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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 huge 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. The two countries also set a target of doubling Japanese FDI and the number of Japanese firms in India by the year 2019.

 2.      Bilateral trade between the two countries more than doubled between 2006-07 and 2012-13. However, total trade has come down to $ 14.51 billion in 2015-16 from a peak of $ 18.5 billion in 2012-13. In 2015-16, India's exports to Japan were $ 4.66 billion while imports were $ 9.85 billion. In 2016-17, India's exports further fell by 17.38% to $3.85 billion and imports by 2.2% to $9.63 billion. The negative or slow growth in trade with Japan is  a matter of concern for India in view of the fact that there is high potential for faster progress on goods and services trade. The share of India-Japan bilateral trade in Japan's total trade has been hovering around 1 per cent but it is in the range of 2.05 to 2.34 per cent of India's total trade in the last five years. The export-import statistics for the last five years as per India's Ministry of Commerce data bank are as follows:

 

  ( Dollar billion) 

Year

2011-12

2012-13

2013-14

2014-15

2015-16

 

2016-17

 

India's export

to Japan

6.33

6.09

6.81

5.38

4.66

3.85

% Growth

-

(-) 1.82

4.66

(-) 1.29

(-) 15.48

(-) 17.38

India’s Total Export

305.96

300.27

314.40

310.33

262.29

276.28

%Share

2.07

2.03

2.17

1.73

1.77

1.39

India's import from from Japan

12.10

12.51

9.48

10.13

9.85

9.63

% Growth

-

3.44

(-) 23.62

6.86

(-) 2.77

(-) 2.2

India’s Total Import

489.32

491.94

450.20

448.03

381.00

384.32

%Share

2.47

2.54

2.11

2.26

2.58

2.53

India-Japan

bilateral trade

18.43

18.61

16.39

15.51

14.51

13.48

Percentage Change

34.3

1.00

   -11.9

(-) 5.36

(-) 6.4

(-) 7.0

 

India’s primary exports to Japan have been petroleum products, chemical elements/compounds, fish and fish preparation, non-metallic mineral ware, Metalliferous ores & scrap, clothing and accessories, iron & steel products, textile yarn/fabrics, machinery, feeding-stuff for animals, etc. India’s primary imports from Japan are machinery, iron & steel products, electrical machinery, transport equipment, chemical elements/compound, plastic materials, manufactures of metals, precision instruments, rubber manufactured, coal/coak and briquettes, etc.

Japan's Investment  in India

3.      Regarding investment, India has been ranked as the most attractive investment destination in the latest survey of Japanese manufacturing companies, conducted by the Japan Bank for International Cooperation (JBIC). Japanese FDI in India has increased in recent years but it still remains small compare to Japan's total outward FDI.  In terms of cumulative FDI inflows into India, Japan is now India's third largest source of FDI. Japanese FDI in India grew exponentially from US$ 139 million in 2004 to all time high of US$ 5551 million in 2008 due to mega deals particularly acquisition of Ranbaxy by Daichi Sankyo. In the last two years, Japanese FDI into India increased from US$ 2.08 billion in 2014-15 to US$ 2.61 billion in 2015-16 and further to US$ 4.24 during the first nine months of FY 2016-17. The amount of Japan's cumulative investment in India since April 2000 to December 2016 has been US$ 25.215 billion, which is nearly 8 per cent of India's overall FDI during this period. Japanese FDI into India has mainly been in automobile, electrical equipment, telecommunications, chemical and pharmaceutical sectors.

 

Year

Japanese FDI  in  India (million US$)

      % Change

2001

150

(-) 14.3

2002

146

(-)    2.7

2003

124

(-)  15.1

2004

139

      12.1

2005

266

       91.4

2006

512

       92.5

2007

1506

     194.1

2008

5551

     268.6

2009

3664

 (-) 34.0

2010-11

2864

  (-) 21.8

2011-12

2326

 (-) 18.8

2012-13

2786

      19.8

2013-14

1718

   (-) 38.36

2014-15

2084

      21.3

2015-16

2614

25.4

2016-17

 

4709

80.15


The number of Japanese affiliated companies in India has grown significantly in recent years. As of October 2016, there were 1,305 Japanese companies that are registered in India, an increase of 76 companies (6%) compared to 2015. These companies had 4,590 business establishments that are operating in India, which is an increase of 173 establishments (3%) compared to 2015.

Japanese Official Development Assistance (ODA)

4.      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. The interest rates applicable from April 2013 are : 1.4% per annum of general projects with a 30 years tenure including a grace period of 10 years. For environmental projects, the interest rate is 0.30% per annum with a 40 years tenure including grace period of 10 years. From April 2013, JICA has abolished levy of commitment charges and has introduced Front End Fee payable one time at the rate 0.2% at the beginning of the project. On the 0.2% Front End Fee, 0.1% will be reimbursed if the project is implemented within the stipulated time. Commitments and Disbursements of ODA loan from Japan for last several years has been as follows:

 

Year

Commitment

Disbursement

 

Yen Billion

Yen Billion

2002-03

120

81

2003-04

125

80

2004-05

134.466

68.85

2005-06

155.458

68.68

2006-07

184.893

55.47

2007-08

225.13

94.65

2008-09

236.047

122.56

2009-10

218.2

128.95

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

2015-2016

400

390*

 * highest ever ODA loan disbursement in a financial year in Yen terms.

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.  
  • The master planning of the DMIC New industrial cities has been carried out by the world class international consultants. Engineering, Procurement and Construction (EPC) contracts for approximately Rs. 3200 crore have been awarded in Dholera in Gujarat, Shendra in Maharashtra, Vikram Udyogpuri in Madhya Pradesh and Integrated Industrial Township Project at Greater Noida.
  • In Dholera, the roads and services work has been awarded to M/s Larsen & Tubro while the similar work for Shendra and Integrated Industrial Township Project at Greater Noida have been awarded to M/s Shapoorji & Pallonji. Construction has started at all the project sites namely at Vikram Udyogpuri in Madhya Pradesh, Shendra in Maharashtra, Dholera in Gujarat and Integrated Industrial Township at Greater Noida.
  • Shareholders’ Agreement (SHA) has been executed with the State Government of Madhya Pradesh, Uttar Pradesh, Maharashtra and Gujarat. Accordingly, SPVs for the Integrated Industrial Township Project at Greater Noida, Uttar Pradesh; Vikram Udyogpuri near Ujjain in Madhya Pradesh, Phase-I of Shendra Bidkin Industrial Park in Maharashtra and Dholera Special Investment region in Gujarat have been incorporated. The equity of the State Government and DMIC Trust has been released/transferred to the SPVs.
  • Earlier environmental clearance has been obtained and Digital master planning/ Information and Communication Technology Master Planning work is completed for almost all the projects. The cities are being benchmarked against the world class standards of sustainability and eco-friendly developments.
  • DMICDC has also commissioned a 5MW Model Solar Power Project at Neemrana, Rajasthan with latest cutting edge Japanese technology and the power is being supplied to the grid.
  • DMICDC is also implementing a smart solution for Logistic sector by creating a Logistics Databank for near to real time tracking of the movement of the containers so as to bring in efficiency in logistics value chain in partnership with NEC Corporation of Japan. The regulatory and statutory approvals have been obtained and the trial operations will start shortly.
  • DMICDC has prepared the DPRs for MRTS projects for Ahmedabad- Dholera in Gujarat and Manesar- Bawal in Haryana, awaiting approval from State Govts. States to start Land acquisition process for taking the projects forward.
  • In Principle Approval has been obtained for Greenfield International Airport at Dholera (Gujarat) and Site clearance has been obtained for the Greenfield Airport at Kotkasim (Rajasthan).

 

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