Comprehensive Economic Partnership Agreement India Japan

The agreement had two main concerns: infrastructure in India and non-tariff barriers in Japan. In 2006, the two countries agreed on the massive $90 billion Delhi-Mumbai Industrial Corridor (DMIC) project. The central agenda of the DMIC project includes the development of nine industrial zones; A high-speed freight line; Three ports; six airports; a six-lane highway without a crossing; and a 4000-megawatt plant. The project agreement looks promising in the context of the new production policy, which aims to increase the share of manufacturing in GDP to 25% within a decade, which could create 100 million jobs. However, the economic side of relations remains well below potential. Japan, with a population of about 127 million, has fallen behind China, becoming Asia`s second largest economy. According to the WDI, gross domestic product (GDP) was $5.5 trillion in 2010. On the contrary, the GDP of India, Asia`s third largest economy, amounted to $1.7 trillion in the same year. It has the second largest population in the world with more than one billion people. In 2007, Japan and India agreed to increase two-way trade flows to $20 billion by 2010.

However, the sum did not meet the target and reached only 1290 billion yen (about 15.85 billion dollars). For 2011-12, bilateral trade between India and Japan amounted to $18.31 billion, an increase of 32% over the previous year. The Comprehensive Trade Pact between India and Japan aims to nearly double bilateral trade to $25 billion by 2014. Japan exports mainly machinery, electronics, iron and steel to India, while India exports mainly oil, iron ore and chemicals to Japan. Japan is India`s 12th largest trading partner, while India is Japan`s 27th largest trading partner. Bilateral trade and investment flows between the two countries have not been spectacular, with Japanese companies focusing on activities with China and Southeast Asia. According to the Japanese government, some 870 Japanese companies operate in India in 2010 and Japan`s direct investment in India amounted to some 241 billion yen (543 billion yen in 2008). This paper attempts to analyze the first effects of the India-Japan Comprehensive Economic Partnership Agreement on both trade and investment relations and other areas of cooperation. Although it is too early to conduct an in-depth impact assessment, the objective of the study is to highlight some facts about the effectiveness of the agreement.

The Comprehensive Economic Partnership Agreement (CEPA) between India and Japan was signed on 16 February 2011 and came into force on 1 August of that year. In addition to accelerating activity, the agreement aimed to eliminate tariffs on 90% of Japanese exports to India, such as auto parts and electrical equipment, and on 97% of imports from India, including agricultural and fisheries products, by 2021. Since the introduction of the EPA, trade between India and Japan has increased by 38%, with bilateral trade expected to reach $24 billion by March 2013. In accordance with the agreement, Mukhopadhyay and Bhattacharyay (2011) assessed the macroeconomic impact of trade integration between Japan and India on the basis of the analysis of the Global Trade Analysis Project (GTAP).