There is paradigm shift in the structure of Japan – India economic relations. Trade is myth. Now, investment is the topic of discussion in the Japanese conglomerates’ boardrooms. No doubt, trade between the two countries has increased. But, more than this, investment attractions have made a great leap forward. Responding to India attraction steered by stellar growth in the economy during the 2000s, Japanese investment in India surged. About 60 percent of the total Japanese investment since 1991 (US$2.2 billion) was poured in between 2000 and 2006 only (US$1.3 billion).

Today, Japan is the fifth largest foreign direct investor in India. Between August 1991 and December 2006, Japanese investment accounted for 4.52 percent share in the total FDI flow into India. Sector wise, the attractive area was automobiles. Between 2000 and 2006, automobiles attracted 52.75 percent of the total Japanese FDI. This was followed by electrical equipment (including Computer Software and Electronics), accounting for 7.1 percent.

This is not the end. A flurry of Japanese investment is in the offing:

• Maruti Suzuki has planned to invest additional US$1.7 billion by 2010 to bolster their second four-wheeler plant and increase production capacity of engines.

• Toyota Motor Corporation has planned to set up an assembly plant for low priced small cars by 2010.

• Nissan has announced the set up of four wheel production plants in joint ventures with its French partner Renault and Mahindra and Mahindra with an investment of US$85.7 billion.

• Mitsubishi Chemicals at Haldia will increase capacity of its PTA plant.

• Honda Motors is setting up a new plant for small cars in Rajasthan, which will ultimately produce 200,000 a year.

• Kansai Paint is setting up a new plant.

• Hero Honda Motors is building a new factory.

• Honda Motorcycles is increasing capacity.

The above examples point to the fact that Japanese are upbeat on investment in India. India is no more a stop-over for the Japanese investors. India has sprung up to the importance of a real investment destination for the Japanese investors. Going by the Japanese visits in the recent past, India now figures as a significant spot on the Japanese radar.

India is not only the first recipient of Japanese ODA, but also the biggest recipient of Japanese ODA. Delhi Metro brought a big sigh of relief to the transport hazard stricken Delhites, which was largely supported by Japanese ODA. Up to 2006, Japanese ODA made a gushing flow to India amounting to Yen 2252.5 billion. Of these, as much as 42 percent were committed for development of energy, which has been causing prolonged woes to the growth of the economy.

Now, the time has come for the development of logistic services. India is a vast country. It is poised for unabated high growth of economy. Its vast pool of skilled talent led it to have a global recognition as the future global economic power. But, there is a whammy. The country reels under an acute regional imbalance of growth. Inadequate availability of proper logistic services can be one of the prime reasons. It not only hinders trade and investment opportunities of the states which are located far away from ports and metros, but also impedes the linkages with the developed states. It is imperative that better logistic services be provided to these states and hence the need was felt for the dedicated Delhi - Mumbai Industrial Corridor. It is again Japan, who moved forward to support the big financed DMIC project and uplift the trade and investment infrastructures of the country. DMIC will cover six States, which will automatically increase the potential of investment and hence employment in these States.

Japan and India have entered into a new vision. Both have decided to extend their role for a balanced growth in global economy and to bring harmony in the political atmosphere of the world. Former Prime Minister Mr Junichiro Koizumi’s visit to India in April 2005 and a reciprocal visit by Prime Minister Dr Manmohan Singh to Japan in December 2006 drew a new dimension to Japan-India relations. As said in some section of the press, Mr Koizumi recognised India as an emerging global economic power, with strong independent-minded players. This resulted in both countries tying a knot for a strategic global partnership.

Japan’s relentless effort to give renaissance to the East Asia Community and India’s “Look East” policy helped both countries to draw a new road for their role in the global economic and political areas. Japan’s staunch support to include India in ASEAN + six and India running the frontrunner to endorse Japan’s call for CEPIA (Comprehensive Economic Partnership for East Asia) manifest a new shape in the Japan-India role in the Asian economy.

JETRO as a Catalyst

JETRO (Japan External Trade Organisation) has risen as catalyst to this new horizon of Japan-India economic relations. JETRO, a non-profit organisation under the umbrella of The Ministry of Economy, Trade and Industry, Government of Japan (METI), encompassed various promotional activities to accelerate Japan-India economic relations. Going by Japan’s keenness to strengthen relations with India, JETRO expanded its activities in India.

One of the unique schemes JETRO adopted to promote Japanese investment in India is to set up a Business Support Centre (BSC) at its New Delhi office. The centre provides cubical temporary office space to new Japanese investors with necessary communication facilities and advisory services for undertaking initial investment studies and market surveys. This sparked a great success for the Japanese investment in India. Since its inception in July 2006, as many as 23 Japanese investors used BSC. Of these, already 17 Japanese investors have shown interest in setting up business operations in India.

JETRO responded to India’s call for rural based growth and its global recognition. It realised that veiled rural talents are unexposed to the global market due to inadequate marketing facilities and unawareness of the global competition. Accordingly, JETRO introduced one of its novel schemes to develop the export capability of tiny sectors at the village level, known as One Village One Product (OVOP). OVOP had great success in Thailand. Now, it is time for India to utilize OVOP and uplift the export capability of Indian villagers who are yet to be exposed to the world market.

JETRO adopted various programmes to increase “India awareness” among the Japanese business circles and to promote the India brand IT technical skill. It organised match-making programmes for outsourcing of Indian IT services, Indian fashion shows and several other fairs to promote India’s exports to Japan.

In sum, India is now beaming in the Japanese radar. The visit of Prime Minister Mr Shinzo Abe will give a shot in the arm to the new shape of Japan-India relations.