Interactions between India’s state governments and other countries – especially in the economic domain – have witnessed an acceleration in the past two decades for several reasons – economic, political and geopolitical (this, phenomena is referred to as para-diplomacy). The focus of India’s state governments has been on drawing greater Foreign Direct Investment (FDI) and several methods – including high level delegations going overseas for roadshows and Annual Investors Summits held in state capitals -- have been used for the same. Several state governments have also been seeking to benefit from the Free Trade Agreements (FTA’s) India has signed with other countries.

While several state governments have been focusing on drawing FDI, in specific sectors, from western countries – especially the US -- they have also been seeking to strengthen linkages in recent years with Gulf nations like UAE and East Asian nations – Japan and South Korea. Only recently (August 2024), the Telangana Chief Minister Revanth Reddy visited the US and South Korea, while Rajasthan Chief Minister Bhajan Lal Sharma visited South Korea and Japan (September 2024). It would be pertinent to point out, that both Japan and South Korea have been important focus countries of India ever since the ‘Look East’ – renamed the ‘Act East Policy’ – by the current dispensation was framed (the scope and geographical focus of the Act East Policy is far more given the economic and geopolitical changes which have taken place in recent decades).

Taiwanese electronic giant Foxconn Chairman Young Liu also visited three South Indian states – Tamil Nadu, Andhra Pradesh and Telangana – and met with their chief ministers. The possibility of expansion of Foxconn’s operations in India was discussed during the meetings.

Importance of East Asia

The outreach towards East Asia is especially important for several reasons. After India introduced the Look East Policy, countries like Japan and South Korea were amongst the first focus countries, as also the first to respond – via FDI and other economic linkages -- to the 1991 economic reforms, as well as re-orientation of India’s foreign policy. Since then, cooperation with both countries has increased manifold. In 2023-20244, trade between India and Japan was well over $22 billion, while trade between India and South Korea stand at over $27 billion. India and South Korea also discussed the possibility of upgrading the Free Trade Agreement (FTA) earlier this month. India’s Commerce Minister Piyush Goyal while commenting on the same said: “Deliberations were held on achieving more balanced trade, upgrading the India-Korea Comprehensive Economic Partnership Agreement (CEPA), promoting investments linked to job creation and addressing non-tariff barriers to further strengthen our economic ties,"

Between 2000 and 2023, Japanese FDI in India was estimated at $41 billion, while South Korea’s FDI in India was estimated at over $5 billion (5.85) between 2000 and March 2024. India has also been a recipient of Japanese Overseas Development Assistance (ODA) – from the Japan government’s lending arm – JICA (Japan International Cooperation Agency). The Delhi Metro, which received assistance from JICA, is a strong example of cooperation between India and Japan. JICA has also been providing support for the Delhi-Mumbai Industrial Corridor project and important development projects in India’s North-East.

Growing geopolitical synergies 

Both India and Japan are also important players in the Free and Open Indo-Pacific concept and key drivers of the Quad (US, India, Japan and Australia) initiative (both countries have been working towards diversification of global supply chains). There are also clear synergies between India’s Act East Policy and South Korea’s ‘Look West’ policy. India’s Northeastern states are also important stakeholders in the Bay of Bengal Corridor, via which New Delhi and Tokyo are working jointly to enhance connectivity between India and Bangladesh as well as South-East Asia – via the northeastern states.

The growing geopolitical synergies between India and the two East Asian nations have also been utilized to dovetail into the overall economic ties between India and the latter.  There has also been a growing pitch for an India-South Korea-Japan trilateral (this was first proposed over a decade ago but has not been able to gain momentum).

Telangana and Rajasthan reach out

From the perspective of the states, outreach towards East Asia is important for achieving their economic goals, which includes greater FDI across sectors, job creation and upgradation of infrastructure. Cooperation can also be strengthened in other areas like skill development, higher education, health and other areas.

Telangana CM Revanth Reddy during his South Korea visit interacted with several South Korean companies. Automobile giant Hyundai announced its plans to set up a large mega test-centre in Telangana. Other companies which made commitments regarding investments in the southern Indian state were Youngone Company, Dongbang Pharma Company and JI Tech.

During his Japan visit, Rajasthan CM Bhajan Lal Sharma, whose visit was focused on attracting investors for Rajasthan’s Rising Rajasthan Global Investment Summit 2024 December 9-11 pointed to the Neemrana Japanese Investment Zone and said: “The flourishing Neemrana Japanese Investment Zone in Rajasthan, where over 48 Japanese firms have invested over USD 8.34 billion and generated over 26,000 jobs is a living example of our commitment to ‘ease of doing business’.

He also said that he looks forward to a long-term relationship with Japan. 

Need for Centre-State coordination

India’s ties with South Korea, Japan and Taiwan which have grown in recent years have become even more important in the context of the current geopolitical and economic situation in the Indo-Pacific. India would also want to be one of the beneficiaries of the China+1 strategy being followed by many companies in East Asia. India’s state governments have an important role to play in strengthening ties between India and East Asia. It is important for strong coordination between New Delhi and state governments  in deliberations pertaining to the Free and Open Indo Pacific.

(The writer is a New Delhi-based policy analyst associated with The OP Jindal Global University, Sonipat, India. Views are personal. He can be reached at tsmaini@jgu.edu.in)