Economy

Japan concerned over fate of its companies in India

Amiti Sen New Delhi | Updated on May 18, 2020 Published on May 18, 2020

The Japanese government has expressed concern over the fate of its companies in India due to nationwide lockdown   -  iStockphoto

Asks New Delhi to ease labour laws, lower import duties

The Japanese government has expressed concern over the fate of its companies in India, especially in the automobile sector, due to disruptions caused by the lockdown. It has asked New Delhi to make labour laws “less stringent’’, improve logistics and lower customs duties on specific products.

Representatives from Japan’s Ministry of Economy, Trade and Investment (METI) met representatives from the Department for Promotion of Investments and Internal Trade (DPIIT) and the Ministry of External Affairs in a video conference recently to discuss problems being faced by Japanese companies in India and how it could be mitigated.

“The Japanese government is not only concerned about the restrictions in place due to the on-going lockdown, but is also worried about the falling demand, especially for automobiles, and wanted to discuss measures for supporting its companies,” a person familiar with the meeting told BusinessLine.

One big problem, according to Japanese companies in India, is the strict labour law that makes it difficult to lay off workers, even when production is low. “The Japanese pointed out that the difficulty in reducing workforce when the COVID-19 situation had hit business and also the necessity to maintain wages was making operations unsustainable,” the official said.

As several States such as Maharashtra, Gujarat, Uttar Pradesh and Madhya Pradesh, have decided to offer some concessions in existing labour laws, and some others are working on it, DPIIT assured the Japanese delegation that it would continue engaging with it on the matter.

The restrictions in movement of workers, especially the inter-State movement of employees, were posing another challenge, the delegation pointed out. With companies such as Maruti-Suzuki starting operations in more than one plant, such movements are essential. “The Japanese officials were assured that with the easing in movement of people and goods in the latest phase of opening-up of the economy, things would get smoother,” the official said.

Lowering of customs duties on products of interest to Japan, including inputs for its plants in India, is another demand made by the country.

“India has to be very careful in its decision to lower customs duties as the domestic producers also need to be protected with their profits in doldrums due to the lockdown,” the official said.

Japanese investments

In the last two decades, cumulative Japanese investments in India have been at $30.746 billion making it the third major investor in the country. Japanese FDI into India has mainly been in automobile, electrical equipment, telecommunications, chemical, financial (insurance) and pharmaceutical sectors. There are as many as 1,441 Japanese companies registered here.

As India tries to totter back to normalcy with the gradual opening of restrictions, Japan was assured that the government will continue to hold meetings and ensure that most problems are sorted out, the official said.

Japan is India’s 12th largest trade partner accounting for $12.77 billion of imports and $4.86 billion of exports in 2018-19.

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Published on May 18, 2020
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