India-Japan trade relations: Current and future prospects

Abstract

After World War II India and Japan have come close togather on many fronts. Trade has been one of the areas in which Japan has been a major partner for India in strengthening its economic position. Currently India and Japan are positioned as giants in the global economy and both have their positions of strength which can be leveraged though bilateral trade relations. However, two-way trade between India and Japan (US $ Million 10,177 for 2007-08) has risen in the last five years, but still remains considerably low when compared with China-Japan (US $ Million 2, 37,193) or even India-China trade figures (US $ Million 37,931 in 2007-08). The recent negociation on the Comprehensive Economic Partnership Agreement (CEPA) is likely to improve the bilateral trade with Japan many-fold allowing trading in as many 9,000 products - ranging from steel and apparel to drugs and machinery - from both sides either duty-free or at very low tariff levels. A recent CII study highlights that trade between India and Japan has the potential to double in the next two years if issues like trade facilitation and non-tariff barriers or NTB’s are addressed amicably. So, one of the major objectives of this study will be to assess mutual interest on the market of both the countries and also to correctly frame the agreement to mutually benefit on different sectors such as goods, services and investment, etc. The study will also try to assess the impact of tariff and nontariff reductions on bilateral trade flows and analyse the specific sectors that may emerge from the trade data analysis and how they need to be addressed through the FTA negotiations.