Reimagining CEPA: Why India–Japan Trade Needs a Second Wind

In a world increasingly polarised by trade wars and protectionist shifts, India and Japan stand out not just for their democratic resilience but for their potential to co-create a balanced, trusted economic corridor across Asia. Yet, their most comprehensive trade instrument — the India-Japan Comprehensive Economic Partnership Agreement (CEPA) — signed in 2011, is showing signs of fatigue. It is time to think seriously about a CEPA 2.0.

Why Now?

Over a decade since CEPA's launch, bilateral trade remains modest — hovering around USD 20 billion, far below potential. While the agreement successfully eliminated tariffs on over 90% of goods, non-tariff barriers, regulatory mismatches, and underwhelming services liberalisation continue to choke momentum.

The timing to revisit CEPA is perfect:

• India's PLI schemes and Make in India push offer fresh ground for Japanese manufacturers.
• Japan's need to diversify supply chains post-COVID and U.S.–China decoupling aligns naturally with India's scale and trustworthiness.
• The emergence of green tech, digital trade, mobility, and healthcare opens new chapters that CEPA 1.0 never envisioned.
• India's Gati Shakti logistics plan and National Single Window System (NSWS) signal serious reform intent in reducing trade friction.

What Needs to Change

1. Digital Trade and Data Governance: India and Japan must set global standards for ethical, secure, and open digital trade. CEPA 2.0 should introduce provisions for cross-border data flows, AI standards, and mutual recognition of digital credentials.
2. Services and Talent Mobility: While CEPA 1.0 focused heavily on goods, CEPA 2.0 should liberalise high-skilled worker mobility, especially in IT, design, and healthcare. This will help address Japan's aging workforce while creating new pathways for Indian professionals.
3. Non-Tariff Measures and Technical Barriers: CEPA 2.0 must prioritise streamlined conformity assessments, regulatory harmonisation, and support for MSMEs facing technical entry barriers.
4. Sustainability and Green Technology: India's green hydrogen ambitions and Japan's leadership in clean mobility offer a chance to co-design trade incentives for climate-aligned goods and services.
5. Supply Chain Co-Investment: Rather than simple trade in goods, the next CEPA must promote co-investment in resilient supply chains — especially for semiconductors, electronics, and medical devices.

Reframing the Relationship: Not Just Trade, But Co-Innovation

India and Japan are not transactional partners. They are civilisational allies. CEPA 2.0 is not just about tariffs. It must become a platform for economic co-innovation, respecting Japan's emphasis on quality and India's agility.

Where Japan brings precision, India brings scale.

Where Japan offers long-term capital, India brings grassroots entrepreneurship.

Where Japan values consensus, India brings speed.

Together, they can build a hybrid model of globalisation — resilient, inclusive, and future-fit.

CEPA 2.0 can also be aligned with Japan's broader Free and Open Indo-Pacific (FOIP) strategy, adding institutional coherence to regional economic diplomacy.

Why This Matters Now — Geopolitically

A renewed CEPA signals that Asia can set its own trade agenda — without depending on the fault lines of U.S.–China competition or the conditionalities of Western pacts. At a time when Donald Trump's return is re-triggering global trade anxieties, a modernised India–Japan compact offers predictability, fairness, and value-aligned integration.

ASEAN and Africa are watching. So is Europe. A bold CEPA 2.0 can become the template for "trusted trade" in the Indo-Pacific.

A Call to Action

We don't need to start from scratch. We already have a foundation.

Let's:

1. Mandate a joint review task force between METI Japan and India's Department of Commerce.
2. Engage industry bodies like JETRO, IJBC, CII, and FICCI to bring ground-level trade insights.
3. Pilot sector-specific fast-track corridors (e.g., green mobility, digital health)

India and Japan don't just need a better trade deal.

They need a modern, mutual, and meaningful economic vision.

Institutions like the Indo-Japan Business Council (IJBC) can play a catalytic role in this renewal — by convening cross-sector dialogues, spotlighting SME challenges, and promoting CEPA awareness among future-ready industries.

CEPA 2.0 is a Leadership Opportunity

Modernising CEPA isn't about ambition. It's about alignment.

It's about showing the world how two very different economies — one cautious, one dynamic — can find common ground through trust, not tariffs alone.

CEPA 2.0 is not just policy reform. It's a statement:

That India and Japan are ready to shape the future of fair trade, not just react to its failures.

------

About the Author: Mr. Siddharth Deshmukh, President of Indian-Japanese Business Council (IJBC). Siddharth has been a catalyst for bilateral engagement, focusing on economic synergies and cultural exchanges. His leadership has solidified IJBC's role as a pivotal platform for enhancing connectivity, trust, and cooperation between India and Japan. His re-election underscores his impactful contributions toward fostering collaboration.