The process of globalization has allowed global economies to share the fruits of free trade, labour migration, capital flows and technology transfer. The importance of trade has been studied as part of the theory of endogenous growth, where it has crystallized with other traditional inputs as one of the peripheral factors of economic growth. In order to strengthen international trade, many studies have, over time, empirically examined different trade theories and developed appropriate strategies. The invention of modern trade theory has highlighted the role of comparative advantage (branch trade) and differentiation of production (intra-enterprise trade) as the basis for trade patterns. In the recent past, global economies have placed the importance they deserve on inter-economic partnerships. India has turned to institutionalizing economic partnership with some Asian countries. Examples: Comprehensive Economic Cooperation Agreement between India and Singapore (ECSC) in 2005; 2010 CEPA India-Korea; India-Malaysia CECA in 2011. For its part, India has also expressed its own concerns about the agreement. New Delhi has called on Japan to remove all non-tariff barriers in order to realize the real benefits provided by the EPA, particularly those that would be realized in the Japanese pharmaceutical market. It is agreed that India`s strong demand for generic drugs could be met, which is a win-win situation for both countries. The Comprehensive Economic Partnership Agreement (CEPA) between India and Japan was signed on 16 February 2011 and came into force on 1 August of that year. In addition to accelerating activity, the agreement aimed to eliminate tariffs on 90% of Japanese exports to India, such as auto parts and electrical equipment, and on 97% of imports from India, including agricultural and fisheries products, by 2021. Since the introduction of the EPA, trade between India and Japan has increased by 38%, with bilateral trade expected to reach $24 billion by March 2013.
In accordance with the agreement, Mukhopadhyay and Bhattacharyay (2011) assessed the macroeconomic impact of trade integration between Japan and India on the basis of the analysis of the Global Trade Analysis Project (GTAP). It was found that production for both India and Japan would increase slightly in 2020, after a reduction in tariffs, compared to business as (BAU). The results were expected of marginal export growth, adequate value-added in trade and an improvement in the well-being of both countries by 2020, with the successful implementation of the EPA. The India-Japan Comprehensive Economic Partnership Agreement (IJCEPA) is the most comprehensive of all India`s agreements with other countries. In 2007, Japan and India agreed to increase two-way trade flows to $20 billion by 2010. However, the sum did not meet the target and reached only 1290 billion yen (about 15.85 billion dollars). For 2011-12, bilateral trade between India and Japan amounted to $18.31 billion, an increase of 32% over the previous year.