Ambassador Sujan R. Chinoy's Keynote Address on
“India: A Bright Star for Global Investments”
SMBC Global Seminar Tokyo 10 March 2016
Yasuyuki Kawasaki San,
Ladies and Gentlemen:
1. Thank you for inviting me to speak to you today on ‘India: A Bright Star for Global Investments'. This is an opportune moment to address this topic, against the backdrop of the rapidly bilateral growing engagement between India and Japan, and, India's economic rise.
2. When SMBC's announced the commencement of its New Delhi branch in March 2013, its press release said that the step was based on assessment that the Indian economy was expected to grow further in the coming years, and that the opening of New Delhi Branch will enable SMBC to tailor its response to the financial needs of Japanese corporations and their clients in India, and enhance its capability to offer financial solutions for projects related to infrastructure development.
3. All of this has come true. The formation of a new Government in India in 2014 led to heightened expectations about India's growth prospects. In 2015, the Indian economy grew faster than other emerging economies and the World Bank has projected it to be the world's fastest growing large economy in 2016. Lower labour costs, the size of its domestic market and macro-economic stability combine to make India a very attractive investment destination.
4. The new government led by PM Modi has made it clear that creating an enabling environment for business and attracting investment is his top priority. The environment for ‘doing business' in India is being continuously improved by ushering in stable, predictable and transparent regulations, reducing the time for registration of businesses and increasing the spread of e-governance. ‘Red carpet' has replaced ‘red tape'. The Companies Act has been amended and the tax structure is being rationalized to change perceptions regarding our tax policy. A national consensus is being built to amend the constitution to implement the Goods and Services Tax (GST) in the near future.
5. As you are probably aware, the Government of India has initiated several flagship programmes to stimulate growth and realize the full potential of the Indian economy. Among them are the Make in India, Digital India, Skill India and Smart Cities initiatives, which aim at raising the competitiveness of India's manufacturing sector by inviting top global companies to set up their manufacturing base in the country, connecting the nation through physical and digital infrastructure, and, creating global supply chains that fully tap into and radiate from the Indian economy.
6. The latest of these is Start Up India, launched by Prime Minister Modi on 16 January. It is an action plan aimed at promoting bank financing for start-up ventures to boost entrepreneurship and encourage start-ups with focus on creation of jobs.
7. Creation of employment opportunities is integral to encouraging the manufacturing sector in the Indian economy. A full fifty per cent of the Indian population is below the age of 25 years. This is a huge advantage at a time when traditional engines of global growth have slowed down and face the demographic challenge of an aging population and escalating labour costs. Many years ago, Goldman Sachs had predicted that among all the BRICS economies, India was the one best placed to notch up an average growth rate well above 5 per cent continuously till the middle of this century. By then, India, which is already the world's third-largest economy in terms of Purchasing Power Parity (PPP), is expected to emerge among the top three economies in nominal terms as well.
8. India today offers global investors an alternative destination for enhancing global competitiveness and increasing global market share. Twenty years ago, it was part of every global investor's plan to invest in China. It was then a statement of faith in the long-term prospects of the Chinese economy. Today, similar faith is being placed on the Indian economy, going by all objective indicators. It is now axiomatic that being part of the Indian economic landscape should be part of every investor's global risk mitigation strategy.
9. Global companies can take advantage of India's Demography, Demand and Democracy - three 'D's - unique to India, which no other country in the world can boast of. Several leading companies such as Softbank, Foxconn and General Motors have already responded positively to the campaign. Softbank has invested about US $ 2 billion in Indian start-ups, which are considered among the most dynamic opportunities for growth and returns. There is also an ambitious programme underway for infrastructure creation and renewal. These include investments in urban transport networks, highways expansion and development of industrial corridors.
10. There are complementarities between our two economies. While Japan has an abundance of capital and cutting edge technologies, it faces a dwindling market and population. The Indian economy is characterized by a booming market, fuelled by the growth of an aspirational middle class, but faces an infrastructure deficit and needs access to technology especially in manufacturing. Combining Japan's capital and technology with India's rich human resources and skills makes for a winning combination for both countries.
11. Japanese ODA has supported India's economic development in priority areas such as power, transportation, environment and social sectors such as health and education. The cumulative commitment of Japanese ODA loans has reached over $ 40 billion.
12. JBIC Surveys for 2014 and 2015 have ranked India as the most preferred destination for Japanese manufacturing companies, which is an encouraging sign for the future of India-Japan economic ties. It is now well know that Japanese companies have invested $ 19 billion in India since the year 2000, making Japan the India's 4th largest foreign investor. Japanese companies are not only focussed on the Indian market but also on India's huge potential as a global manufacturing hub. Japanese cars already dominate the Indian market and automakers are expanding their production bases in India targeting not only the domestic market but making India as the hub for exports to West Asia and Africa. Who would have imagined only a few years ago that American companies would export large numbers of Made In India cars to Mexico and Japanese companies like Suzuki would produce cars in India for the Japanese market?
13. Prime Minister Abe's announcement of the creation of a special ‘Make In India' fund of 1.5 trillion Yen to support Japanese companies is expected to provide a further boost in this context. We appreciate Prime Minister Abe's efforts to increase the quantum of Japan's finance and investments for India over five years to 3.5 trillion Yen.
14. Profitable sectors that could attract Japanese investment include Smart Cities, infrastructure projects, nuclear and renewable energy, electronic hardware and life sciences. The mega infrastructure projects of the Western Dedicated Freight Corridor, the Delhi Mumbai Industrial Corridor (DMIC), Chennai Bangalore Industrial Corridor (CBIC) and the Shinkansen High Speed Railway between Mumbai and Ahmedabad, as well as the Metro Rail projects in Delhi, Ahmedabad and Bengaluru offer unprecedented opportunities for Japanese industry and products to enter India. The two Governments have also identified 12 industrial parks, which will act as nodes to attract Japanese investment in India. State Governments in India are now competing with one another to offer better facilities to attract such investment.
15. The Union Budget for 2016 was presented recently before Parliament. It lays focus on (a) the rural economy to generate demand and (b) stepping up public investment in infrastructure to sustain the growth momentum. Reforms in FDI policy to attract more investment in insurance and pension, stock exchanges and asset reconstruction companies have been indicated. In addition, 100% FDI has now been permitted in the marketing of food products. The financial sector reforms that have been announced are deepening of the corporate bond market, a consolidation roadmap for public sector banks and allocation of an initial corpus for their recapitalisation along with the listing of government owned insurances companies on stock exchanges. A roadmap to reduce corporate taxes is also to be laid out during the current year. Markets and analysts have responded favourably to the Budget and expect India's growth trajectory to continue on its upward path.
16. Ladies and Gentlemen, Relations between Japan and India, both Asian democracies, have grown to the level of a Special Strategic and Global Partnership. The strong commitment of Prime Minister Abe and Prime Minister Modi to our relationship has opened new vistas for co-operation. Our traditionally warm and friendly relations are cemented by close historical bonds forged on the anvil of Buddhism and shared values.
17. Prime Minister Modi has said that no partner has played such a decisive role in India's economic transformation as has Japan. Prime Minister Abe has said that ours relationship has the greatest potential of all. There exists unmatched public goodwill and political consensus in India for our Special Strategic and Global Partnership. The Memorandum we signed on Civil Nuclear Energy Cooperation is a shining symbol of a new level of mutual confidence and strategic partnership in the cause of a peaceful and secure world.
18. Friends, please do visit India. Every effort will be made by the Embassy of India in Tokyo to facilitate your business. We have already implemented the promise of the “Visa on Arrival” scheme for all Japanese travellers, including visitors on business, from 1 March 2016. This will surely facilitate your travel to India for business and leisure.
19. Thank you!