Indo-Jap deal holds productive promise
Economic Times (India) | June 19, 2006
Indo-Jap deal holds productive promise
More than a trade pact
If commerce minister Kamal Nath’s statements in Tokyo are any indication, the proposed trade agreement with Japan will mark a distinct shift from the free-trade agreements India has favoured with other countries.
Instead of being preoccupied merely with the number of commodities for which trade barriers will be lifted, the minister has focused on specific areas where there’s scope for mutual benefit. In sensitive areas like Japan’s agriculture this may mean no more than allowing import of mangoes from India.
But India does also offer opportunities to overcome some of the emerging constraints on Japan’s growth. Japan’s problem of an ageing workforce can be addressed by tapping the younger workforce India has to offer.
Kamal Nath has indicated that townships could be set up to create the economic and social environment that Japanese industry is comfortable with. And there would be further benefits to be had if small and medium Japanese enterprises are encouraged to invest in them.
These enterprises are more likely to bring official Japanese financial support, and the greater the number of investors the less will be the dependence on a few large players.
This strategy is not without its risks. On the financial side, it’s likely that at least some of the projects would involve Indian public investment as well as conditional aid from Japan. It would then become imperative to initially evaluate and later monitor whether the benefits justify the costs.
We cannot also ignore the potential social strains of creating isolated pockets of industrial development in the midst of a relatively less developed rural economy. Can we assume that the original owners of the land, taken over for a township, will remain silent spectators when its value multiplies?
Clearly, not. So, while Kamal Nath’s initiatives do reflect a long overdue recognition that benefiting from globalisation is not simply a matter of lowering trade barriers, they raise a number of issues that the government will need to address.
