The Japan Institute of International Affairs
The 60th Anniversary of the Establishment of Diplomatic Relationshipbetween Japan and India

Japan-India Economic Relationship- Trends and Prospects December 13, 2012
Masanori Kondo
International Christian University
1Japanese FDI to India(US$ million)
6000
5000
4000
3000
2000
1000
0
2004

2006

2008

2010

2

India-Japan bilateral trade

Source： ＪＥＴＲＯ Ｗｅｂｓｉｔｅ
3

Salient features of India-Japan business
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•
•
•
•
•

Concentration on the automobile and related sector
Delayed entry in the home electronics industry
Difficulties for small and medium-sized enterprises (SMEs)
Limited success in the service industry
Increase in investment does not increase bilateral trade
Limited people-to-people contact
Untapped potential of the nuclear business4

India-Japan complementarities
•
•••
•
•

India•
Requires capital in all areas
and technology•
Many investment
opportunities with strong
domestic demand•More than 50% population
below 25
Easy availability of scientific, •technical and skilled personnel•
Global powerhouse insoftware solutions•
Extremely cost competitiveJapan
Surplus capital with businesses
and technology powerhouse
Limited investment
opportunities and stagnant
domestic demandAging population - 23% above
65 years
Limited availability of skilled
and technical manpower
High tech hardware andtechnological capabilities
High cost economy
5

Obstacles for Japanese companies
•
•
•
•
•
•
•

Underdeveloped infrastructure
Bureaucracy
Land acquisition
Labor management
Difficulty in finding a right partner
Competition with local companies
Declining profitability

6

Recent developments
•
•
•
•
•
•
•
•

Doubling the number of Japanese companies in India in 3 years
Catch up through large-scale M&A
Investment in the steel and power generation equipment industries
Chennai as a new investment destination
Interest in BOP (Base of the Pyramid) businessIndia-Japan Comprehensive Economic Agreement (EPA/CEPA)
Further negotiation on movement of natural persons
Negotiation on Social Security Agreement

7

Development in Neemlana• Limited land availability in National Capital Region (NCR).
• MOU between METI/JETRO and RITCO for the industrial
estate for Japanese companies.
• Tax and other incentives.
• 14 Japanese companies have already started operations,and 32 companies are committed.
• Issue of power, water, and other infrastructure.

8

Development in Chennai area
• Mizuho Corporate Bank and JGC Corporation invest 4 billion
yen in the industrial park developed by Ascendas Group.
• The park will be 2.3 square kilometers, and the plants will
start operation in 2013.
• The residential area will be 2 square kilometers. Japanese
shopping center, golf course, and hospitals will also be built.
• Sojitz is also developing an industrial park in Chennai withMotherson Group, and its development cost is 5 billion yen.
It will start operating in 2014.

9Japanese government projects•••••••

India as the largest recipient of Japanese yen loan since 2006
Delhi Metro project
Delhi-Mumbai Dedicated Freight Corridor (DFC)
Delhi-Mumbai Industrial Corridor (DMIC)
Neemrana Japanese Investment Industrial Area
JETRO Business Support Center in India
Comparison with US, Europe and Korea

10Strategies for Japanese companies in India•••••••

Commitment from the top
Entry – JV or 100%?
Long-term strategy
Positioning India in the global strategy
Localization
Managing labor issues
Collaboration with other MNCs11