India-Japan business ties at a high in 2016-17

At the end of 2016-17, the FDI inflow from Japan rose to $4.7 billion which stood at $1.7 billion in 2013-14

The bullet train from Ahmedabad to Mumbai is not the only significant business deal for the Prime Minister of Japan. The country has a lot to rejoice, with the India-Japan business ties at an all-time high, it can be noted that India will benefit from the business ties and the technology of Japan. After seeing a downward trend in the recent years, the Japanese FDI in India has been on an upswing.

 

FDI from Japan stood at $150 million in 2000-01 and it reached $5.5 billion in 2007 because Japan’s Daiichi Sankyo Co. Ltd acquired Ranbaxy Laboratories. The investment from Japan started to decelerate in these years and stood at $1.71 billion in 2013-14 which is shortly before Modi took over as the prime minister. There has been a phenomenal surge after that. At the end of 2016-17, the FDI from Japan rose to 80% and stood at $4.7 billion from a year earlier.

There has also been an increase in the number of Japanese firms entering India. As on October 2016, there were 1,305 Japanese firms registered in the country, which is an increase of 76 or 6% from 2015. These companies had 4,590 business establishments operating in India, which is also an increase of 173 or 3% from 2015. Despite the increase, Japanese FDI in India remains low as compared to the total outward FDI of Japan. In terms of cumulative FDI inflows in India, Japan is India’s third largest source.

About 48% of Japanese investment has gone into the auto sector and the remaining in different sectors such as financial services, metals, chemicals, transport, chemical and information technology. The economic segment has moved from government to government to more cross border inorganic engagement as a full stake or part stake. The private sector across Japan is keen on investing in a developing economy like India and these investments are about 13-14% in volume. This is an ideal opportunity for India to leverage Japanese technology to move up in the value chain of digital and industrial activity. Japan is looked as a potential hub for promotion of investment. As many as 15 large Japanese firms plan to enter India in the coming years.  It will be important to ensure that the investment is diversified across different industries. Majority investment goes into auto, but it should also be diversified to ensure that the IT and pharma sector can benefit from the same. With the ease of doing business and the opportunities of the growing economy, India has become a hub for FDI.

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