cabinets and periodic elections both at the centre and several states. it is remarkable that political cycles have not hindered the progress of well - calibrated economic reforms. as michael mandelbaum, a democracy expert at johns hopkins university in washington said : “ there ’ s a lot of turmoil on the surface of indian democracy, but there ’ s a lot of consensus deep down in the political system. ” in fact the political system should lend comfort to the global businesses in view of elements of longterm predictability. ambassador yasukuki enoki, japanese ambassador to india is reported to have said : “ for the next two decades, indian society is predictable and democratic framework is predictable. ” as regards macro - economy, there is an increasing consensus that india has crossed the threshold of reform, leading the economy to become really market - oriented and price based economy. this orientation has helped the country emerging as the major service - outsourcing hub for the world. moreover, acceleration in growth is expected to be sustained in view of the evolving pattern of domestic demand. for example, national council of applied economic research ( ncaer ) mish data “ clearly indicates that india is growing immensely wealthy. by the end of this decade, the structure of the country ’ s demographics will change from an inverted pyramid, signifying a small rich class and a very large low - income class, to a rudimentary diamond, where a significant part of the low - income class moves up to become part of the middle class. ” further, there may be demographic bonus between 2010 and 2040 when india ’ s working population is still increasing while population in the rest of asia may be levelling off or even declining. moreover, public and private sector compete and co - exist in a dynamic balance which is imparting competitive strength to the economy. finally, in terms of business environment, the impressive growth coupled with market orientation of the economy has been a bottoms - up exercise, with a very broad - based growing entrepreneurial class. the capacity to innovate is considered high and costs of innovation are reportedly low in india. for example, engineering - intensive service - led manufacturing is sought to balance the advantages of standardised way of mass production of goods. reportedly, there is an increasing emphasis on service approach to manufacturing with adaptation of techniques such as lean production to keep quality high and boost efficiency. these tendencies are perhaps reflective of a penchant for innovation 5 / 7 among growing entrepreneurial class in india

, imbued with professionalism and seeking to be globally competitive. evolving indo - japanese economic relations from global and our perspective, japan, as a leading industrial economy, has made substantial contributions to the growth of world trade over the years. japan has also played a key role in the integration of developing countries, especially emerging asia, with the world economy in terms of trade and investment. the developing economies have been the major destinations and source of japan's exports and imports, accounting for 58 per cent and 65. 5 per cent of japan's total exports and imports, respectively, in 2004. within developing economies, the share of emerging asia accounted for nearly 40 per cent of japan's exports as well as imports. india and japan share a cultural bond dating back to many centuries. the two countries, in the recent times, have seen major improvement in the bilateral relations. the visit of the japanese prime minister mr. koizumi to india in april, 2005 marked a high point in this bilateral relation. the visit highlighted the fact that the spiritual affinities, enduring cultural contacts and high degree of commonality of political, economic and strategic interests provide great strength to india and japan as partners in a globalising world. an eight fold initiative to further strengthen this partnership was enunciated as an outcome of this visit. the intensity of high level contacts with japan has continued since then and the prime ministers of the two countries have also met on the sidelines of the first east asia summit at kuala lumpur. the last one year has, therefore, seen intense engagement in our bilateral relations making japan the focus of our policy in asia. india and japan have many complementarities in the economic sphere also. japan is a relatively labour scarce but capital abundant country whereas india has an abundance of an entire spectrum of human resources. similarly, india has a world acknowledged prowess in the software sector and japanese strength in the hardware sector is established for decades. india has a wealth of resources by way of raw - materials and minerals and japan has the technology and capital to produce knowledge intensive manufactured goods. in short, if the two were to engage more intensively in terms of economic collaboration, the resulting synergies, the economies of scales and the complementarities could lead to great welfare gains for both the countries. in recent times, japanese foreign institutional investors ( fiis ) have started to evince an increasing interest in india and among the fiis registered during the year 2004, a significant number belonged