Gains 038; misses

India-Japan summit had economic and strategic substance,but there remain nuclear miles to go

Against the backdrop of global economic uncertainty and doubts of Europes ability to solve its sovereign debt crisis any time soon,India and Japan,as part of their annual bilateral summit,inked a new bilateral currency swap line of 15 billion for three years,multiplying the previous swap line of 3 billion which had expired last June. While this agreement flags the continuing misgivings in New Delhi and Tokyo about the economic wind in the West,it is also designed to bulwark the rupee,Asias worst performing currency this year,against the flight of foreign investments from the

Indian market. The currency swap will allow India and Japan to ease liquidity problems and tap into each others forex reserves. However,the two countries will need to eventually move to direct trading in each others currency,as Japan and China intend to promote holding of rupees by Tokyo can ease Japanese investment in India too.

Japan has committed to invest 4.5 billion in the 90 billion Delhi-Mumbai Industrial Corridor DMIC. The DMIC is of course an essential part of the larger infrastructural development India needs,for which the Twelfth Plan is likely to ask for 1 trillion,which the government expects to be funded largely by the private sector and PPPs. India believes large Japanese investments will also come to the proposed National Manufacturing Zones. Japanese companies have a big opportunity to invest in Indian infrastructure and lift it from its fourth-world standards to the quality and integration necessary for growth. The long-stagnant Japanese economy can also profit from these infrastructure and manufacturing ventures,along with Tokyos role in providing nuclear and green technologies and improving Indias energy efficiency.

Unfortunately,while the economic chapter of this years summit has been substantial,the two sides still need to finish negotiations for civil nuclear cooperation. There are strong and understandable sensitivities in Japan about this,but tackling climate change and Indias energy needs are imperatives too. The deal should be clinched in the near future. Geopolitically,stress has been laid on maritime security,including countering piracy as well as bilateral naval and coast guard exercises. The emphasis on ensuring navigational freedom in international waters will undoubtedly be read into the context of maritime friction in Southeast and East Asia. Delhi and Tokyo must proceed hereon to a complete grasp of their full bilateral potential.