SpecialArticle 2Prospects & Outcomes Under
New Prime Minister
By Sanjeev Sinha
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Author Sanjeev Sinha

Although India has leapfrogged from primary to tertiary industries, such as information technology, itlags behind in manufacturing due to a lack of infrastructure. The manufacturing industry is essential toachieve balanced growth in such a huge country, to create large-scale employment and to manage thetrade deficit. Given its great pool of young human resources, excellent environment for intellectual
property development and protection, and strategic location, India has attracted great interest from Japan
with regard to manufacturing, but poses a great challenge due to its lack of the high-quality infrastructurethat Japanese manufacturers are used to in Japan. In this context, the most valuable contribution Japan
can make to India’s development is in the field of large scale, high-tech and long-term infrastructuredevelopment, including the financing thereof. In addition, India can expect four qualities from Japan –safety, environmental friendliness, ergonomics and strategic trust – leading to a low life-cycle cost. A
combination of such qualities is very desirable but also creates a complexity in the assessment anddecision-making process.
Let us look at these aspects more closely and see how the government of new Prime Minister Narendra
Modi can help in the matter.
The Nature of Potential Japanese Collaboration
with India
Japan is well-known for its bullet trains, which probably rank as
the world’s best in terms of length, speed, frequency, service andmost of all safety: not a single accident fatality despite many severe
earthquakes in a history of more than 50 years. The remote ruralparts of Japan are also well served by public transport despite very
mountainous terrain due to bridges and tunnels. Japan’s urban
transport systems are also a wonder, with greater Tokyo having theworld’s most extensive urban rail network of 158 lines with 2,200
stations serving 40 million passenger rides daily, a little more than
the total population of the region, which is also world’s largest urban
conglomerate, at about 35 million. This is complemented by frequentbus operations as well as developments in pedestrian and bicycle
friendly urban planning, and topped by an impressive overall safety
record.
Crucially, since the global financial crisis following the Lehman
shock, Japan stands out as having a large financing appetite in termsof amounts and time periods. Japan is already the biggest financier
for the Asian Development Bank, which in turn has India as its
biggest recipient, while the Japan International Cooperation Agency
is a leading ODA provider, with India being its largest recipient for
many years. The Japan Bank of International Cooperation provides
loans of up to 40 years and has a strong interest in India.
Now is precisely a time when India is in need of infrastructure andlong-term financing for it.

40 JAPAN SPOTLIGHT • November / December 2014

Photo: the Official Website of the Prime Minister of Japan & His Cabinet

Japanese Prime Minister Shinzo Abe and Indian Prime Minister Narendra Modi are pictured
at an Omotesenke tea ceremony practice room in Tokyo during the latter's official visit toJapan from Aug. 30 to Sept. 3, 2014.

Growth of Demand in India

12We have seen strong demand for good quality infrastructure in 3
India over the last decade. Until the early 1990s the masses in India 4
preferred free roads, which were purely a responsibility of the 5government. Due to various political and government inefficiencies, 6
the quality of public infrastructure development was very poor, while 7
the government was also under huge fiscal pressure due to lack of 8tax revenues. This lack of infrastructure also resulted in the lack of a 9
manufacturing industry which crucially depends on infrastructure 10

1 and hence India continued to be too dependent on imports both for
2 energy and manufactured goods. The fiscal and trade imbalances
3 grew to a state of crisis and forced India to take major steps in
4 economic reforms in the early 1990s.
5With economic liberalization a new momentum in the Indian
6 economy kicked in. India saw major foreign direct investments
7 coming in and also the timing coincided with the Y2K problem in the8 global IT industry which demanded huge software manpower. This
9 was an area India could excel in, given the extensive knowledge of
10 English. The IT industry created a new confidence and global
11 exposure in India. As Indian people travelled more frequently to
12 developed countries for various IT-related jobs they brought back a
13 new expectation of quality. Global exposure through TV and other14 means also created new standards of quality and there was a new
15 demand for high-quality infrastructure even if it meant paying for the16 use, like toll roads. In the wake of the economic liberalization India
17 quickly adopted privatization of infrastructure and saw more and18 more of the private sector coming into infrastructure development
19 and operations through PPP models. This new demand and PPP
20 paradigm provides a platform for Japanese collaboration in India.
21
Difficulties in Infrastructure Development
22
23
Despite the new demand, however, various political and regulatory
24
25 complexities across different ministries and authorities have
26 hindered proper planning and decision making on large scale
27 projects, and that’s where there are great expectations of the new
28 government. Modi’s government, being a powerful single-party
29 government built on the success of the Gujarat Model, is in a good
30 position to expedite decision making on large and complex
31 infrastructure projects, which would create the right opportunity for
32 Japan to become engaged.
It is more than 30 years since India has had a single party majority
33
34 in the central government. During these three decades India had
35 coalition governments of various compositions including community
36 parties, regional parties and religion-based parties with varying
37 agendas. This led to great difficulty in reaching agreements with
38 long-drawn-out debates on various aspects of social, environmental,
39 religious, political and economic issues. The nature of the coalition
40 governments also established a model of pacification and
41 appeasement by creating too many ministries, reaching around 75
42 ministers at times, so that more and more members from different
43 parts of the coalition could be accommodated as a minister, which
44 further complicated the decision-making process.

The election of Modi and the formation of his government is also 1very different from the last single party majority government formed 2in 1984. In that year the assassination of Prime Minister Indira 3Gandhi led to a wave of sympathy that saw her son Rajiv Gandhi, 4
who had little political experience, become prime minister at the head 5of a single party majority government. The differing agendas and 6
styles of the various political parties made even the most obvious of 7
decision-making processes too complex. Due to severe political 8competition, often one party would block a decision merely to stop 9
another party getting credit for a good project. Given the lack of good 10
public media and education, there was also a lack of sufficient debate 11
and analysis among the public which further encouraged the political 12
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parties to continue with their own petty agendas.
14
New Political Process Leading to Modi’s Election 15
16
This year’s election witnessed a very different approach led by 17
intense debates and information propagation through online media 18
like Facebook, Twitter, WhatsApp and others.
19
As I have mentioned, India continued to lack physical 20
infrastructure due to inefficiency in decision making, development 21
and financing processes, but it could excel in the IT industry due to 22
the advantage of English and the independence of large-scale 23
physical infrastructure for the IT industry. One other relevant factor 24
here is the theoretical and debate-loving mindset of Indian people.
25
The Indian constitution allows a great degree of freedom of speech 26
and expression, and this has helped lead to an IT-driven online media 27
in India. While India is still far behind in terms of printed media, it 28
has surged forward in online media. Social Network Systems have 29
further contributed significantly to online information propagation 30
and analysis. The online media also has the natural virtue of being 31
better connected with the educated and technologically more savvy 32
people of India who are better able to judge the political agenda and 33
are more respected opinion leaders in their respective communities. 34
With a recent surge in mobile phones, including smartphones 35
supporting SNS features, the latest elections were dominated by a 36
very active debate on SNS and online media.
37
Global exposure and economic liberalization also put the economy 38
and good governance on a higher agenda than the religious and 39
regional political agenda which had mostly dominated elections in 40
the past. Modi’s humble background of childhood poverty and being 41
an active member of a nationwide grassroots Hindu organization 42
called Rashtriya Swayamsevak Sangh (RSS) also contributed to his 43
popularity among the masses.
44
JAPAN SPOTLIGHT • November / December 201441

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Modi’s Track Record in Gujarat
India is well known to be a very diverse country. This diversity is
not just evident in natural and cultural terms but also in theeconomic situations in different parts of India. Different states ofIndia have very different levels of economic development andinfrastructure as well.
Modi headed the state of Gujarat as chief minister of the statefrom 2001 to 2014. The progress made by the state during thisperiod was a major factor in his election as well. Gujarat is one of theleading states by various criteria. It is among the very few states witha sufficiency of electricity, with electricity production growing 2.5
times during Modi’s tenure. Gujarat also has a better quality of roads
compared to the average condition in India, and the total length ofroads in the state grew by 3.6 times during Modi’s term in office.
The whole of India is now expecting a similar process of growththroughout the country under Modi’s premiership.

Style of Governance
Modi’s style of governance in the state of Gujarat speaks volumes
about his methods. While corruption is a big problem in various
aspects of life in India, Modi himself is known to be a clean andselfless individual. He is also a very hard-working person, sleeping
only a few hours each, and demands the same from hisadministration. He is known to be a hands-on person with anexcellent memory, remembering the people in charge of particular
projects as well as performance parameters and deadlines, and willoften personally follow up on matters directly by phone.
Through this process Modi built a close-knit network of bureaucrats
around him in Gujarat whom he has also taken along with him to thecentral government into the Prime Minister’s Office. A large part ofcritical decision making is done at the Prime Minister’s Office directly
under his supervision. This is quite unlike the methods of previous
prime ministers who delegated decision making to various othersenior politicians as well as other members of the ruling party.
As already mentioned, for various reasons including the nature of
the coalitions, the number of ministers had risen to 75 in previous
governments. Modi has slashed this to around 25, a step towards amore compact government in line with one of his election
campaign’s slogans. Most of the senior ministers are younger thanModi, who is 64, and are also strong followers of his, which alongwith his decision-making process has led to analogies with the WhiteHouse style in the United States.
42 JAPAN SPOTLIGHT • November / December 2014

Role of Japan in Modi’s Plans

1
2
The Modi government has plans to build 100 new smart cities, and 3
Japan has some of the world’s best technology and implementation 4
examples, such as Yokohama. Japan has leading transport system 5
technology and expertise in construction of ports, airports, highways 6and railways, as also noted above. In India there are many accidents 7on the transport systems, so safety is another attractive aspect of 8
Japanese technology. Japanese bullet trains are equipped with 9systems that can detect an earthquake about a minute in advance 10
and special systems for emergency braking from high speeds of 11
around 300 kilometers per hour within a minute.
12
With disasters such as earthquakes and typhoons being quite 13
common in Japan, such preparedness enables life and work to 14
continue almost as normal despite such occurrences. As a personal 15
experience, following the devastating earthquake and tsunami of 16
March 11, 2011, my Japanese colleagues continued to work to meet 17
a promised delivery for a client that same afternoon. My worried 18
brother from India researched and informed me that my office 19
building was among the strongest in the world in terms of 20
earthquake resistance and that it would be safer for me to stay in 21
Tokyo for the time being. Such earthquake-resistant construction 22
technology is also desirable for India where significant quakes also 23
occur occasionally.
24
Nuclear power is seen as an important source of energy and India 25
and Japan have been in discussions on potential collaboration in civil 26
nuclear technology. Japan’s experience in dealing with the disaster at 27
the Fukushima Dai-Ichi Nuclear Power Plant following the Great East 28
Japan Earthquake will also be useful in such collaboration, which is 29
high on Modi’s list of priorities.
30
After safety, the quality of environmental friendliness is 31
demonstrated by Japan’s having the lowest carbon footprint per 32
dollar of GDP among major countries. As the world is already facing 33
a serious challenge from climate change and India catches up on per 34
capita energy consumption with the industrial world, it’s important 35
for all developed and developing nations to adopt eco-friendly 36
technology across the life cycle of production, usage and disposal. 37
Japan has some of the best low carbon emission power production 38
technology across different sources like thermal, hydro, solar, wind, 39
geothermal and nuclear. Not many countries have enough of such 40
technology or the capacity to finance it. With more than $100 billion 41
of assets under management, one of the prime mandates of the 42
Japan Bank of International Cooperation (JBIC) and Japan 43
International Cooperation Agency (JICA) is the environment. Already 44

1 there are many environmentally friendly projects financed by the2 JBIC and JICA in India, but there is still a tremendous untapped
3 potential that Modi’s plans for smart cities and new energy projects
4 could tap.
5As the Resident Representative in Japan for GMR Urban
6 Infrastructure, a leading infrastructure development and operator
7 group in India, I facilitated a memorandum of understanding
8 between GMR and JBIC on bilateral collaboration in technology and9 capital, and can bear witness to the willingness and potential for
10 cooperation between both countries.
11Lastly, another very important quality I would mention is the deep
12 mutual trust between the two countries on strategic matters. While
13 India helped Japan with early diplomatic recognition and natural
14 resources following World War II, JICA was founded with India
15 especially in mind and continues to work for the humanitarian
16 development needs of India. Despite not being an English-speaking
17 country such as the United Kingdom, the US or Singapore, Japan is
18 greatly trusted and respected in India.
19Moreover, in India’s desperate need to reduce import costs by
20 promoting domestic electronics manufacturing Japan can be an ideal
21 partner, as Japan too needs markets for the survival of its high-tech
22 electronics industry. India offers a holistic and near green-field
23 opportunity for Japan to start cost-effective manufacturing in newly
24 planned Electronics Manufacturing Clusters and cater to an expected
25 $400 billion Indian electronics market by 2020.
26
The high cost of Japanese technology is an often cited concern,
27 but this could well be compensated for by low-cost long-term
Photo: the Official Website of the Prime Minister of Japan & His Cabinet

Prime Minister Shinzo Abe delivers an address at a science and technology seminar at an IndiaJapan Business Forum.

financing by cash rich Japan, along with reduced life-cycle costs in 1
the long run. This raises the possibility of dedicated Japan-India 2
funds which could support Japanese technology with Japanese 3
4financing.
A combination of technology with government financing could 5
provoke debates on the international competitive bidding processes 6
and the various guidelines of the multilateral organizations like the 7World Trade Organization, IMF and Asia Development Bank. Also a 8longer and more rigorous life-cycle assessment process is required 9
to fully appreciate the economic feasibility and attractiveness of a 1011Japanese technology and financing package.
India has seen too many examples of cheap technology and 12
inadequate planning processes leading to the failure of various 13
infrastructure projects. This includes power plants, city development 14
and other infrastructure projects. The problem is often exacerbated 15
by the corruption involved in the process. India, as well as foreign 16
investors from Japan, is looking for strong leadership from Modi to 17
enforce a rigorous due diligence and planning process, build 18
confidence in future quality, and combat corruption. Two major free 19
market democracies with common traditional values and mutual 20
trust have perfect economic complementarities whereby Japan can 21
provide the technology and finance for the development of India and 22
India can reciprocate with a huge growth market and human 23
resources for the aging society in Japan. The “most potent bilateral 24
relationship of the world”, as Japanese Prime Minister Shinzo Abe 25
proclaimed during his visit to India in January 2014, has been 26
waiting for strong leadership from both sides. With the election of 27
Modi and formation of his government, expectations are now very 28
29high indeed.
30
Going Forward
31
32
One of Japan’s most significant contributions to India would be in 33
large-scale infrastructure projects like ports, smart cities, railways 34
and industrial zones, requiring both reliable eco-friendly technology 35
and long-term financing. With a strong new government in India, it is 36
reasonable to expect effective decision making on such large-scale 37
projects and hence a new paradigm of effective Japanese 38
collaboration with India.
39
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S a n j e e v S i n h a i s d i r e c t o r o f D e a l s , P P P & I n f r a s t r u c t u r e a t 42
PriceWaterhouseCoopers, advising on cross-border investments and business 43
strategies between India and Japan.
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JAPAN SPOTLIGHT • November / December 201443