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, totalled to US$ 15.71 billion during FY 2017-18. Exports from Japan to India during this period were US$ 10.97 billion and imports were US$ 4.7 billion. As Petroleum products have a big share in bilateral trade, the oil prices affect the overall bilateral trade numbers. 2012-2013 oil prices were at its peak in past decade and therefore, the bilateral trade numbers also peaked in that year. Japan’s exports to India were 2.36% of India’s total imports and India’s exports to Japan were 1.56% 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

2011-12

2012-13

2013-14

2014-15

 

2015-16

 

2016-17

2017-18

India's export to Japan

6.33

6.10

6.81

5.38

4.66

3.85

4.73

India's import from Japan

11.99

12.41

9.48

10.13

9.85

9.75

10.97

India-Japan

bilateral trade

18.32

18.51

16.29

15.51

14.51

13.60

15.71

3. 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.

4. Japan's Investment in India: India has been ranked as one of the most attractive investment destinations in recent years. In the survey conducted by the Japan Bank for International Cooperation (JBIC) for Japanese manufacturing companies India ranked at the top two positions in last few years. Japanese FDI in India has increased in recent years but it still remains small compared to Japan's total outward FDI. Japanese FDI into India was US$ 2.61 billion, US$ 4.7 billion and US$ 1.6 billion in FY 2015-16, 2016-17 & 2017-18 respectively. Cumulatively, since 2000 the investments to India have been around US$27.28billion (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

2015-2016

400

390*

2016-17

308.8

206.1

2017-18

384.132

246.325

2018-19

316.458

(as of November 2018)

 

* Source JICA

7. 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.

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.

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.

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. 

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.

 

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. Eighth Joint Committee Meeting for the MAHSR project, co-chaired by Vice Chairman NITI Aayog and Special Advisor to Japanese PM was held in September 2018 in New Delhi. 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.

January 2019