India’s Trade With Japan Constraints and Opportunities

Dr. Abraham Joseph studies the constraints and opportunities for India to diversify exports to Japan between the First and Sixth Plan periods. He explains that a high concentration of nonmanufactured exports to Japan is not a desirable element as it causes instability in export earnings in the short run, while the rate of return in the long run would decline. Examining the possibility for India to switch over to a new trading framework with Japan in manufacturers, Dr. Joseph states that with India?s rich factor endowments, it was possible for India to move into this framework. However, during this period, the author demonstrated that production efficiency in Indian industries had inhibited diversification to Japan. Internal industrial production factors had militated against an expansion of export manufactures. Unless these internal barriers are eliminated, it will be difficult for India to compete in the Japanese market, no matter how low levels of protection may be. The study draws implication from experience of newly industrialized countries in their trade with Japan. One of the reasons why these countries expanded trade with Japan rapidly is that the trade flow among them has been stimulated by the technology transfer and foreign investment by Japan into these countries. Until 1980s India?s policies were not adequately harmonized with Japan?s Overseas Investment Policy and for this reason too, among others, no substitution of the Indian Industries have taken place. The study concludes that as Japan moves into the 21st century, many more of Japan?s labour intensive manufacturing industries will enter the reimport stage of its industrial development and will transfer technology and investment overseas. Dr Joseph suggests India to invite Japan?s technology and investment in those specific manufacturing industries as it has major economic advantages.