IEEJ： September 2014ｃ○ IEEJ 2014

Special Bulletin
A Japanese Perspective on the International Energy Landscape (185)September 3, 2014

Japan-India Summit and the India's SignificanceKen Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn September 1, Indian Prime Minister Narendra Modi and his Japanese counterpart
Shinzo Abe held an India-Japan summit in Tokyo and issued a joint communiqué titled "Tokyo
Declaration for Japan-India Special Strategic and Global Partnership,” calling for enhancing bilateralrelations in a wide range of fields from economics to security. Key points of the communiqué
include (1) some 3.5 trillion yen in Japanese investment in and loans to India over the next five years,(2) about 50 billion yen in Japanese official development assistance loans to India Infrastructure
Finance Company, (3) early Indian rare earth exports to Japan, (4) India's emphasis on businessenvironment improvements to attract foreign investment, (5) welcoming progress in bilateral nuclear
cooperation negotiations, (6) continuing an annual bilateral summit, (7) considering a 2+2 forum ofJapanese and Indian foreign and defense ministers, and (8) regular bilateral maritime exercises. Infact, the document spelled out as many as 39 items of measures to enhance Japan-India cooperationand partnership.
Bhutan neighboring India was the first foreign country that Modi visited as prime minister.
Japan was selected as the first major foreign country for him to visit. Modi seeks to vitalize theIndian economy with his “Modinomics” economic policy and may have placed great expectations on
Japan as India's economic cooperation partner. He also might have considered that it would be
important for India to enhance relations with Japan in foreign, national security and other policy
areas while keeping China in mind, when thinking about India's "Look East" policy or its Asianpolicy. As a matter of course, India's importance for Japan, as well as Japan's importance for India,
has been strongly recognized, leading to the latest Japan-India summit and joint communiqué.
India is set to increase its presence in all aspects of international politics, the global
economy and the international energy situation in the future. It is very significant for Japan todeepen its cooperative relations with India. In the following, I would like to focus on energy
problems involving India. First, I would like to describe India's importance for the internationalenergy market.
From the viewpoint of energy supply and demand, India supported by a population of
more than 1.2 billion and robust economic growth is seen as a large growing energy-consuming
country. In 2013, India's primary energy consumption totaled some 600 million tons of oil equivalent,
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accounting for 5% of the global total. India is the fourth largest energy consumer after China, theUnited States and Russia. It is also the fourth largest oil consuming country (accounting for 4% of
the global total). India is the third large consumer of coal that is a mainstay energy source for thecountry. In 2013, energy consumption growth slowed down to 4%, though allowing India to increase
its presence in the energy market. Particularly important is the future long-term growth potential.
The International Energy Agency, the Organization of the Petroleum Exporting Countries and ourInstitute of Energy Economics, Japan, all expect that India will outdo China in energy demandgrowth between 2020 and 2030 and beyond. If China is viewed as a current and medium-term
energy demand driver for the future, India may be expected to replace China as such driver for thelong term future.
In India, domestically produced coal is the largest energy source, accounting for 55% ofIndia's total primary energy consumption. As for oil as the second largest energy source (accountingfor 29% of the total) and gas as the third (accounting for 8% of the total), domestic production
growth has failed to catch up with demand growth, with India's dependence on oil and gas importsexpanding. The trend is expected to be enhanced. Although India had been self-sufficient in coal, it
has seen growing coal imports over past years. Energy security has rapidly grown important forIndia. Therefore, India gives priority to promoting nuclear and renewable energy as domestically
produced non-fossil energy sources contributing to environmental conservation, as described later.
As coal has been the largest energy source for India where energy consumption has beenexpanding, it has become important for India to address air pollution and other environmental
problems and global warming caused by increasing carbon dioxide emissions. For the international
community, India's environmental measure and policy development is a focus of attention we cannot
brush off. Factors behind the energy consumption expansion include not only population andeconomic growth but also energy subsidies for social policy and poverty reduction purposes thathave worked to hold down energy prices. Even in India where economic growth is continuing, thepresence of many citizens failing to use modern energy (including electricity) in rural regions is also
an important problem. Responses to energy subsidies and modern energy diffusion measures,
including rural electrification, are key domestic policy challenges beyond energy problems for India.
In summary, India now has a great presence in the international energy market and willfurther expand its presence and influences through future economic growth. Furthermore, India
could outdo China in energy consumption growth in the long run, becoming the mostattention-attracting country in the world. India's growth and development will bring about greatchallenges regarding energy security and environmental problems, particularly global warming, forIndia itself and the rest of the world. At the same time, India's growth and development will provide
great opportunities (business chances) in the energy market.
In this sense, it is significant for India and Japan to deepen their energy cooperation. While
media reports make little mention of Japan-India energy cooperation, the joint communiqué in fact
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covers energy cooperation including joint procurement of liquefied natural gas and cooperation inclean coal technology, clarifying energy cooperation as a key challenge for the two countries. As
various challenges exist for international politics, the world economy and the energy situation andare increasing uncertainties, Japan and India need each other, with the strategic enhancement of theirpartnership growing more important. The two countries will thus be required to steadily deepen
bilateral relations in a comprehensive or extensive range of fields including energy. I would like tosee firm progress in the implementation of key measures given in the communiqué.

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