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Monday, October 20, 2008

India PM to visit Japan and China to boost ties

By Rina Chandran

MUMBAI (Reuters) - Armed with a potentially lucrative civil nuclear technology deal, Indian Prime Minister Manmohan Singh visits Japan to push energy and trade partnerships and China for a summit of Asian and European nations this week.

India and the United States earlier this month signed a deal that will allow India to buy civilian nuclear technology for the first time in three decades, seen as bolstering its strategic clout in Asia.

Japan, which had supported India's inclusion in the Nuclear Suppliers Group despite strong local opposition over India's failure to sign nonproliferation accords, is keen to participate in the Indian nuclear energy market estimated to be worth around $27 billion over the next 15 years.

The two countries will be looking to boost trade, which is small compared with the flow between the fast-growing economies of India and China, and cementing what some analysts see as an alliance of democracies in Asia to counterbalance China.

India and Japan carried out military exercises last year along with Australia and the United States.

"India and Japan have shown they are serious about strengthening their relationship," said Lalima Varma, a professor at the Centre for East Asian Studies at Jawaharlal Nehru University in New Delhi.

"But there is still a lot of ground to cover on the economic front."

Singh is scheduled to meet Taro Aso, the new Japanese prime minister, during his visit from Oct. 21-23. Singh had last visited Japan in 2006. Japan's trade with India in 2007 was about 1.21 trillion yen ($11.8 billion), according to the Japanese finance ministry, slightly more than 4 percent of Japan's trade with China.

Japan's Hitachi Ltd and Westinghouse Electric, a unit of Toshiba Corp, will now compete with global giants including General Electric Co and France's Areva for a slice of India's nuclear energy pie.

Japan is also expected to invest in a dedicated freight corridor between Delhi and Mumbai, while Japanese financial services firms and automakers are stepping up their presence in India as regulations ease and to offset sluggish Western markets.

Japan's Daiichi Sankyo Co earlier this year acquired control of Indian drugmaker Ranbaxy Laboratories Ltd, and Indian firms are keen for a larger share of Japan's generic drugs market, the world's second-largest after the United States.

"Japanese industries will be keen to have more access to a growing market in India," said Kohei Shiino, deputy director at the international economic research division at Japan External Trade Organisation (JETRO).

High import tariffs imposed by India on Japanese exports such as auto parts and steel products are a sore point, he said, but both countries may push for a free trade agreement.


Singh's visit to Beijing for the Asia-Europe Summit comes on the heels of Pakistan President Asif Ali Zardari's visit there. Singh has called a China-India relationship an "imperative necessity" and has dismissed talk that India was ganging up with the United States, Japan and Australia against China.

Conventional wisdom is that India will act for the United States as a counterbalance to China, and the nuclear deal will mean China faces an emerging strategic competitor.

But India has resisted being drawn into a "China containment strategy", instead focusing on improving ties with Beijing, boosting trade and solving a long-running border dispute.

Meanwhile, India's nuclear-armed rival Pakistan is trumpeting its closer ties with China, with China agreeing to help Pakistan develop its civil nuclear power generation capacity as well as investing in a mega-dam and hydro-electricity project.

India, whose booming economy has brought New Delhi closer to Washington, has sought to forge common ground on issues such as climate change and energy security.

"Yes, there are irritants, but we want to engage with China and keep the dialogue going," Varma said.

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