By George Nishiyama TOKYO, Aug 16 (Reuters) - Japan and India will seek to bolster lagging business ties between Asia's largest and third-largest economies when their leaders meet in New Delhi next week. Japan is India's biggest donor of economic aid, but trade and investment between the two economies have been unspectacular as Japanese companies have focused on China and Southeast Asia, such as Thailand and Vietnam. "Japan's presence there does not match that of its standing as the largest donor," said Shuji Uchikawa, an India expert at the Institute of Developing Economies. Japan is only India's 10th-biggest trade partner, behind countries that include Belgium and Switzerland, and is the fourth-largest provider of direct investment. Analysts said many Japanese firms stopped investing in India seeing the limited size of the domestic market, a result of the small share of the middle class, and because they already have manufacturing bases in nearby Southeast Asian countries. But in a sign that Japan Inc is serious about boosting its profile in India, Japanese Prime Minister Shinzo Abe will be taking about 200 business executives led by the head of Japan's largest business lobby when he visits the country Aug. 21-23. The two countries have already agreed to forge an economic partnership agreement within two years, and they also have an ambitious plan to build, with Japanese assistance, a $90 billion industrial corridor with state-of-the-art infrastructure linking Delhi and Mumbai. HIGH-SPEED FREIGHT LINE Tokyo is set to offer around 400 billion yen ($3.44 billion) in low-interest loans as official development aid to help fund the construction of a high-speed freight line between New Delhi and Mumbai as part of the industrial corridor project, the Sankei Shimbun reported this week. "Given India's stable growth, Japanese investment there is likely go grow from now on," said Uchikawa, referring to an average of 8 percent growth India's economy has recorded for the last three fiscal years. He added the Japanese executives would in particular be keen to see further easing of foreign investment restrictions still in place for some industries. While Japanese firms may also be keen to build nuclear power plants in India, which may be made possible following India's controversial nuclear deal with the United States, officials said the issue was unlikely to be high on the agenda when Abe meets his Indian counterpart Manmohan Singh. The agreement aims to allow India access to U.S. nuclear fuel and equipment to help meet its energy needs although it has stayed out of non-proliferation pacts and tested nuclear weapons. Critics in Japan, the only country to suffer an atomic bombing, argue that the India-U.S. deal could undermine efforts to stem nuclear proliferation by allowing India to pursue nuclear energy use without adhering to non-proliferation obligations. "Japan understands India's energy requirement, but at the same time, nuclear non-proliferation is a sensitive issue for Japan," a senior Japanese diplomat said. "It's not time for us to make any position on the deal." In addition to India, Abe would visit Indonesia and Malaysia during the week-long trip. ($1=116.26 Yen)
