UPSC Mains 2013 GS Paper 2 Q20: model answer

In 2013 India–Japan trade stood at about $16 billion, while Japan's trade with China was over $300 billion. Japan was India's largest bilateral aid donor, yet its companies kept their factories in China and Thailand. Politics was warm; business was cautious, and the reasons lay mostly in policy.

Constraints on India's side

• Land acquisition delays and unclear titles.
• Labour laws that made hiring and closing difficult.
• Tax uncertainty: retrospective taxation (2012) scared investors.
• Infrastructure gaps: power, ports, logistics costs.
• Contract enforcement and slow dispute resolution.
• Non-tariff barriers and standards.
• The CEPA (2011) was under-used because rules of origin and procedures were complex.

Constraints on Japan's side

• Risk-averse companies and preference for familiar Asian locations.
• Language and cultural barriers; few Japanese-speaking Indian managers.
• Agricultural protection that limits Indian food exports.

Progress since

• Delhi–Mumbai Industrial Corridor and the Mumbai–Ahmedabad high-speed rail with Japanese finance.
• Japan Industrial Townships and a dedicated 'Japan Plus' desk.
• India's GST, IBC and labour codes reduced some constraints.
• At the 2025 summit Japan set a target of ¥10 trillion of private investment in India over a decade.
• Supply chain resilience initiatives with Australia, moving firms out of China.

Conclusion

The constraints were mostly in India's policy environment. As India fixes them, Japan's capital and technology can turn a warm political friendship into an economic partnership of equal weight.