India - Japan Economic Relations
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India-Japan Economic Relations

Economic relations between India and Japan have vast potential for growth, given the obvious complementarities that exist between the two Asian economies. Japan's interest in India is increasing due to variety of reasons including India's big and growing market and its resources, especially the human resources. The signing of the historic India-Japan Comprehensive Economic Partnership Agreement (CEPA) and its implementation from August 2011 has accelerated economic and commercial relations between the two countries. During the visit of Prime Minister Modi to Japan in September 2014, PM Shinzo Abe pledged $35 billion in investment in India's public and private sectors over the next five years as well as to double the number of Japanese companies operating in India.

2. Japan bilateral trade with India totaled to US$ 17.63 billion during FY 2018-19. Exports from Japan to India during this period were US$ 12.77 billion and imports were US$ 4.86 billion. Japan’s exports to India were 2.48% of India’s total imports and India’s exports to Japan were 1.47% of India’s total exports. This underlines that there remains a big potential. The export-import statistics for the last five years as per India's Ministry of Commerce data bank are as follows:

( Dollar billion)

Year

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

2018-19

India's export to Japan

6.10

6.81

5.38

4.66

3.85

4.73

4.86

India's import from Japan

12.41

9.48

10.13

9.85

9.75

10.97

12.77

India-Japan

bilateral trade

18.51

16.29

15.51

14.51

13.60

15.71

17.63

3. India’s primary exports to Japan have been petroleum products, chemicals, elements, compounds, non-metallic mineral ware, fish & fish preparations, metalliferous ores & scrap, clothing & accessories, iron & steel products, textile yarn, fabrics and machinery etc. India’s primary imports from Japan are machinery, electrical machinery, iron and steel products, plastic materials, non-ferrous metals, parts of motor vehicles, organic chemicals, manufactures of metals, etc.

4. Japan's Investment in India: India has been ranked as one of the most attractive investment destinations in recent years’ survey of Japanese manufacturing companies, conducted by the Japan Bank for International Cooperation (JBIC) at first or second place. In FY2017 survey, it ranked at the second place. Japanese FDI in India has increased in recent years but it still remains small compare to Japan's total outward FDI. During FY 2015-16 and FY 2016-17, Japanese FDI into India increased from US$ 2.61 billion to US$ 4.7 billion respectively. Japanese FDI for FY 2017-18 reached US$ 1.6 billion and for FY 2018-19 reached US$ 2.965 billion. Cumulatively, since 2000 till June 2019 the investments to India have been around US$ 30.746 billion (Japan ranks third now among the major investors). Japanese FDI into India has mainly been in automobile, electrical equipment, telecommunications, chemical, financial (insurance) and pharmaceutical sectors.

5. The number of Japanese affiliated companies in India has grown significantly in recent years. The number of Japanese companies registered in India increased 5.2 percent in 2018 from the previous year with number reaching to 1,441 as of October 2018, 72 more companies than a year earlier, with manufacturing firms accounting for half the total, according to the latest joint survey by the Embassy of Japan in India and the Japan External Trade Organization (JETRO). These 1441 companies have in all 5120 business establishments in India. They include liaison and branch offices in India as well as local subsidiaries. Similarly, number of Indian companies working in Japan is also increasing with number now crossing more than 100. Indian investment in Japan in the first quarter of 2018 is US$ 384.8 million with total investment crossing US$ 1 billion.

6. Japanese Official Development Assistance (ODA): Japan has been extending bilateral loan and grant assistance to India since 1958. Japan is the largest bilateral donor to India. Japanese ODA supports India’s efforts for accelerated economic development particularly in priority areas like power, transportation, environmental projects and projects related to basic human needs. A noticeable positive trend in these years is that even as amount committed has stabilized or gone down somewhat, actual disbursement has increased. From 2007-08, Japanese side has introduced a Double Track Mechanism for providing ODA loans which allows us to pose project proposals to the Japanese side twice in a financial year. Commitments and Disbursements of ODA loan from Japan for last several years has been as follows:

ODA loan and Disbursements

(JPY in billion)

Year

Commitment

Disbursement

2010-11

203.566

123.84

2011-12

134.288

139.22

2012-13

353.106

113.964

2013-14

365.059

144.254

2014-15

71.39

74.36

2015-16

400

390*

2016-17

308.8

206.1

2017-18

384.132

246.325

2018-19

416.458

266.757

* Source JICA

7. India-Japan CEPA: The 5th meeting of the Joint Committee meeting under India-Japan CEPA was held on 21st December 2018, led by Commerce Secretary from Indian side in New Delhi. The Joint Committee reviewed the progress made since the 4th meeting in Tokyo in Aug 2017 and decided to improve the operational aspects of CEPA through further consultations. Before that 4 Sub-committee’s meetings were held through video conferences on Trade in Services, Movement of Natural Persons, Rules of Origin and Technical Regulations, Standards, Conformity Assessment Procedures and SPS measures. Ninth Strategic Economic Dialogue was also held in New Delhi on 21 December 2018. The 3rd Sub-Committee meeting on Movement of Natural Persons was held on November 26, 2019 in Tokyo. During the meeting, both sides discussed on movement of licensed nurses, certified care takers, yoga instructors and architects from India. The 5th Sub-Committee meeting on SPS/TBT was also held on the same day. During the meeting both sides discussed on steel import monitoring system, food imports to Japan and market access in pharmacy sector. The Sub-committee on Rule of Origin was also held on December 6, 2019 in Tokyo.

8. The Embassy of India exchanged Note Verbale with the Japanese Ministry of Foreign Affairs on 29 September, 2016 for the implementation of the Protocol amending the Indian-Japan DTAC (The Protocol entered into force on 29 October 2016). The Protocol provides for internationally accepted standards for effective Exchange of Information in tax matters and that both India and Japan shall lend assistance to each other in the collection of taxes. These provisions will help in preventing international tax evasion and tax avoidance.

9. India-Japan Social Security Agreement (SSA): The implementing Arrangement under the India-Japan SSA (signed on 16 November 2012) and the Administrative Arrangement for implementation of the agreement between the two countries were exchanged on 9 June 2016 (The SSA came into force from 1st October 2016). A Seminar on the SSA was jointly organized by the Embassy of India, Tokyo and the Ministry of Health, Labour & Welfare (MHLW), Japan in September 2016 for explaining the modalities, guidelines and utility of the Agreement.

10. Promotion Events/Make-in-India: Embassy of India Tokyo is actively promoting “Make in India” in its outreach and activities. In 2017, DIPP and METI signed “India-Japan Investment Promotion Road map” according to which it was mentioned that Embassy of India in Japan will continue to organize promotional activities in Japan for the purpose of realizing Japanese investment potential in India in close cooperation and support of Japan External Trade Organization (JETRO) office. In pursuance to that, Embassy has been organizing the Make-in-India’ Seminars and ‘India Investment Seminars’ for promoting India as a favorable destination for doing business and attracting investments from Japan. In 2018, the Embassy of India jointly with CGI, Osaka-Kobe, JETRO and ICIJ organized “Make in India” outreach events in Kagawa Prefecture (February 8, 2018), Ehime Prefecture (February 9, 2018), Fukuoka Prefecture (March 15, 2018) and Niigata Prefecture (March 23, 2018) respectively. Three “Make in India” events were also organized in Osaka, Nagoya and Tokyo during the visit of delegation led by Additional Secretary, DIPP, Ministry of Commerce & Industry in June 2018. A Round table Discussion on “Make in India” was also jointly organized by Invest India, Embassy of India, JETRO and L. S. Partners & Atsumi Sakai in October 2018 in Tokyo. An outreach event was also organized by Embassy of India and CGI, Osaka-Kobe in Okayama in February 18, 2019. A B2B meeting was also organized by the Embassy of India on 28th February - 1st March, 2019 during the visit of Invest India Team to Japan. Joint Secretary, DPIIT and Invest India delegation also visited Japan from October 9-11, 2019 and held meetings with Japanese companies for promoting “Make in India”.

11. Energy Sector Cooperation: In the India-Japan Joint Statement of December 2006, the two sides agreed "to promote cooperation in the energy sector in a comprehensive manner". Till date nine rounds of the meetings have taken place. The 9th Energy Dialogue was held in New Delhi during the visit of METI Minister co-chaired by him and Minister of State (IC) for Power and New & Renewable Energy. Both countries agreed to work together for energy security, energy access & climate change issues, agreed to initiate discussion on Electric Vehicles (EVs) and committed to work together in promoting well-functioning energy markets. Strengthening cooperation between Japan, the world’s largest importer of LNG, and India, a potential leader of a trend expanding the demand for LNG worldwide, the two sides signed MOC on “Establishing a Liquid, Flexible and Global Liquefied Natural Gas Market” on 16 October 2017 during his visit to Japan. Under the MOC, both sides will aim to conduct joint activities to establish a highly liquid, flexible and transparent global LNG market. We are also looking at participating in capacity-building initiatives in the LNG sector with Japan. 5 groups have met under India – Japan Energy dialogue as per details below:-

Electricity Working Group in July 2019

Renewable Energy Working Group in July 2019

Energy Efficiency Working Group February & July 2019

(discussion between chairs).

Coal Working Group in April 2018

Oil & Natural Gas Working Group in April 2018 (on telephone)

12. Cooperation in Skill Development: Eight Japan India Institutes of Manufacturing’ (JIM) to train future shop floor leaders in Japanese style manufacturing processes and two Japanese Endowed Courses’ (JEC) in selected engineering colleges for training middle management engineers in the manufacturing sector, have started in India in 2017-2018. India and Japan signed a MoC on TITP (Technical Intern Training Program) in October 2017 with National Skill Development Corporation (NSDC) as the implementing body for TITP. As on date, MSDE and NSDC have empaneled, 23 Indian Organisations to operate as Sending Organisations for TITP from India. Following this, the first batch of Indian TITP interns had arrived in Japan (trained by CII) in July 2018. The 2nd TITP Seminar was organized in September 2018 in Nagoya, in cooperation with MSDE, NSDC and JITCO , with participation of all 23 sending organizations from India and 35 Supervising organizations from Japan side. As of March 2019, 31 TITP interns have arrived in Japan.

13. India-Japan Digital Partnership (IJDP) and Start-up Hub: An “India-Japan Digital Partnership” (I-JDP) was launched during the visit of PM Modi to Japan in October 2018, furthering existing areas of cooperation as well as new initiatives within the scope of cooperation in S&T/ICT, focusing more on “Digital ICT Technologies”. This also incorporates setting up “Start-up Hub” between India and Japan. MeitY will be nodal agency to implement it from Indian side with Ministry of Communications (MoC), DIPP, NITI Aayog & other stakeholders and METI from Japanese side with MEXT and MIC & other stakeholders from Japanese side. First Startup Hub was established in Bangaluru by JETRO to identify select Indian start-ups for Japanese market and for potential Japanese investors. Thereafter, Startup-India (under Invest India) and Japan Innovation Network (JIN) signed an MoU on innovation collaboration with a focus on SDGs (Sustainable Development Goals) connecting two start-up eco-systems in June 2018. Invest India also launched an on-line portal for the Start-up hub. Union Minister of Commerce and Industry Shri. Piyush Goyal attended the G20 Ministerial Meeting on Trade and Digital Economy on 8-9 June 2019 in Tsukuba and participated in discussions relating to increasing trade and cooperation to harness the potential of digital economy. On the sidelines, he held a bilateral meeting with METI Minister Hiroshige Seko on India-Japan bilateral cooperation in trade and investment.

14. Bilateral Dialogue on Financial Markets: In June 2015, Finance Minister approved the proposal of an India-JapaIt is grateful if you can forward this message to anyone who is interested in fintecn Dialogue on Financial Markets to seek wider cooperation on financial issues such as financial markets, banking, insurance and financial regulations. The second meeting was held in New Delhi on 28 January 2016 and the third meeting in Tokyo on 16 September 2016. The 5th India – Japan Financial Dialogue was held in Tokyo on 26th – 27th September, 2019 led by Joint Secretary (Financial Market Division), DEA, Ministry of Finance.

15. High Level Strategic Economic Dialogue: This dialogue was established at the behest of the Japanese side in order to develop an overarching dialogue mechanism on all economic issues. The first meeting, co-chaired by Finance Secretary and Deputy Foreign Minister of Japan was held in New Delhi in July 2007. The 7th dialogue was held in New Delhi on 22 December 2014 and, the 8th dialogue was held in New Delhi in July, 2016 co-chaired by Secretary Economic Affairs and Deputy Foreign Minister of Japan. 9th Strategic Economic Dialogue was held in Japan in March 29, 2018.

16. Advance Pricing Agreement (APA): The competent authorities of India and Japan discussed bilateral APA cases and cases under Mutual Agreement Procedure (MAP) during meetings held in Tokyo. APA mechanism provides certainty with respect to tax outcome of the tax payer’s international transactions, creates a taxpayer friendly environment by minimizing the transfer pricing issues, and thereby helps in improving the investment climate.

17. JIM/JEC Project: The Ministry of Economy, Trade and Industry (METI), Japan and the Ministry of Skill Development and Entrepreneurship, India signed an MOC in November 2016 to facilitate the following projects which aims to train 30,000 floor shop leaders and engineers to Japanese standards in the next 10 years. 12 JIMs and 4 JEC have been launched in India till date.

18. India-Japan Cooperation in Urban Development: In pursuance of the Memorandum of Understanding (MoU) between India and Japan on cooperation in the field of Urban Development signed on 1.5.2007 at New Delhi by Minister of Urban Development on behalf of Government of India and Minister of Land, Infrastructure, Transport and Tourism in behalf of Government of Japan, a Working Group was formed co-chaired by the Secretary, Ministry of Urban Development, Government of India and Vice-Minister for Engineering Affairs, Ministry of Land, Infrastructure, Transport & Tourism, Government of Japan. There are also separate Sub-Working Groups on Water, Urban Development and Urban Transport. The 11th India-Japan Joint Working Group Meeting on Urban Development took place from 15-19 October, 2019 in Tokyo, Japan. During the meeting, three areas for intersession with focused co-operation have been identified and the same will be formalized soon. MoU is being revised in view of emerging policies, programs and urban needs.

 19. India-Japan Steel Dialogue: This dialogue is being established as an Institutional Mechanism to strengthen the relationship and cooperation in steel sector between India and Japan by improving the processes of steel production & product mix and safety of work place. The Terms of Reference (ToR) & Memorandum of Cooperation (MoC) for steel dialogues have been approved from both the sides.

 20. Patent Prosecution Highway (PPH): During the India-Japan Summit in October 2018, both the Prime Ministers of India and Japan concurred to start a bilateral Patent Prosecution Highway (PPH) program on a pilot basis in certain identified fields of inventions in first quarter of FY2019. Under the program, Japanese companies can request expedited examinations in India through simplified procedures, based on their applications whose claims have been determined to be patented in Japan. Before deciding to institute this trial run, the Japan Patent Office had signed a memorandum of cooperation with the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry (MCI), India in June 2015, which has been allowing the countries to promote the development of an environment that enables applicants in Japan to register intellectual property rights quickly in India.

 21. Trade Fairs, Exhibitions and Seminars: The Embassy of India in Tokyo actively conduct seminars, B2B meetings and G2B meetings in Tokyo and other prefectures to promote the investment opportunities in India. During the current year (January-December 2019), 14 seminars were conducted by the Embassy of India in collaboration with JETRO and other Japanese organizations. B2B meetings were also arranged during the visit of FICCI delegation on February 27, 2019, Invest India Team delegation from February 28 – March 1, 2019 and visit of delegation from National Investment and Infrastructure Fund (NIIF) in September 18-19, 2019. In September 18, 2019, a Buyer-Seller Meet was also arranged during the visit of delegation from Basic Chemicals, Cosmetics & Dyes Export Promotion Council (CHEMEXCIL). During the visit of delegation led by the Chief Minister of Kerala, a “Kerala State Investment Seminar” was also organized in November 28, 2019. Apart from these events, the Embassy has been actively supporting participation of Export Promotion Councils from India and Indian exporters to various trade fairs in Japan such as FOODEX Japan, India Autoparts Business Matching Expo, India Trend Fair, India Garment and Home Furnishing Fair, Fashion World Tokyo, JAPANTEX and other international trade fairs / exhibitions in Japan to promote high quality products from India.

 Specific Projects and Industrial Corridors

The DMIC - a flagship project of Indo-Japanese cooperation. Implementation of the project is in progress. Indian Government, through the Delhi Mumbai Industrial Corridor (DMIC) Project, is in the process of initiating a new era of industrial infrastructure development with the creation of new generation smart cities across six Indian States.

In addition to new manufacturing hubs, DMIC will envisage development of infrastructure linkages like power plants, assured water supply, high capacity urban transportation and logistics facilities as well as important interventions like skill development programme for providing employment opportunities of youth.

Rapid progress has made in the Chennai Bengaluru Industrial Corridor and the finalisation of the perspective plan for the CBIC region.

Japan Industrial Township (JIT): In 2015 both countries agreed to take steps to develop 12 potential sites as Japan Industrial Townships (JITs) in India in the states of Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Haryana, Andhra Pradesh, Tamil Nadu, Karnataka and Uttar Pradesh. Out of these, 6 are operational as of October 2018. JITs are envisaged as Integrated Industrial parks with ready-made operational platform, equipped with necessary infrastructure and investment incentives for Japanese companies.

Dedicated Freight Corridor Project: Western DFC, a corridor of 1504 km from Dadri to JNPT is being developed for reducing the congestion in Delhi-Mumbai route. The project is executed through JICA funding of JPY 550 billion. Total disbursement of loan till July 2018 is JPY 443 billion.

With overall physical progress of 45%, track laying of 1012km has been completed.

Longest bridge of DFC network of length 3.06km has been completed.

Approx. 98% land acquisition has been made.

Overall 97% tenders have been awarded worth Rs. 51,906 Cr.

Inaugural run of Indian Railways Freight train was conducted successfully on 15th Aug’2018 on 190km long Ateli-Phulera section of DFC falling on Jaipur Division of North Western Railway between NCR and Mumbai.

Mumbai-Ahmedabad High Speed Railway (MAHSR): MAHSR is another very important area of cooperation between India and Japan in Railway Sector. National High-Speed Rail Cooperation Limited (NHSRCL) is implementing the project. The 9th and 10th Joint Committee Meeting (JCM) for the MAHSR project were held in March 2019 (in Tokyo) and July 2019 (in New Delhi) respectively. As part of the cooperation in HSR (High Speed Railway) technology, JICA is providing training to Indian Railway officers. The Government of Japan has also offered 20 seats per year for master degree course from the universities of Japan, for serving Indian Railways officials. A new High-Speed Rail Training Institute is being built at the National Academy of Indian Railways (NAIR) campus in Vadodara.

December 2019