By warming up to Japan to meet India’s infrastructure needs, Prime Minister Narendra Modi may have put several Western politicians — who shunned him post 2002 Gujarat riots — on notice.
However, Modi’s strong engagement with the Japanese Prime Minister Shinzo Abe earlier this month is expected to propel the Chinese to further expand its economic ties with India.
The emergence of Asian axis could impact the US influence on moulding the balance of power within Asia, say economy watchers.
China now sees the Indo-Japanese industrial collaboration as more “strategic”.
Modi’s coziness with Japanese leader Abe has clearly led to some eye-catching deals this month — assurance of $35 billion Japanese foreign direct investment into India over next five years, more Japanese soft loans besides collaboration in defence industry and rare earth exploration.
Japan will also play a strong role in the development of industrial corridors and may nudge its automakers and electronics companies to expand their Indian operations.
Japan, formerly a big donor for China, now counts India as its largest aid recipient.
Modi’s visit to Japan has certainly put India on a strong diplomatic wicket, raising its bargaining power with China (during the forthcoming visit of President Xi Jinping to India) and also the US (when Modi embarks on an official visit this month-end).
China is now clearly looking to match the investments promised by Japan into India.
After dilly-dallying for a long time, China has suddenly started walking the talk on its intention of pumping money into India. A team of Chinese officials has already identified two locations — one in Gujarat and the other in Maharashtra — to set up industrial parks with Chinese investments.
The country is also set to pledge its investments into railway infrastructure. Related MoUs will be signed during the Chinese President’s visit this week. China is already a large lender when it came to commercial loans, especially for the power sector.
India’s power sector has had the largest share of Chinese loans.
Look beyond Japan: UK The United Kingdom, which is seeing the changing dynamics amongst the Asian biggies, does not seem all that happy with the growing India-Japanese collaboration on the industrial front.
UK Deputy Prime Minister Nick Clegg, in a meeting with representatives of think tanks and the Indian industry, during his recent India visit, indicated that India needed to think beyond Japan when inviting foreign investments.
“Since all countries are not able to invest by giving soft loans like Japan, the UK wants India to keep in mind the terms and conditions under which other countries can invest,” said a person who attended the meeting.
With inputs from Amiti Sen and Debabrata Das)