The Hindu Business Line : What Japanese business wants India to do

As Prime Minister, Dr Manmohan Singh, reached out to Japan's political and business class to step up their engagement and investments in India, there was little he had heard from the Japanese as to what had been holding them back in recent years. He should when he meets for substantive discussions with the Prime Minister, Mr Shinzo Abe, on Friday.

Nippon Keidanren, the Japanese Business Federation, that represents big business in Japan, has been actively pushing for greater interaction between the two countries over the past year. It believes that an Indo-Japan Economic Partnership Agreement will not only help expand trade and investment between the two countries but can also help India increase its attraction as a production and export base.

Overseas expansion

Japanese companies that are working their domestic capacities to the full are looking overseas to expand, but India would need to spruce itself up to get the nod.

On the Keidanren wish list spelt out a few months ago were:

Reduction in import tariffs: The average effective tariff is 29.1 per cent, the tariffs being high for automobiles (60 per cent) and textiles/garments (15-30 per cent). The reduction of duties in the case of raw materials will help Indian producers as well.

Removal of investment restrictions: Foreign businesses that have joint ventures should not need a no-objection certificate from their domestic partners before they set up their own business in the same field.

Opening up the services sector: Sectors such as retail, where foreign investors can make distribution more efficient, real estate, banking and finance.

Reducing taxes: Dependence on customs duties must be lowered, reducing the higher effective corporate tax on foreign business (at 41.82 per cent versus 33.66 for domestic businesses) and full implementation of VAT.

Improve infrastructure: Electricity, roads, industrial water supply, airports and seaports are still inadequate, and a bottleneck for economic growth. Japan, through the Overseas Development Assistance and the private sector technology can help improve the infrastructure.

Review labour laws: The need for Government permission to retrench workers is rigid by international standards and hampers scrap-and-build corporate strategies.

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