The Hindu Business Line : Expectations run high as PM embarks on Japan tour

The Prime Minister, Dr Manmohan Singh, leaves for Tokyo on Wednesday on a four-day trip amid considerable anticipation that India will be able to expand significantly its economic engagement with Japan.

He knows that such levels of optimism have built up several times in the 15 years of India's economic reform, only to peter out. Japanese businessmen, traditionally slow and deliberate and yet thorough in their decision-making, could not persuade themselves to put their big investments in India. The nuclear explosion of 1998 provided the political dampener if at all any was needed to dissuade Japanese business.

Japanese attention was substantially diverted to China, which over the past ten years has won investments of over $27 billion in a wide range of sectors when India got barely a tenth of that, and that too largely in two spheres, automobiles and electronics.

There are sufficient pointers now that the tide may be turning. For one, observers have been pointing to the Japan's new Prime Minister, Mr Shinzo Abe. The 52-year-old son of the country's former Foreign Minister, Mr Shintaro Abe, and grandson of the former Prime Minister, Mr Nobusuke Kishi, under whose tenure between 1957 and 1960 saw what is acknowledged by the Indian diplomats as the best period in Indo-Japanese relations, had declared his interest in engaging with India even before he became the Prime Minister three months ago.

In his book Utsukushii Kuni e (Toward a beautiful nation), published earlier this year when he was still a Cabinet Secretary, Mr Abe talked of India being a "new Asian partner" for Japan. He ventured to project that in another 10 years' time, Japan-India relations might even overtake his country's relations with China and the US.

His musings comes in the wake of Japan's current discomfort with China, especially after the wave of anti-Japanese sentiment ignited last year, left the large contingent of Japanese companies on the mainland nervous to the point of inducing some to re-think their strategies.

In a survey conducted 18 months ago by the Japan External Trade Organisation (JETRO) nearly 50 per cent (80 of 172) of Japanese companies operating in China said they were either affected or feared they would be affected by the anti-Japanese sentiment in China.

The concerns included the possibility of lower sales arising from a boycott of Japanese goods, tarnished image and worsened relations with staff. The perception of risk of operating in that country being higher, only about half the companies surveyed believed they would consider investing further in China, a number that was down from about 83 per cent in 2004.

Will these companies explore India as an alternative destination? At least their Government is keen on giving India the chance. Diplomats note the length to which the former Prime Minister, Mr Koizumi, went to ensure that India was invited to the East Asia summit in Kuala Lumpur in 2005. India has replaced China as the largest recipient of Japan's Overseas Development Assistance, funds from which have contributed to the building of New Delhi's Metro rail system.

On their part, the Japanese companies have also signalled a higher interest in India. The number of companies operating in India has increased by 50 per cent in the past three years to 350. Suzuki has announced that it will set up its second Maruti Suzuki plant, while Honda and Toyota have both indicated expanding their capacities. Japanese funds have also taken a shot at the Indian equity and debt market, their institutional investors ploughing in over $5 billion in the past 18 months.

The Economic Partnership Agreement that Japan is seeking to work out with India is the platform that will launch its deeper foray into India.

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