing influence in the region.

Indo-Pacific security is a major concern for both India and Japan. The region faces a number of security challenges, including terrorism, piracy, and maritime disputes. The India-Japan partnership is a key element in the efforts to address these challenges and to maintain peace and stability in the region.

Regional economic integration is another important issue for India and Japan. Both countries are members of various regional economic groupings, such as the Regional Comprehensive Economic Partnership (RCEP), and they are working together to promote greater economic integration in the region.

The India-Japan partnership is also rooted in historical ties that date back centuries. Buddhism spread from India to Japan in the 6th century, and this has created a cultural connection between the two countries. In the early 20th century, Japan supported India's independence movement, and this helped to build goodwill between the two countries. After India's independence, Japan became a major provider of economic assistance, and this further strengthened the relationship.

The Future Outlook: Continued Strengthening of Ties

The future outlook for the India-Japan partnership is positive. All indications suggest that the relationship will continue to strengthen in the years to come. Both countries are committed to deepening their strategic partnership, increasing economic cooperation, and enhancing maritime security cooperation.

One area where the relationship is likely to grow is defence technology cooperation. India and Japan are exploring opportunities to jointly develop and produce military equipment, and this could lead to significant advances in defence technology for both countries.

Another area where the relationship is likely to grow is in the field of digital technology. India and Japan are both major players in the digital economy, and they are working together to promote innovation and entrepreneurship in this field.

The India-Japan partnership is a vital element in the emerging geopolitical landscape of the Indo-Pacific region. It is a partnership based on shared values, common interests, and a commitment to promoting peace and prosperity. As the region faces new challenges and opportunities, the India-Japan partnership will continue to play a crucial role in shaping its future. The summit in 2019 only served to reinforce the dedication of both nations to continue working together.