JAPAN TRADE RELATIONS WITH INDIA, INVESTMENTS AND FUTURE PROSPECTS
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TABLE OF CONTENT Investments in India
Top Countries Investing in India
India Advantage
Indo-Japan Ties
Japanese Investments
Areas Attracting Investment
Top companies Investing in India
JETRO Survey
Small and Medium Industries
Problems Faced During Expansion
Concerns and Opportunities
Crosscoop Business Centre
Japanese Business Centre
Conclusion
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Investments in India
India has a conducive foreign investment environment that provides freedom of entry and favorable location
Government has done away with the complex pre-entry approvals. FDI through automatic route possible
Most investments are made to services sector due to availability of skilled manpower
19
12
7
6
5
5
4
4
4
3
0 5 10 15 20
Services Sector
Construction Development
Telecommunication
Computer Software and Hardware
Drugs and Pharamaceuticals
Chemicals
Power
Automobile Industry
Metallurgical
Hotel and Tourism
SECTOR WISE % SHARE OF INVESTMENT
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Top 10 countries investing in India Country (Rank wise)
FDI inflows(in US $ million.) August ’91 – Mar ’12
% share of total inflows
Mauritius 67,777 37.1
Singapore 17,496 9.6
UK 16,567 9.1
USA 13,014 7.1
Japan 9,146 5.0
Netherlands 7,737 4.2
Cyprus 6,425 3.5
Germany 5,293 2.9
France 3,207 1.8
UAE 2,254 1.2
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India Advantage DEMOGRAPHIC
FACTORS POLICY RELATED
FACTORS ₪6th most attractive investment destinations |KEARNEY Business Confidence Index, 2003
₪India has the Best licensing regime |KEARNEY
₪India was rated among the most favourite investment destinations|UNCTAD, JETRO, JBIC, Deutsch Bank, EIU etc.
₪Major destination for foreign venture capital funds |Far Eastern Economic Review
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Indo-Japan Ties
Japan: 4th Largest Investor
More than 1422
Japanese companies
Delhi Mumbai Industrial
Corridor in partnership with Japan
Delhi Mumbai Freight
Corridor in partnership with Japan The major
sector of investment:
Drugs & Pharmaceut
icals
Major Japanese clusters in
Delhi & NCR
Exports automobile
s to India
₪Initiatives like ‘Namaste India’ and ‘India Centre’ intend to strengthen the ties between the two countries
₪Major pacts like CEPA and Japan-India Economic Partnership Agreement have been signed for trade and investment promotion
₪Top sectors for future investment ‡ Indian Power Sector
‡ Pharmaceuticals
‡ Civil Aviation
‡ Logistics
‡Biotechnology ‡Nano-technology ‡Agro Processing ‡Clean technology
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Japanese Investments
5,670.40
7,062.98
14,089.09
11559.08
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
16,000.00
Rs.
in c
rore
FDI Equity Inflows
FDI Equity Inflows
₪Out of a negligible number of FIIs, 8-11 of them have entered the Indian market in the past year and a half
₪Japan looking to shift their investment destination from China to India
₪CEPA-Comprehensive Economic Partnership Agreement, aimed at reducing the trade tariffs by 94% between India and Japan
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Areas Attracting Investment From Japan
29
%
16
%
14
%
9%
5%
Sectors Attracting FDI₪ Pharmaceuticals is the major sector attracting investments from Japan (Rs. 20,239.75 Crores- Jan’00-Dec’11)
₪RBI branch office at New Delhi received an investment of Rs. 1220.81 Crores
₪Companies like Nissan, Suzuki and Yamaha investing heavily
₪After a policy intervention, services sector is now open for investment
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Top Companies Investing In India TOP JAPANESE COMPANIES INVESTING IN INDIA AMOUNT OF FDI INFLOWS (in Rs. Crore)
DAIICHI SANYO CO. LTD 19804.03
JFE STEEL CORPORATION 4,800.72
NIPPON LIFE INSURANCE COMPANY 4238.61
NISSAN MOTORS 1927
MATSUSHITA ELECTRIC WORKS LTD. 1866.55
SUMITO MITSUI BANKING CORPORATION 1366.12
HONDA MOTORS CO. LTD 1200
HITACHI 1159.50
SUZUKI MOTOR CO. LTD. 1000
(through Indian companies, from April 2000 to February 2013)
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JETRO SURVEY
About JETRO(Japan External Trade Organization)
JETRO-a government related organization promotes mutual trade and investment between Japan and the rest of the world.
About JETRO-Survey
Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey)
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Most of the Japanese companies in India were established after 1996
Improved operating profits in emerging economies forecasted for 2013
A large number of firms planning to downsize their China operations and look to invest in India
87.5% looking to expand in the automobile industry and 83% in wholesale and retail in India
Japanese firms put priority on local market development in India rather than developing exports
83.6% firms intend to expand operations in couple of years
62.4% firms expecting an increase in operating profits in 2013
87% of respondents correspond this increase to increase in local market sales
Key Findings
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Business Development
67.2% firms would like to
employ locally
35.3% firms would like to
employ Japanese
expatriates
Most Japanese
firms would like expand their sales capabilities
89.7% cited ‘increase in sales’ as the main reason
for expanding India
operations
72% see high growth
potential in India
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Proportion of Profitable Japanese Firms
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Downsizing in China Increase of
costs
Difficulty in procuring labour
Relationship with clients
Tightening of regulations
Sales Decrease
₪ China has been a major destination for Japanese investment
₪ According to recent surveys, firms are shifting their base from China to India
₪ Low labour costs, large market and skilled workforce attract investments into the country
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Small and Medium Industries ‡ FIEO and JETRO have joined hands to promote Japanese SMEs in India
‡FIEO in association with JETRO is organizing a three prong strategy to help SMEs of the two nations.
† One: Aggressive seminars in metros, plus two tier cities.
† Second: Exchange of delegation. Take the SME delegation to Japan and exchange their delegation and then have B2B meeting with them.
† Third: Participate in their leading exhibitions
Break-up of SMEs in India
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Problems Faced During Expansion Wage
Increase
Growing market share
of competitors
Power shortage or
blackout
Difficulty in procurement of material & rising costs
Complicated customs
clearance procedures
Difficulty in recruiting executive
staff
Drop in FIIs due to the depreciating rupee
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Bureaucracy is a major deterrent.
Concerns and Opportunities
India’s growing middle class an opportunity for foreign firms to invest Concerns that plague entry of
Japanese firms
83% of Japanese
SMEs targeting
the middle class
70% middle
price range to tap the
market
75.2% overall in
manufacturing
sectors.
74% in finance
and Insurance
85% are concerned about the
price competitive
ness
66% firms take the
local companies
as competition
70% firms have prioritize on local market development
rather than developing exports to India
Product differentiati
on
Secure and train human
resources
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Conclusion
Japanese investments in India have been on the rise, specially after the souring of ties between Japan and China
With the current economic slowdown, the FIIs into the country have come down, but Japanese companies are positive about investing in the growing economy once it stabilizes
A Japanese Business centre at a location like Gurgaon is favourable due to it’s proximity with industrial locations like Manesar and Neemrana. Since most of the Japanese automobile companies set up manufacturing units in India, it makes sense for them have their corporate offices in the vicinity
Although initially they have their Japanese staff, data shows that most of these companies would like to employee locally. Generally the ratio is 35%:65%
Staff, fluent in Japanese, to cater to the needs of these companies in the centre is crucial for business dealings. The staff should also be acquainted with the Japanese work culture to help the companies in the transition process.
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