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FOCUS: JAPAN
INAUGURAL ISSUE: OCTOBER 2015
I
age-old friends and close partners and share a warm relationship based
on common values. Japan has greatly assisted India in its development
mission, partnering on key infrastructure projects including the Delhi
Metro, Delhi-Mumbai Industrial Corridor and Dedicated Railway Freight
Corridor. The state visit of Prime Minister Narendra Modi to Japan in
September 2014 marked a new milestone in bilateral relationship as the
two countries elevated their ties further to a ‘Special Strategic and
Global Partnership’.
Economic engagement, particularly investment, has been accorded
high priority in the bilateral relationship. Building on the landmark
ndia and Japan, two of Asia’s three largest economies, have been
01
Indian members of the India Japan Business Leaders forum interacting with Japanese Prime Minister Shinzo Abe in Tokyo.
Director General’s MessageINSIDESTORIES
Message from Indian Ambassador03Message from Japanese Ambassador04Viewpoint:Naushad Forbes05CEO Speak: Baba Kalyani06PolicyBarometer10Industry Voices12
Comprehensive Economic Partnership Agreement A key recommendation of the Report was faster
(CEPA) implemented between the two countries in 2011, progress on infrastructure development, including
the Prime Minister of Japan, Mr. Shinzo Abe pledged $35 power, water supply, roads, railways, etc. Expanded
billion in investment in India’s public and private sectors cooperation in strategic areas including energy,
over the next five years. The two countries also set a environment, technology and advanced manufacturing
target of doubling Japanese FDI and the number of was also suggested. Joint Working Groups are being
Japanese firms in India by 2019. formed to identify opportunities and delineate specific
issues in infrastructure, energy, skill development and
innovation. Bilateral trade engagement more than doubled between
2006-07 and 2012-13. However, aggregate trade has
come down to $15.52 billion in 2014-15 from a peak of Both Indian industry and government agencies must
$18.5 billion in 2012-13. This is a matter of concern for strive to promote export of value-added goods to Japan.
us. Japan ranked fifteenth among India’s trade partners Japanese policies and recent reform measures have
in 2014-15. There is high potential for faster progress spurred interest among Indian entrepreneurs in sectors
on goods and services trade. such as food products, garments, pharmaceuticals, IT
and ITeS. CII suggests that market access issues and
facilitation of trade in services should be taken up with Regarding investments, India has been ranked as the
the Japanese side. Non-tariff barriers must be lowered, most attractive investment destination in the latest
testing and certification procedures and costs survey of Japanese manufacturing companies as
rationalized.conducted by the Japan Bank for International
Cooperation. Interestingly, $1.1 billion worth of Japanese
FDI came into India during the second half of 2014 alone, CII has had a long and valued partnership with Japanese
compared to about $17 billion between April 2000 and business and institutions which has greatly benefited
June 2014 in all. Indian industry. We have recently signed an MoU with
Hitachi India to implement pilot projects in the Smart
Cities mission. We also work closely with Japanese The unique Japan Plus team, as constituted by
professors on programs such as Visionary Leaders for Government of India in October 2014 to assist Japanese
Manufacturing (VLFM) and Visionary SMEs which have investments into India, has guided over 120 Japanese
helped improve the competitiveness of Indian industry.companies on various business verticals. The India-
Japan Public-Private Investment and Trade Promotion
Policy Dialogue held in April this year was another The India-Japan economic engagement today is
welcome step which outlined a road map for Japanese multifaceted, vibrant, and dynamic. CII believes that
industrial townships in India. given the strong interest of our leaders, the India-Japan
economic relationship will have transformational impact
on India’s development. We look forward to intensifying our The India-Japan Business Leaders’ Forum (IBJLF), led
engagement with our Japanese friends in years to come.by CII and Keidanren, held its last meeting concurrently
with the Annual Summit of the two Prime Ministers in
Tokyo in September 2014. In its Joint Report submitted
to the two leaders, the Forum members expressed
concern about declining bilateral trade and recommended
effective use of CEPA to improve the business environment Director General
and resolve barriers. A broader dissemination of the CEPA Confederation of Indian Industry
mandate amongst the authorities and businessmen of both
countries is required.
Chandrajit Banerjee
FOCUS: JAPAN 02
DIRECTOR GENERAL'S MESSAGE
FOCUS: JAPAN 03
MESSAGE FROM AMBASSADOR
My best wishes to the Confederation of Indian Industry (CII) on the
launch of the new newsletter Global Watch, the inaugural issue of
which is focusing on India-Japan trade and investment links.
India is now the most preferred destination for Japanese
manufacturing companies, according to the Japan Bank for
International Cooperation (JBIC) Survey of November, 2014 in the
medium and long term, overtaking both China and Indonesia, which
led the listing in the past. India is preferred due to its market size,
which is at an inflection point in terms of growth appetite for consumer
goods andits ideal geographical location, both as part of the pan-Asian
supply chain, as well as a manufacturing base for markets in Africa and
the Middle East. Bilateral trade figures, however, belie potential and this is
clearly an area where both countries need to work on.
The good news is that the number of Japanese companies in India is
on a path of growth with around 10-15 new companies opening
offices in India every month. The cumulative figure now stands at over
1300 (with more than 2500 bases) in sectors such as infrastructure
development, manufacturing (led by the automobile sector), insurance
and retail. The Tokyo Declaration of September2014, signed during
Hon’ble Prime Minister Shri Narendra Modi’s visit to Japan, has the
joint objective of realising investments of ¥3.5 trillion and doubling the
number of Japanese companies in India, over the next five years.
The challenge is for the two governments and other stakeholders to
work in tandem to achieve that goal.
However, I am confident that the India-Japan economic engagement
will deepen at a rapid pace. The two flagship projects of Japanese
investment in India, the Delhi-Mumbai Industrial Corridor (DMIC) and
the Chenna i- Bengaluru Industrial Corridor (CBIC), together cover
almost 30% of our population and hold the promise of world-class
infrastructure along with manufacturing hubs. Besides this,
12Japanese industrial parks have been identified across the country
which will act as nodes for Japanese companies seeking to invest in
India. Several Indian state governments have also taken the initiative to
develop special ties with Japan. Just in the last six months, the Chief
Ministers of Rajasthan, Andhra Pradesh, Maharashtra and Madhya
Pradesh have led business delegations to Japan and promised to
ease the path of Japanese companies entering their States. These
high profile visits and measures have elicited a positive response
among Japanese companies and I, therefore, believe that the mutual
targets set by the leaders of India and Japan can easily be met, setting
the stage for an exponential growth in our economic ties.
H.E. Deepa Gopalan WadhwaAmbassador of India to Japan
FOCUS: JAPAN 04
MESSAGE FROM AMBASSADOR
I congratulate the Confederation of Indian Industry on this Inaugural
Issue of “Global Watch”, which focusses on India – Japan
relationship.
The decades-old friendly relationship between the two countries
has witnessed marked progress and expansion in recent years. We
share fundamental values such as democracy, rule of law and
respect for human rights. We are located in crucial positions in the
Indo-Pacific region, which is of growing strategic importance.
Last September, Prime Minister Abe expressed his intention to
realize 3.5 trillion yen of public and private investment and financing
from Japan. In turn, Prime Minister Modi underlined his
determination to further improve the business environment in India,
in order to boost investment. The Delhi-Mumbai Industrial Corridor
(DMIC) is a symbolic project of cooperation between the two
countries. Chennai Bengaluru Industrial Corridor (CBIC) is another
major project and the Comprehensive Integrated Master Plan has
recently been completed. Japan Industrial Townships (JITs) are
already developing andcandidate sites have been identified
for special investment incentives.
Figures also show robust Japanese investment. When we
aggregate announcements made by Japanese companies in the
past year on large investments in India, it is already close to
11 billion USD.
Our relationship has been elevated to the Special Strategic and
Global Partnership. As Prime Minister Abe called it, our relationship
is “blessed with the largest potential” for further development. Our
robust and deepening economic ties are the key driver of this
special relationship. Let us take these economic ties forward
together.
H.E. Takeshi YagiAmbassador of Japan to India
FOCUS: JAPAN 05
VIEWPOINT
ENHANCING INDIAN INDUSTRY’S ENGAGEMENT WITH JAPAN
Development stands at the heart of the India-Japan
relationship and India has benefited greatly from Japan’s
engagement with its development aspirations.The state
visit of Prime Minister Narendra Modi to Japan was his
first bilateral destination outside the Indian subcontinent
and marked Japan’s continuing central position in India’s
Look East policy. CII believes that the Tokyo Declaration
for India-Japan Special Strategic and Global Partnership
signifies an important landmark in the economic
partnership of the two sides.
For the business community, it was of special interest to
note the emphasis on Partnership for Prosperity, which
was further detailed with specific projects in a separate
Fact sheet. The Fact sheet appreciated the report
submitted by the India-JapanBusiness Leaders’ Forum
in which CII represented Indian industry. The
participation of Japan as partner country in CII’s
International Engineering and Technology Fair (IETF) was
noted as well. Almost 50 Japanese companies
showcased their technological prowess and offered joint
opportunities with Indian companies at the IETF held in
February 2015.
The India-Japan Investment Promotion Partnership was
announced by the two Prime Ministers to double Japan’s
foreign direct investment and the number of Japanese
companies in India. Japan pledged 3.5 trillion yen
through public and private investments as well as
financing and overseas development assistance over a
period of five years. Projects are planned in the areas of
next generation infrastructure, connectivity, transport
systems, Smart Cities, rejuvenation of Ganga and other
rivers, manufacturing, clean energy, skill development,
water security, food processing and agro industry,
agricultural cold chain, and rural development, among
others. The wide range of proposed cooperation areas is
impressive and can redefine the Indian industrial landscape.
Electronics Industrial Parks were agreed upon to help
build up electronic manufacturing capacity in India and
promote India’s participation in global supply chains.
Special Japan Industrial Townships are proposed as
well. Officials of the two countries are now working on
financing mechanisms which would include the private
sector as well.
Infrastructure remains central to bilateral economic
cooperation. Japan has pledged approximately $500
million for Public-Private Partnership Infrastructure
Financing Project to the India Infrastructure Finance
Company Limited and about $156 million for the
Guwahati Sewerage Project.
New generation Smart Community projects are planned
alongside the Delhi-Mumbai Industrial Corridor including
the Logistics Data Bank Project, a Mega Solar Power
project at Neemrana and a Seawater Desalination
project at Dahej. The two sides also decided to fast-track
the Chennai-Bengaluru Industrial Corridor.
Energy efficiency, renewable energy and coal-fired
generation technology were stressed along with specific
projects such as the Barauni super critical thermal power
p lant and energy management system in
telecommunication towers. In the railway sector, a
feasibility study on the Mumbai-Ahmedabad High Speed
Railway has already been submitted in July 2015. There
is also strong emphasis on joint research and innovation
which would help bring Japan’s high technology to India.
The CII project ‘Champions of Societal Manufacturing’,
undertaken with the assistance of Japan to strengthen
manufacturing in India, is delivering notable results for
the Indian SME sector. In addition, CII’s Village Buddha
project was mentioned in the Factsheet as a program for
leadership development for self-help groups in rural
areas, particularly women.
This strong direction from the leadership of both nations
is bound to result in positive outcomes for India’s
development aspirations and Indian industry would
continue to enhance its engagement with Japanese
government and business to meet our common objectives.
President Designate, CII and
Chairman, CII International Council
Naushad Forbes
FOCUS: JAPAN 06
CEO SPEAK
Industry can play a major role in strengthening India – Japan Relations
The launch of the India-Japan Business Leaders’ Forum led by CII and Keidanren during Prime Minister Abe’s visit to India in 2007 was a crucial step in taking trade ties to a higher growth trajectory and its deliberations have led to several key issues being addressed by both sides.
Q. India and Japan have evolved a Special
Strategic and Global Partnership in 2014. What
role does economic cooperation play in the
overall relationship?
ion
in India and the participation of Japanese companies in
important projects such as the Delhi Metro. These have
set the stage for development across multiple sectors.
For example, the Delhi Metro has emerged as a
paradigm for mass transit systems across urban India.
In addition, India is privileged to be the largest recipient
of Japanese Overseas Development Assistance since
2003-04. This has contributed to various sectors
including power, tourism, agriculture and so on. The
elevation of relationship between the two countries
to‘Special Strategic and Global Partnership’ and
Japan’s commitment to invest FDI to the tune of 3.5
trillion yen further strengthens the economic
cooperation and bilateral trade.
Q. Industry plays a critical role in developing
economic relations between global trade
partners. What has been Indian industry’s
contribution to economic ties with Japan?
A. Industry has a pivotal role in taking trade ties to a
higher growth trajectory. The launch of the India-Japan
Bilateral economic engagement has been a
cornerstone of India-Japan relations. We recall with
pride how Maruti Suzuki led the automotive revolut
Business Leaders’ Forum led by CII and Keidanren
during Prime Minister Abe’s visit to India in 2007 was a
crucial step in that direction and its deliberations have
led to several key issues being addressed by both
sides.
The business communities of both countries have
through the years worked to resolve a number of
challenges, including those related to the
implementation of the India-Japan Comprehensive
Economic Partnership Agreement (CEPA). We have
consistently engaged with each other through diverse
platforms including overseas business missions,
participation in trade fairs in each other’s countries, and
specific sectoral cooperation. Japan participated as
partner country for the International Engineering and
Technology Fair (IETF) 2015 for the fourth time.
Q. How has CEPA contributed to the business
engagement between India and Japan?
A. Bilateral ties have deepened even more since CEPA
was signed in 2011. It has given a fillip to trade in both
goods and services. More and more Japanese
enterprises recognize and are willing to tap the market
potential in India. Here let me mention the latest JBIC
(Japan Bank for International Cooperation) survey,
which found that India was the most preferred overseas
destination among Japanese manufacturing
companies. Japan now accounts for more than 7.5 per
cent of total FDI flows into India, and is the fourth largest
investor in our country.
The statistics speak for themselves. Between June and
September last year, FDI flows from Japan climbed to
$618 million from $273 million during the same period
of 2013. In October 2014 alone, Japanese companies
pumped in $103.14 million investments. Japan’s
industry reportedly plans to pour some $12 billion into
India over the next two or three years.
An Interview with Mr Baba Kalyani, Co-Chair, India Japan Business Leaders Forum and Chairman and Managing Director, Bharat Forge Ltd.
FOCUS: JAPAN 07
CEO SPEAK
Q. What has been the action on the ground
following Prime Minister Modi’s visit to Japan in
August-September 2014?
A. Prime Minister Modi’s visit set a new benchmark for
the bilateral friendship and in particular accorded high
importance to facilitating investments from Japan. One
significant outcome of the visit has been Japan Plus, set
up by the Department of Industrial Policy and
Promotion (DIPP) to facilitate and fast-track investment
proposals from that country. Both governments are
represented on the team, which will handhold
Japanese investments across sectors. Its mandate
cove rs the fu l l spec t rum o f i nves tment
promotion–research and outreach, promotion,
facilitation and aftercare.
In addition, the action agenda for India-Japan
investment and trade promotion signed in April 2015 by
the two Commerce Ministers was an outcome of the
last summit, and in sync with Prime Minister Modi’s
‘Make in India’ vision. Importantly, the agenda
contained specific points such as development of
select Indian locations as Japanese industrial
townships, and increased cooperation in IT and
strategic sectors. In the last few months, we have seen
some leading Japanese companies commit significant
investments in Automotive, Renewable Energy,
Infrastructure sectors and assistance in a few
development projects. At a government to government
level, efforts to increase cooperation in Defence sector
with special emphasis on Technology have also
commenced.
Q. Isn’t it paradoxical that bilateral trade is
shrinking while the number of Japanese
companies present in India is growing?
A. India offers Japanese industry vast investment
opportunities. In infrastructure, the Japanese
assistance in the Delhi-Mumbai Industrial Corridor
(DMIC) would lead the development of roads, industrial
parks, and urban facilities along side. Japanese
enclaves can come up with clusters of Japanese
manufacturers in cities in parallel with the DMIC.
Sadayuki Sakakibara, Japanese Co-Chair of the India Japan Business Leaders Forum and Baba Kalyani, Indian Co-Chair of the Forum presenting the Joint Report of the Forum to Indian Prime Minister Narendra Modi and the Japanese Prime Minister Shinzo Abe in Tokyo on 1 Sept. 2014
FOCUS: JAPAN 08
CEO SPEAK
Japan is also assisting India in railway development
where we can benefit from its expertise in high-
speedrail and station development. Under the Smart
Cities mission, Japanese companies can invest in
water and sanitation management, mass urban transit
systems, and IT-enabled infrastructure management.
Yes, we have observed that the bilateral trade between
the two countries has declined over the last two years
which can be partly attributed to the slowdown in global
economic activity. However, this also highlights the
need for us to enhance the bilateral trade between
Japan and India to a level which is commensurate with
the size of the two economies and the balance of trade
is reflective of the strengths of our economies. Two
specific areas which I believe could enhance the overall
trade turnover and could also lead to a better balance of
trade are:-
(1) facilitating Japanese investment into India in
advanced manufacturing and high – technology fields
and,
(2) encouraging Indian companies to export value
added products to Japan.
CII is hopeful that both governments will fulfill their
commitments on improving the business environment.
With the positivity demonstrated in the Annual Summit
and a slew of measures to boost investor confidence, we
believe the results will begin to show sooner than later.
Q. Which sectors of Indian industry, according to
you, hold interest for Japanese manufacturers?
A. India offers Japanese industry vast investment
opportunities. In infrastructure, the Japanese
assistance in the Delhi-Mumbai Industrial Corridor
would lead the development of roads, industrial parks,
and urban facilities alongside. Japanese enclaves can
come up with clusters of Japanese manufacturers in
cities in parallel with the DMIC. Japan is also assisting
India in railway development where we can benefit from
its expertise in high-speed rail and station
development. Under the Smart Cities mission,
Japanese companies can invest in water and sanitation
management, mass urban transit systems, and IT-
enabled infrastructure management.
Further, the Make in India campaign offers
opportunities across advanced manufacturing,
electronics and electricals, heavy machinery and so on.
Japanese brands are already popular in India and
consumer electronics and telecom equipment can be a
popular destination. Technology-intensive areas such
as agriculture, environment technology and R&D too
offer high potential.
Q. How can Japanese knowhow help Indian
manufacturers move onto a faster growth track?
A. Japan is a hub of R&D, innovation and advanced
technology while India benefits from a larger talent pool
in these areas. Greater synergies between the two can
help our manufacturing sector. Additionally, Small and
Medium Enterprises (SMEs) in particular are the
backbone of growth in manufacturing. SMEs have
been critical to Japan’s development over the decades.
We could learn a lot from the best manufacturing
practices of Japanese SMEs. CII regularly works on this
aspect with Japanese partner institutions. We believe
the B2B portal will also help develop strong synergies of
our SME sectors.
FOCUS: JAPAN 09
CEO SPEAK
Eleven locations have been identified for Japanese
industrial townships and there is need to expeditiously
address key issues such as smooth approval
procedures for land acquisition, environmental permits,
appropriately priced quality and uninterrupted power
supply, deregulation of power degeneration,
distribution and sale. Indian industry would benefit from
enhanced Japanese participation in industrial
townships.
Q: What about CII’s association with counterpart
business organizations in Japan?
A. CII has institutional partnership with 11 MoU partners
in Japan, including leading industrial chambers such as
Keidanren and Kankeiren. We work closely with Japan’s
Ministry for Economy, Trade and Industry (METI) and have
a strong association with its business promotion wing,
the Japan External Trade Organization (JETRO).
During IETF in February 2015, we held a business
summit together with Keidanren and Japan participated
in concurrent sectoral dialogues. About 100 industry
representatives from both countries participated,
including 30 Keidanren member delegates.
CII is particularly proud of its wide-ranging cooperation
with Japanese institutions which has helped lead the
Quality Movement in India. We also have programmes
such as the Visionary Leaders for Manufacturing
Program,aimed at creating a new cadre of innovative
Indian entrepreneurs with Japanese collaboration. It is
an honour that Prof Shoji Shiba was awarded the
Padma Shri for his work in competitiveness of Indian
manufacturing firms.
Q. How does CII intend to take forward the
bilateral agenda of exponential growth in trade
and investments?
A. We are working closely with our partners in Japan to
facilitate investments into India. Our joint moves
together with Keidanren include the report submitted
by the India-Japan Business Leaders’ Forum during the
Prime Ministers’ Annual Summit held in Tokyo in
September 2014. We took a joint decision about
following up regularly with our government agencies on
specific actions related to implementation of the
recommendations made in the report.
One of the MoUs we signed for pilot projects under the
government’s Smart Cities initiative is with Hitachi India
for innovative and sustainable solutions in such projects.
CII has institutional partnership with 11 MoU partners in Japan, including leading industrial chambers such as Keidanren and Kankeiren.
FOCUS: JAPAN 10
POLICY BAROMETER
Key CII Recommendations to Enhance India-Japan Economic Relations
Dismantling NTBs
Optimizing the
Comprehensive Economic
Partnership Agreement
(CEPA)
The Sub-committee on Improvement of the Business Environment set up under CEPA could
meet regularly and evolve ways to improve the business climate and increase investments,
manufacturing and job opportunities in India. It is also important that both the authorities and
businesses in India and Japan be sensitized on the provisions of CEPA and the benefits that could
accrue from utilizing them. The two countries should also keep pushing for an early conclusion of
the Regional Comprehensive Economic Partnership negotiations in view of their convergent
interests in the economic development of the Asia-Pacific region.
Developing
infrastructureJoint projects such the Delhi-Mumbai and Chennai-Bengaluru Industrial Corridors and the
Western Dedicated Freight Corridor must be fast-tracked, along with concomitant physical and
social infrastructure facilities. Smart cities, power supply and smart grids, water supply, treatment
and recycling; roads; railways and mass rapid transit systems and; logistics and industrial parks
need detailed planning and implementation with cutting-edge technology, where Japan can assist.
To give an extra push to infrastructure development, legal restrictions must be relaxed by both
sides, with swift and transparent decision making. Minimizing project risks and offering
government guarantees where needed would also help address demand-side concerns and
encourage higher Japanese participation. Issues related to projects being undertaken by
Japanese companies can be swiftly resolved through forums such as the Ministerial-level
Public Private Policy Dialogue and the DMIC Vice-ministerial Taskforce.
Boosting SME
cooperation
India must create favourable business conditions for Japanese SME investments in India such as
plug-and-play or rental factories with seamless infrastructural facilities. This will not only lead to job
creation but also give rise to supporting industries around them. It will also enhance our
competitiveness and add to the ‘Make in India’ momentum. Current start-up procedures and labour
laws discourage such SME investments and ease of doing business must be promoted in India.
Food exports such as poultry, meat, tuna fish and shrimp products, mangoes and grapes face
a number of non-tariff barriers (NTBs) in Japan. Measures notified to WTO by Japan include
foods and food additives produced by recombinant DNA techniques (SPS); feed produced by
recombinant DNA techniques (SPS), and all foods and beverages on sale for consumers
(TBT). While tests are successful in India, in Japan they fail to meet the grade. The Japanese
ban on 17 food additives needs to be lifted too. The default levels of Ethoxyquin usage in milk
and milk products needs revisiting. Moreover, the cost of products exported to Japan is
significantly higher than of those sold to other countries because of the high testing, labelling
and certification costs involved. The problem is more acute in the case of organic products
such as basmati rice, honey, spices, tea and select dry fruits.
After a healthy pace of growth since 2009-10, when trade between India
and Japan grew from $10.3 billion to $18.5 billion by 2012-13, it has
slowed to $16.3 billion in 2013-14 and $15.5 billion in 2014-15. It is
imperative that the downtrend be checked and trade volumes reach a
level commensurate with the size and potential of our two economies.
India’s exports to Japan comprise mainly raw materials such as iron,
steel and chemicals, mineral fuels and mineral oils, and meat, poultry and
marine products. Its principal imports from Japan include capital and
knowledge-intensive manufactured items such as electronic goods,
non-electrical machinery and transport equipment.
FOCUS: JAPAN 11
POLICY BAROMETER
IT/ITeS
Pharmaceuticals
Movement of natural
persons
Offshored manufacturing
Taxation matters
Technological
upgradation
India’s vibrant software services industry faces challenges while operating in Japan due to lack
of outsourcing culture, complex procedures for contract qualifications for overseas companies,
and the long time taken to close a deal. Japanese companies often do not follow standard
Software Development Life-Cycle (SDLC) and require high level of customization which involves
high costs. Withholding tax should be reduced to nil and the Totalization Agreement should be
implemented at the earliest. Relaxation of Visa regulations with minimum procedures would
also help facilitate easy movement of professionals. A platform to connect software SMEs of
Japan and India can help increase presence of Indian companies in Japan.
Generic pharmaceuticals constitute 12 per cent of the total Japanese market. Japan offers
national treatment to Indian generic pharmaceuticals under CEPA, so the substitution potential
is high. A Mutual Recognition Agreement (MRA) is needed, enabling both countries to identify
the testing procedures and standards used in the other country for their goods. The complex
registration process and language barrier in the Japanese market also hamper Indian exports.
Indian industry enjoys a vast pool of skilled service providers across a range of sectors including
IT, accounting, financial services, infrastructure-related services, legal, retail,
telecommunications, tourism and health services. Japan may consider dismantling barriers
such as economic needs tests and discipline domestic regulations, especially where
qualification requirements and procedures are concerned. Japan too has requested easier
access for its professionals in India.
India’s share in Japanese imports is far below potential, notably in auto and auto components,
precision instruments, electrical and electronic goods, and organic chemicals. This is because
supply chain linkages and offshore production arrangements between the two countries are yet
to be established. Major Japanese companies conduct most of their trade with other major
Asian economies such as Malaysia, Thailand and Taiwan on the basis of intra-industry trade
stemming from offshore production. There is a need to look at the high costs of doing business
with India and the difficult logistics because of which Japanese enterprises do not find it an
attractive destination for offshored manufacturing.
There is a strong case for abolishing Japanese withholding tax on companies registered in India.
Under Japanese tax laws, Indian companies operating there must pay a 10 percent withholding
tax on dividend, royalty and technical service fees payments. Claiming tax treaty benefits is a
complicated procedure. The tax should be cut to 5 per cent-nil, as is the case under the treaties
with the US and UK. Japanese companies have called on India for exempting Minimum
Alternative Tax from Special Economic Zones and abolishing Special Additional Duty.
Key areas of strategic cooperation where Japanese technology can prove to be of critical help
include energy, digital governance and ICT in agriculture. Bilateral cooperation in energy
technology, including nuclear power, could be expanded on commercial lines. The progress in
the India-Japan Energy Dialogue is welcome. Also, Japan’s state-of-the-art environment
technology could be of great interest to India.
Other sectors where Japan’s cutting-edge technology could make a big difference include
automobiles, machinery, material sciences, telecommunications equipment, heavy industry
and rail transport management systems. Upgrading electronic hardware manufacturing with
Japanese technology can help the Digital India campaign gain traction faster.
FOCUS: JAPAN 12
INDUSTRY VOICES
N Chandrasekaran,CEO & Managing Director,Tata Consultancy Services Limited
Hari S Bhartia,Past President, CII and Co-Chairman & Managing Director, Jubilant Life Sciences Limited
The Comprehensive Economic Partnership Agreement (CEPA) between India and Japan, which came into force from August 2011, extends to trade in goods and services as well as investments. It is one of the most comprehensive agreements concluded by India, and sets the stage for exponential growth in bilateral trade and investments. Trade volumes did pick up after 2011, but have declined in the last two years. A better understanding of CEPA provisions among both authorities and businessmen could lead to a higher realization of the potential it holds for mutual prosperity, and better utilization of the opportunities it holds out.
Rakesh Bharti Mittal,Chairman, CII Public Policy Council andVice Chairman, Bharti Enterprises
We have to encourage a sustained and increased flow of
professionals from India to Japan and vice versa to enhance
cultural and operational awareness. Specifically in the IT/ITES
sector, Indian companies can partner in a number of opportunities
in Japan which synch well with our capabilities. These include
embedded systems, engineering services and R&D, software
implementation, infrastructure services, and the digital adoption.
India's proven strengths in this sector can help Japanese
companies embrace the digital opportunity optimally. We also
hope the two sides will implement the Totalisation Agreement
shortly, and address the Withholding Tax issue that Indian
companies face in Japan. Easier visa and permanent residency
status as also facilitative contract procedures could enable
greater participation of Indian companies in the Japanese
software market.
Food products have a sizeable weightage in India’s
basket of exports to Japan. However, SPS measures
come in the way of fully tapping the market potential.
The matter of 17 food additives registered in India
still banned by Japan is an area of concern, as is the
issue of permissible Ethoxyquin residue levels in
several products. Marine and agricultural goods
face non-tariff barriers such as costly procedures
for test ing, inspect ion and record-keeping,
especially of marine products, on landing. The move
to invite supervisors from Japan to oversee
inspection of mango shipments promises to ease
export procedures and help increase shipments.
FOCUS: JAPAN 13
India has a $10 billion pharmaceuticals export market, with Japan accounting for just 1% of it. This presents a huge potential and a tremendous opportunity for Indo-Japan collaboration, especially in the areas of Basic Research, Bio-informatics, drug discovery and manufacturing. While Indian generic drugs enjoy national importance in Japan under CEPA, we need to formulate strategic policies to tap deeper into the Japanese pharmaceuticals market, the world’s second largest by revenue. Pending issues, such as the mutual recognition agreements in the sector, need faster resolution, enabling one country to identify the testing procedures and standards which the other uses for its goods. This would boost prospects for contract manufacturing for Japanese companies.
Rajiv I Modi,Chairman, CII National Committee on Pharma and Chairman & Managing Director, Cadila Pharmaceuticals Limited
INDUSTRY VOICES
Vikram Kirloskar,Vice Chairman,Toyota Kirloskar Motor Private Limited
The Western Dedicated Rail Freight Corridor and the Delhi-Mumbai Industrial Corridor are the most ambitious, multi-dimensional Indo-Japanese projects so far, with an estimated investment of $90 billion. The smart, futuristic and sustainable industrial cities expected to come up along the corridors would help us address the triple challenges of industrialisation, urbanisation and job creation. Preparatory work is also on for the Chennai-Bengaluru Industrial Corridor, along with a joint feasibility study on the Ahmedabad-Mumbai railway route. It is hoped that Japan's famous safe and reliable high-speed railway technologies will contribute in a big way to Prime Minister Modi’s exhortation to ‘Make in India’.
Ravi Parthasarathy,Chairman, CII Mission on Smart Cities and
Chairman, Infrastructure Leasing & Financial Services Limited
A number of iconic Infrastructure projects have been successful in India with Japanese participation, and more transformational projects are in the pipeline, such as the flagship DMIC and the Dedicated Freight Corridor. Japanese technology and expertise can translate into major gains for Indian industry.
However, many of the collaborations in the past have been on mega projects undertaken on a G2G basis. A greater level of enhancement in industrial and infrastructure co-operation can easily be achieved if there are more partnerships on a plethora of smaller and quick-to-ground projects between private counter-parties in India and Japan. In recent years, steps have been taken in the right direction by Japan, with the extension of STEP loans outside the G2G framework, and the recent easing of JICA norms to permit Indian firms to participate in the Dedicated Freight Corridor.
Japan has long been the most significant donor agency to India, and the stage is today set for a manifold increase in collaborations between India and Japan. CII is undertaking three pilot projects initially with Japanese assistance that can be used as a common template for scalability.
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Fact Sheet
JAPAN: KEY ECONOMIC INDICATORS
Population 127.083 million
GDP 2014 $5.30 trillion
GDP per capita 2014 $38,633
GDP growth rate in 2014 0.7% (provisional)
Trade Trends, 2014
Total exports $710.5 billion, down from $714.9 billion in 2013
Total imports $811.9 billion, down from $832.6 billion in 2013
Top export destinations US, China, South Korea, Taiwan, Hong Kong, Thailand, Singapore, Germany, Australia, Indonesia
Top import sources China, US, Australia, Saudi Arabia, UAE, Qatar, South Korea, Malaysia, Indonesia, Russia
Major items of export Motor vehicles; semiconductors; iron and steel products; motor vehicle parts; plastic materials; power generation machinery; organic chemicals; scientific and optical instruments; ship and electrical apparatus
Major items of import LNG; clothing and accessories; petroleum products; semiconductors; computer units and parts; coal; non-ferrous metals; audio and visual apparatus; medical products
Source: Embassy of India, Tokyo and CII World Factbook
India’s exports to Japan: Top 20 items, in $ million
Export commodities 2013-14 2014-15 % change
Mineral fuels, mineral oils and products of their distillation; 3,006.13 1,852.69 -38.37bituminous substances; mineral waxes
Fish and crustaceans, molluscs and other aquatic invertebrates 396.68 432.79 9.1
Organic chemicals 311.74 344.01 10.35
Natural or cultured pearls, precious or semiprecious stones, precious metals, 348.58 283.54 -18.66clad with precious metal and articles thereof; imitation jewellery; coins
Iron and steel 274.86 245.2 -10.79
Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof 226.08 228.55 1.09
Ores, slag and ash 306.36 217.52 -29
Articles of apparel and clothing accessories, not knitted or crocheted 192.05 169.16 -11.92
Vehicles other than railway or tramway rolling stock, 133.28 147.88 10.95and parts and accessories thereof
Electrical machinery and equipment and parts thereof; sound recorders and 129.27 125.64 -2.81reproducers, television image and sound recorders and reproducers, and parts
Miscellaneous goods 109.7 94.66 -13.71
Miscellaneous chemical products 112.01 84.65 -24.42
Cotton 70.08 65.16 -7.01
Tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and 62.6 62.85 0.4other colouring matter; paints and ver; putty and other mastics; inks
Edible fruit and nuts; peel or citrus fruit or melons 54.19 59.72 10.2
Other made-up textile articles; sets; worn clothing and worn textile articles; rags 57.24 56.74 -0.88
Articles of iron or steel 67.95 48.08 -29.24
Oil seeds and olea; fruits; miscellaneous grains, seeds and fruit; industrial or 40.91 45.57 11.39medicinal plants; straw and fodder
Lac; gums, resins and other vegetable saps and extracts 52.42 45.1 -13.95
Inorganic chemicals; organic or inorganic compounds of precious metals, 58.63 44.38 -24.31of rare-earth metals, or radi. elem. or of isotopes
Source: Department of Commerce, India
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India’s imports from Japan: Top 20 items, in $ million
Import commodities 2013-14 2014-15 % change
Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof 2,597.34 2,466.52 -5.04
Iron and steel 1,289.65 1,453.75 12.72
Electrical machinery and equipment and parts thereof; sound recorders and 1,057.92 959.92 -9.26reproducers, television image and sound recorders and reproducers, and parts
Ships, boats and floating structures 438.42 944.09 115.34
Vehicles other than railway or tramway rolling stock, and parts and 528.01 551.94 4.53accessories thereof
Optical, photographic cinematographic measuring, checking precision, 547.21 544.37 -0.52medical or surgical instruments and apparatus parts and accessories thereof
Plastic and articles thereof 367.4 442.7 20.5
Organic chemicals 388.63 413.33 6.36
Articles of iron or steel 416.82 397.22 -4.7
Project goods; some special uses 143.76 287.13 99.73
Rubber and articles thereof 272.84 262.64 -3.74
Miscellaneous chemical products 178 187.76 5.48
Mineral fuels, mineral oils and products of their distillation; 250.34 159.37 -36.34bituminous substances; mineral waxes
Copper and articles thereof 58.67 130.4 122.27
Tools implements, cutlery, spoons and forks, of base metal; 143.06 127.17 -11.11parts thereof of base metal
Man-made filaments 77.88 82.67 6.15
Inorganic chemicals; organic or inorganic compounds of precious metals, 99.65 79.45 -20.28of rare-earth metals, or radi. elem. or of isotopes
Soap, organic surface-active agents, washing preparations, lubricating 67.54 73.72 9.15preparations, artificial waxes, prepared waxes, polishing or scouring prep
Tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and 54.24 60.85 12.2other colouring matter; paints and ver; putty and other mastics; inks
Nickel and articles thereof 21.71 48.18 121.9
Source: Department of Commerce, India
Trade between India and Japan, 2005-06 to 2014-15, in $ billion
Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Exports 2.48 2.87 3.86 3.03 3.63 5.09 6.33 6.10 6.81 5.39
% change 16.61 15.59 34.53 -21.58 19.96 40.26 24.30 -3.61 11.71 -20.96
Imports 4.06 4.60 6.33 7.89 6.73 8.63 11.99 12.41 9.48 10.13
% change 25.53 13.26 37.53 24.67 -14.61 28.18 39.01 3.44 -23.62 6.86
Total trade 6.54 7.47 10.18 10.91 10.36 13.72 18.33 18.51 16.29 15.52
% change 22.01 14.22 36.28 7.17 -5.04 32.43 33.55 1.01 -11.98 -4.77
Source: Department of Commerce, India
Japanese FDI into India, $ million
Fiscal Year 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Cum.
Amount 85 815 405 1,183 1,562 2,972 2,237 1,718 2,084 18,352
Source: Department of Industrial Policy and Promotion, India
No. of Japanese companies registered in India, 2006-14
Year 2006 2007 2008 2009 2010 2011 2012 2013 2014
No. 267 362 550 627 725 812 926 1,072 1,209
Source: Surveys by Embassy of Japan, New Delhi
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