The Hindu Business Line : Abe’s visit signals impetus for India-Japan relations

Looking ahead
Call to use Japanese FDI for production & re-export to markets there.
Efforts needed on both sides to augment bilateral trade from $7 b to $14 b in medium term.
Japan is 4th largest provider of FDI into India (deals touched $2.56 b last year).

Mr Shinzo Abe

G. Srinivasan

New Delhi, Aug. 19 With the India-Japan engagement on a multi-sectoral level gaining importance in recent years, the official visit of the Japanese Prime Minister, Mr Shinzo Abe, to India beginning August 21 heralds a new chapter in bilateral relations, besides consolidating the existing cooperation on several areas for mutual benefits.

Sources in the Government told Business Line here that as a prelude to the Japanese Prime Minister’s maiden visit to India, the high-level business delegation from Tokyo led by Mr Fujio Mitanai would hold talks with the Union Minister of Commerce & Industry, Mr Kamal Nath, to be joined by the Presidents of the Confederation of Indian Industry Mr Sunil Bharati Mittal and the Federation of Indian Chambers of Commerce & Industry, Mr Habil Khorakiwala.

The Japanese Vice Minister, Ministry of Economy, Trade & Industry (METI), Mr Toyoda, would address Indian industry on the ongoing Japanese efforts to bolster Japanese business in India at the inaugural session of the India-Japan Business Seminar. Mr Kamal Nath will inaugurate the Joint Business Forum meeting on that day.

Partnerships

With Indian companies spreading wings in Europe and the Far East, Japan has also become a key destination for domestic corporates in recent times as they switched from investments to setting up joint ventures with local Japanese partners.

Instances of such tie-ups include Zylus-Cadilla’s acquisition of 50 per cent equity in Nihon Pharmaceutical Co Ltd in Japan. Ranbaxy and Torrent too operate in Japan.

Sources said Japan is no longer looking at India as one of the largest markets as it is aware of India’s young workforce with technical skills, which could be leveraged in areas like security systems, embedded software, and application programmes.

This is particularly so in the light of the ageing working population in Japan and the impetus of the incipient economic recovery Japan has staged in the recent period.

Investment run

On investment, Japan is the fourth largest provider of foreign direct investment (FDI) into India with deals touching $2.56 billion last year, according to officials in the Department of Industrial Policy & Promotion, not to include the private Japanese companies’ growing stake in India’s infrastructure ventures and the expected $10 billion investment spread over five years in the proposed Delhi-Mumbai Industrial Corridor, estimated to cost a staggering $90 billion. The Union Cabinet gave its nod to this project on August 16.

A latest study by FICCI on Japan’s trade relations in the Asian region reveals that Japan’s direct investment in Asia has focused on China and ASEAN and points to a close linkage between Japanese investments in these countries and Japanese trade.

A larger proportion of products produced by Japanese companies based in China and ASEAN region are re-exported to Japan to cater to the domestic needs. Hence FICCI is of the view that similar linkages could also be evolved by the Japanese companies with India and that New Delhi should do well if it is able to give an export-orientation to these investments by funnelling larger volumes of FDI into India from Japan for production and re-export to the Japanese markets.

Trade pointers

Considering the fact that top Japanese companies such as Nippon, Cannon Inc, Toyota Motor Corporation, Mitsubishi Corporation, Matsushita Electric Industrial Co Ltd, Hitachi Ltd, Fujitsu Ltd, Suzuki Motor Corporation, and Japan Airlines would accompany the Prime Minister Mr Abe to India, efforts should be made from both sides to augment the extant bilateral trade from $7 billion to $14 billion in the medium-term.

This would also pave the way for the realisation of the Comprehensive Economic Partnership Agreement (CEPA) that both countries hope to wrap up by the end of next year.

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