NEW DELHI |
NEW DELHI (Reuters) - Japanese Prime Minister Yoshihiko Noda called for greater economic relations between two of Asia's largest economies on Wednesday, after India's trade minister said bilateral commerce would only reach $25 billion by 2014.
India and Japan enjoy warm diplomatic ties, but at a paltry $15 billion, bilateral trade in 2010 was less than 5 percent of Japan's commerce with China.
"I believe that India's middle class will be the driving force if the manufacturing sector grows in India ... we can achieve greater trade volumes," Noda said at a meeting with business leaders in Delhi.
Despite the low trade volume, Japanese companies are increasingly viewing India as a long-term play, with a large and youthful population set to drive growth in coming years.
"We can and should step up economic relations between the two countries," Noda said.
Noda, Japan's sixth prime minister in seven years, said talks with India about sales of civil nuclear technology were "in the right direction".
Japan is working closely with India to build a 1,483 km (920 mile) industrial corridor stretching from New Delhi to the financial hub of Mumbai in the west, that could help transform India's economic landscape and give its choked, teeming cities room to breathe.
The corridor includes plans for 24 new cities and Indian Trade Minister Anand Sharma said overall investment would be more than $100 billion.
FINANCE AND NUCLEAR
Noda was on a one-day trip to India to boost financial cooperation between Asia's second and third largest economies, which are also working more closely on security issues along with the United States.
Japan and India are in the final stages of deciding on a dollar swap agreement which may be announced during Noda's visit and would help defend the rupee, Asia's worst performing currency in 2011.
The planned mechanism is welcome news for India, which is suffering an industrial slowdown that has raised concern about its twin fiscal and current account deficits.
Japanese corporations see India as a major opportunity as Japan's population ages and the fast growth seen by main regional partner China in recent decades slows, said Rajiv Biswas, IHS Global Insight's chief Asia economist.
"When you look at Japan's economy you are looking at demographic ageing, the population is declining, they don't have growth markets domestically," Biswas said.
"They are looking elsewhere to really get growth and India is the prime candidate."
India wants to buy civil nuclear technology from Japan, but talks have been slow, with Japan wanting India to commit to a moratorium on nuclear weapons tests.
"The civil nuclear agreement is at the working level, discussions have proceeded in the right direction. I welcome this progress," Noda told reporters and said the issue was raised at a meeting with India's foreign minister.
"I hope it will be achieved," he said.
Hours before Noda left for India on Tuesday, Japan's security council relaxed a decades-old arms exports ban. India was the world's top weapons importer last year.
(Additional reporting by Abhijit Neogy, Annie Banerji and Mayank Bhardwaj; Editing by Ranjit Gangadharan and Richard Borsuk)
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