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Journalism of Courage
With the Japanese Prime Minister Shinzo Abe’s first official visit to India beginning today, expectations of a paradigm shift in Indo-Japan trade and investment are running high. According to a study, a new economic engagement model is needed that pushes bilateral trade from $7 billion, at present, to $14 billion in 2012.
Titled ‘India-Japan Economic Relations: Current Status and Prospects’, this FICCI paper suggests that India should enter into an export-oriented foreign direct investment strategy with Japan, which channelises large volumes of FDI into India for production and re-export to the Japanese market.
This would facilitate the creation of large-scale employment in India, with production facilities requiring the employment of the local workforce and resources. In fact, Japan’s engagement with its Far-Eastern neighbours such as Singapore, Korea, Thailand and most notably, China has been largely based on this model.
Meanwhile, Japan is reportedly proposing a democratic alliance, anchored by India, Australia and Japan, to put the process of economic growth in the region on a higher trajectory. According to FICCI, this should be followed by vigorous people to people contact between Japan and India, large scale student exchanges and a process to enable Indian SMEs to avail themselves of niche Japanese technical and management expertise for performance enhancement.
An examination of Japan’s trade and investment data reveals that with a growth in its investments in China and in other Asean countries, its imports from these countries have also risen. In other words, a large proportion of products produced by Japanese companies based in China and Asean region are re-exported to Japan to cater to the domestic requirements. FICCI suggests that similar linkages should be developed between Japanese companies and India.
Official data shows that total FDI inflows into India from Japan during the period August 1991 to March 2007 amounted to $2.2 billion. Although Japan is the fifth largest investor in India, it still accounted for a mere 4.85 per cent of the total FDI received by India during the period August 1991 to March 2007.
